“In 1898, delegates from across the globe gathered in New York City for the world’s first international urban planning conference. One topic dominated the discussion. It was not housing, land use, economic development, or infrastructure. The delegates were driven to desperation by horse manure. The situation seemed dire. In 1894, the Times of London estimated that by 1950 every street in the city would be buried nine feet deep in horse manure.” (From Horse Power to Horsepower -Eric Morris)
Domestication of horse has been one of the key contributors of human progress; as it provided logistics support for business, leisure, pleasure and even conquests. We are good at building on and exploiting anything that would maximise our private benefits that sooner than later the negative externalities start taking a toll to the society at large; what the economists call the tragedy of the commons.
This happened in case of Horse Power too. With exponential growth in horse drawn logistics, by the end of 19th century accidents, pollution, and health hazards associated with horse was scary and appeared un-controllable.
Then came internal combustion engines that were much less polluting (even the methane produced by horse manure is eight times more potent than CO2 from automobiles as a greenhouse gas) less accident prone, much faster and more powerful. But by the end of 20th century this saviour has grown to a monster that is ready to savour its creator as it has proliferated to almost unsustainable levels.
The same is true for most of the human innovations. In financial services the time taken for an innovation of graduate to a Frankenstein has been quite low.
For examples derivatives have been developed as a tool for hedging risk. It has grown to be an instrument not infrequently used to structure products with the sole intention of profiting from the unsuspecting investors. Credit Default Swaps and Securitisation of debt instruments contributed enormously to the maturing of debt markets and helped better resource allocation. But this was also taken to its ridiculous extent that in most cases there was nobody who really cared or owned up responsibility to assess the true cost and risks associated with the underlying assets. The recent indictment of Goldman Sachs is an example of such unfair practices.
Does it mean that we need to curtail innovations? The answer is no. It is these innovations that ensured that the Malthusian theory has turned out to be an imaginary fear and the standard of living of a significant majority of human beings across the globe is hundreds of times better than the best the select few enjoyed even a few decades ago.
But as the time goes, products of these innovations reach such gargantuan proportions with very high impact on the well being of the society especially in a ‘flat world’ as described by Thomas Friedman. With large segment of wealth under the control of few large entities who are ‘too big to fail’, the difficulty of reining their run-way exploitation of their innovations gets to be even more difficult.
Addressing these is one of the key challenges for any government. Towards this goal, firstly we need to support strong regulations and stronger regulators who do not fall prey to their megalomaniacal instincts and try to micro-manage or centrally control; but who have the intellectual capability to analyse issues to identify key levers for action, recognize practices that exploit the common investors and curtail them, have courage to take strong and often unpopular decisions, can make the institutions who screw-up to pay-up and has moral strength not to be influenced by money, power or influence and at the same time is capable to encourage and get out of the way of innovations that are game changers. The stand taken by SEBI recently with respect to Unit Linked Insurance Policies (ULIP) which is a mutual fund masquerading as insurance is an excellent case in point on the constructive role the regulator can play.
Secondly we need to enable, encourage and empower disruptive technologies, processes and products that solve problems that are critical to survival of humanity. Especially since the existing interest groups who have heavily invested in the old system will work overtime to prevent success of these innovations. For example the oil industry will be happy to ensure that till the last drop of oil is left, human beings are addicted to it and are willing to pay more and more for the less and less that is drilled or excavated out. We experienced similar resistance from custodians and registrars when we were setting up a depository for Indian Capital Market.
The governments have a major role to play here too. They have to support, encourage, fund and place enabling provisions so that innovations are allowed to take root and reach a critical mass. Only then these disruptive technologies, products and processes can manage to break the status-quo and establish better, cleaner, more efficient solutions to problems that appear to make human race a run way experiment that is ready to destroy the mother earth as we know today.
That is why the two principal challenges for the day are Regulation of Innovation and Innovative Regulation
"It has yet to be proven that intelligence has any survival value." — Arthur C. Clarke
Sunday, April 25, 2010
Monday, April 19, 2010
To be or Not to be – Part III - Tharoor’s Dilemma
After eleven months in the office, Shahi Tharoor has stepped down from the post of Minister of State for External Affairs. Everybody knows the reason. It was not his ability to perform that cost him the post. He, instead of being an asset in the parliament for the ruling party, became a liability on account of the way he has conducted himself on a few occasions.
I don’t believe that he was corrupt, I don’t know whether his ‘transgression’ compared to the standards of some of the politicians are anything extraordinary, I don’t know whether compared to the loot of public finance that many in the ruling class perpetrate, Tharoor benefitted in any financial sense; though the there are questions on the nature of sweat that paid for certain equity.
For a seasoned diplomat with decades of experience in international diplomacy his failure is that he forgot an age old dictum; “Caesar’s wife has to be above suspicion”. Natural question is whether all our “Caesars' wives are above suspicion”
There is one big difference here. Tharoor was trying to muscle into a club, banking on a different skill set and preaching a different value system. On the basis of these credentials he had managed to take an express elevator to the position of power and influence in Indian politics. It has caused jealousy pangs among many who had been waiting in the wings for years, it has caused concerns among some established veterans about the changes propounded by people like him, it has caused worries that the apple cart is tilting. It was natural that the empire would strike back.
When he embarked on such a challenge he should have been a bit more careful; especially when he was yet to establish a strong support base who would have stood up for him. He should have shown more discretion and tried to avoid anything that could be misconstrued as pushing private agendas.
Now he has two choices. Work on building the support base and fight on the position of strength. Or join the club on their terms. This is standard operating procedure for any new entrant at the top. Or he can decide to retire and take up less risky hobbies like sky diving...
“Serious sport has nothing to do with fair play. It is bound up with hatred, jealousy, boastfulness, disregard of all rules and sadistic pleasure in witnessing violence. In other words, it is war minus the shooting". George Orwell.
Politics could be more demanding than any serious sport.
I don’t believe that he was corrupt, I don’t know whether his ‘transgression’ compared to the standards of some of the politicians are anything extraordinary, I don’t know whether compared to the loot of public finance that many in the ruling class perpetrate, Tharoor benefitted in any financial sense; though the there are questions on the nature of sweat that paid for certain equity.
For a seasoned diplomat with decades of experience in international diplomacy his failure is that he forgot an age old dictum; “Caesar’s wife has to be above suspicion”. Natural question is whether all our “Caesars' wives are above suspicion”
There is one big difference here. Tharoor was trying to muscle into a club, banking on a different skill set and preaching a different value system. On the basis of these credentials he had managed to take an express elevator to the position of power and influence in Indian politics. It has caused jealousy pangs among many who had been waiting in the wings for years, it has caused concerns among some established veterans about the changes propounded by people like him, it has caused worries that the apple cart is tilting. It was natural that the empire would strike back.
When he embarked on such a challenge he should have been a bit more careful; especially when he was yet to establish a strong support base who would have stood up for him. He should have shown more discretion and tried to avoid anything that could be misconstrued as pushing private agendas.
Now he has two choices. Work on building the support base and fight on the position of strength. Or join the club on their terms. This is standard operating procedure for any new entrant at the top. Or he can decide to retire and take up less risky hobbies like sky diving...
“Serious sport has nothing to do with fair play. It is bound up with hatred, jealousy, boastfulness, disregard of all rules and sadistic pleasure in witnessing violence. In other words, it is war minus the shooting". George Orwell.
Politics could be more demanding than any serious sport.
Sunday, April 11, 2010
One good reason to blog
When I took to writing a blog, two of my friends had strong reservations. One is a senior banker who believes that he is more an economist (he apparently reads quite a number of books on economics and spends a lot of time in the hallowed company of economists) and other an economist by training, thoughts and deeds. They came to a conclusion that I should avoid attempting this venture. The reason, my academic credentials on economics are not good enough to write on topics like public policy or management of financial services which have relation with economics. I completely agree with them about my academic credentials in economics.
This conflict of academic elitism and managerial pragmatism is a reality of life. Many academics tend to take the path of extreme specialisation that they are incapable to grapple with multi-disciplinary challenges of real world. They hide themselves in specialised jargon and restrictive logic of “ceteris paribus” that while much of what they say are sensible, it fails to make sense to those who are expected to act on it. In fact many of these academic high priests behave as if it is below their dignity to articulate their theories in a manner the common man (even an educated manager) can understand. Some of them seem to think that the world is made up of only rational economic agents analysing myriad decision variables in real-time leading to best possible outcome. Such elitism is still tolerable in music, literature, drama etc But in applied sciences like economics, management etc., unless it connects with the practitioners it will fail to have real value except to satisfy a few ego trips
If they don’t find a way to reach across to the guy who is expected to practice the theories they propound, how can they expect those thoughts to be more widely accepted? If they don’t find a way to fathom the life and challenges of the practitioners, how can they evolve solutions that are acceptable? If they don’t understand the inner fears, insecurities and private agendas and work around them, how can they implement policies that are game changers?
On the other hand the managers and administrators hide their laziness to be up-to-date and unwillingness to think-through, under their complaints on impracticability of the academic thoughts. They are happy with the networking dinners, what the various vendors and interest groups are keen to convince them or their boss’s whims. The more ‘professional manager’ or the more senior in the bureaucratic ladder they are, the more intransigent and intellectually sterile they make themselves. Quick results at whatever cost instead of institution building become the norm than an exception.
Our educational institutions, even the elite ones, fail to bridge this chasm to any meaningful extent. Our schools focus primarily on the ability to memorise and regurgitate answers to a bank of potential questions that may come for the exams. The colleges follow the same route too and the kids forget everything the moment the exams are over because the focus is more on marks than on what is learned. We can’t blame them as none of the teachings are contextual and most fail to demonstrate any relevance. Then the schools and colleges become just tools to attain a degree which itself is nothing but a pre-requisite to open many doors.
My blog is my attempt to address this conflict within me; the conflict between practical compulsions and theoretical possibilities. The blog for me is not a log of my private life laid bare to the public voyeurism as a means of keeping in touch. It is a tool that forces me to work on a thought and think-through its nuances for a few hours; crossing the ‘t’s and dotting the ‘i’s, which helps to bring some more clarity in my mind. It also throws open, to peer scrutiny, criticism and appreciation, my interpretations and how I use this learning (or the lack of it) and interpretations in tackling day-to-day challenges.
When I get your comments or thoughts or experiences on related issues, (I get many private mails in response to my postings and it appears that many are not comfortable to take a public position, may be eventually they will) it could offer another avenue,for both of us, to benefit from the “wisdom of the crowds” at very little cost. Some academicians willing to skim through these ramblings may also get some ideas on how to “win and influence” the guys in the trenches.
The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. ALVIN TOFFLER
This conflict of academic elitism and managerial pragmatism is a reality of life. Many academics tend to take the path of extreme specialisation that they are incapable to grapple with multi-disciplinary challenges of real world. They hide themselves in specialised jargon and restrictive logic of “ceteris paribus” that while much of what they say are sensible, it fails to make sense to those who are expected to act on it. In fact many of these academic high priests behave as if it is below their dignity to articulate their theories in a manner the common man (even an educated manager) can understand. Some of them seem to think that the world is made up of only rational economic agents analysing myriad decision variables in real-time leading to best possible outcome. Such elitism is still tolerable in music, literature, drama etc But in applied sciences like economics, management etc., unless it connects with the practitioners it will fail to have real value except to satisfy a few ego trips
If they don’t find a way to reach across to the guy who is expected to practice the theories they propound, how can they expect those thoughts to be more widely accepted? If they don’t find a way to fathom the life and challenges of the practitioners, how can they evolve solutions that are acceptable? If they don’t understand the inner fears, insecurities and private agendas and work around them, how can they implement policies that are game changers?
On the other hand the managers and administrators hide their laziness to be up-to-date and unwillingness to think-through, under their complaints on impracticability of the academic thoughts. They are happy with the networking dinners, what the various vendors and interest groups are keen to convince them or their boss’s whims. The more ‘professional manager’ or the more senior in the bureaucratic ladder they are, the more intransigent and intellectually sterile they make themselves. Quick results at whatever cost instead of institution building become the norm than an exception.
Our educational institutions, even the elite ones, fail to bridge this chasm to any meaningful extent. Our schools focus primarily on the ability to memorise and regurgitate answers to a bank of potential questions that may come for the exams. The colleges follow the same route too and the kids forget everything the moment the exams are over because the focus is more on marks than on what is learned. We can’t blame them as none of the teachings are contextual and most fail to demonstrate any relevance. Then the schools and colleges become just tools to attain a degree which itself is nothing but a pre-requisite to open many doors.
My blog is my attempt to address this conflict within me; the conflict between practical compulsions and theoretical possibilities. The blog for me is not a log of my private life laid bare to the public voyeurism as a means of keeping in touch. It is a tool that forces me to work on a thought and think-through its nuances for a few hours; crossing the ‘t’s and dotting the ‘i’s, which helps to bring some more clarity in my mind. It also throws open, to peer scrutiny, criticism and appreciation, my interpretations and how I use this learning (or the lack of it) and interpretations in tackling day-to-day challenges.
When I get your comments or thoughts or experiences on related issues, (I get many private mails in response to my postings and it appears that many are not comfortable to take a public position, may be eventually they will) it could offer another avenue,for both of us, to benefit from the “wisdom of the crowds” at very little cost. Some academicians willing to skim through these ramblings may also get some ideas on how to “win and influence” the guys in the trenches.
The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. ALVIN TOFFLER
Monday, April 5, 2010
It doesn’t make sense
The newspapers these days have almost a daily coverage on Sania Mirza’s marriage to Shoaib Mallik, the Pakistan cricketer. It is a celebrity wedding and there is controversy; so newspapers have a right to capitalise on this. It is a matter of circulation and profits for them.
Why should there be such controversy? Isn’t it their personal choice 'whom to marry'? The controversy is because she is marrying a Pakistani and anything related to Pakistan is paranoia these days. (The feelings are mutual)
I remember an incident that was narrated by one of my friends narrated. He is the country head of a multinational IT firm in India. He had a technical expert coming over for a project and he was by roots a Pakistani though he has never been to Pakistan as his father had migrated to US. It took an enormous effort to get the visa cleared. Then the local police insisted that he could not move out of the hotel room, except to attend office. They posted two police men outside his hotel room. This young lad had to be in this state of house (hotel) arrest for almost a month. Almost at the end of his project, he decided to go for a picnic with his friends for a drive out.
He sent an SMS to the local Police Superintend as he could not get him on phone. Within an hour the matter became a security emergency and quite a lot of harassment to his local sponsors and him. He had to be packed out of the country within a day!
It is true that both countries are not on good terms and forces of destabilisation are at work everywhere. We agree that we need to be careful that 26/11 is not repeated.
But does it mean that we have to have these extreme reaction in anything related with Pakistan and vice versa? There is no reason why Sania is not allowed a visa to visit the hometown of her would be fiancé and there was no sense it kicking up the controversy on the participation of Pakistani Cricketers in IPL.
Doesn’t it make sense to keep the tension low and encourage better interaction between both the countries without dilution of security controls? For example we have very strict verification process when we issue a passport. But, on the basis of the standing of the person (which is clearly defined and traceable) who issues a testimony there is of course a relaxation.
This is not an exception based on nepotism but an exceptional process of risk mitigation. If we find that such exceptional process can help more avenues for healthy interaction and such exceptions don't affect security concerns, we should try to encourage it. This can only help to strengthen both the countries.
Let us also ask ourselves some hard questions on the underlying causes of this mutual distrust. Don’t factors like religious intolerance, political expediency, attempt to distract public attention, machinations of a variety of interest groups and the self interest of the arms lobby contribute to this sustained tension?
Some of us need to rise above these biases, to build up a voice of reason, a voice of tolerance and a voice of compromise if we have to see a de-escalation of tension at the border and deep in our hearts. May be we need a few more marriages like that of Sania and Shoaib, some more train rides like the one Vajpayee initiated and a lot more cricket. The idea is to allow more opportunities for active engagement and more occasions to come together as human beings; sharing joy and sorrow. It is then that we can bring about disarmament of minds. But it is worth it.
“Unless both sides win, no agreement can be permanent.” ~ Jimmy Carter
Why should there be such controversy? Isn’t it their personal choice 'whom to marry'? The controversy is because she is marrying a Pakistani and anything related to Pakistan is paranoia these days. (The feelings are mutual)
I remember an incident that was narrated by one of my friends narrated. He is the country head of a multinational IT firm in India. He had a technical expert coming over for a project and he was by roots a Pakistani though he has never been to Pakistan as his father had migrated to US. It took an enormous effort to get the visa cleared. Then the local police insisted that he could not move out of the hotel room, except to attend office. They posted two police men outside his hotel room. This young lad had to be in this state of house (hotel) arrest for almost a month. Almost at the end of his project, he decided to go for a picnic with his friends for a drive out.
He sent an SMS to the local Police Superintend as he could not get him on phone. Within an hour the matter became a security emergency and quite a lot of harassment to his local sponsors and him. He had to be packed out of the country within a day!
It is true that both countries are not on good terms and forces of destabilisation are at work everywhere. We agree that we need to be careful that 26/11 is not repeated.
But does it mean that we have to have these extreme reaction in anything related with Pakistan and vice versa? There is no reason why Sania is not allowed a visa to visit the hometown of her would be fiancé and there was no sense it kicking up the controversy on the participation of Pakistani Cricketers in IPL.
Doesn’t it make sense to keep the tension low and encourage better interaction between both the countries without dilution of security controls? For example we have very strict verification process when we issue a passport. But, on the basis of the standing of the person (which is clearly defined and traceable) who issues a testimony there is of course a relaxation.
This is not an exception based on nepotism but an exceptional process of risk mitigation. If we find that such exceptional process can help more avenues for healthy interaction and such exceptions don't affect security concerns, we should try to encourage it. This can only help to strengthen both the countries.
Let us also ask ourselves some hard questions on the underlying causes of this mutual distrust. Don’t factors like religious intolerance, political expediency, attempt to distract public attention, machinations of a variety of interest groups and the self interest of the arms lobby contribute to this sustained tension?
Some of us need to rise above these biases, to build up a voice of reason, a voice of tolerance and a voice of compromise if we have to see a de-escalation of tension at the border and deep in our hearts. May be we need a few more marriages like that of Sania and Shoaib, some more train rides like the one Vajpayee initiated and a lot more cricket. The idea is to allow more opportunities for active engagement and more occasions to come together as human beings; sharing joy and sorrow. It is then that we can bring about disarmament of minds. But it is worth it.
“Unless both sides win, no agreement can be permanent.” ~ Jimmy Carter
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