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Wednesday, March 21, 2018

Interesting Readings 20 March 2018

Lemon Tree is ranked 4th Best Company to Work for but attrition rate is 43%. Readers know that I have my gripes about the practice of HR management. I think most of it is glorified payroll processing. Real talent management has not developed at all. HR can be quite strategic asset if used properly.

Actually some of the ideas Jio is using came for Reliance Communications. RCom, before the split, was going along the exact same way only they were going to use fibre-to-home rather than mobile. Also the choice of CDMA was because it was data efficient. This is back in 2002 when iPhone had not changed the world. Mukesh Ambani is a tech geek and understand new tech very well.

Andy Mukherjee is at it! Well written. Kumar Mangalam Birla just treated India’s new bankruptcy law with utter disdain. But before you dismiss the behaviour, think of the huge favour he’s doing the legal system.

This crisis is entirely Modi's making. Modi, when he was campaigning, seemed like Narsimha Rao 2.0 - take political risks but fix the economy. Vajpayee's NDA was not ready to take political risks because of their marginal majority. However, Modi's policies are more in line with Gandhi's (Rajiv and Indira) and Manmohan Singh than either Vajpayee or Narsimha Rao. The sooner he aligns himself with the correct economic model the better.
Barry Ritholtz finds we haven't learnt much.

Look at the LBO-based financialization of the firm. This shows the difference between investors such as Warren Buffet and these vulture funds. In one of the meeting with investee, I happened to join with analyst from a co-investor firm. First thing this guys says to the entrepreneur "we own you guys".
They blame her but she is getting off the hook. Apparently after being charged with defrauding investors out of more than $700 million, Theranos founder and CEO agreed to a $500,000 fine, gave up her voting control of the company, reduced her equity stake significantly, and will not be able to serve as an officer or director of a public company for 10 years. 

The main culprit here is the silicon valley culture. One fellow suggested to me that entrepreneur should get financed by VCs because "they will open the doors" for him. So if his idea was important and he did not need funding no one will open the door? The once you get first round, you have to get second round at 10X the valuation and third round at 10X till you go for IPO exit where everyone gets off and common investors are left holding the bag. Read some issues raised by this episode at Worden Report.

Excellent pointer thanks to Barry Ritholtz. Look at this chart, India should focus on improving patenting of innovations already being used. Indians are quite lax about patenting.

Trade war with China was always on the cards. In fact tariffs and trade blockade is the way to keep China from damaging US interests. China was becoming increasingly aggressive with US and its allies. A US trade blockade will put the wages and employment of large population at risk. So will China suffer? I think not. Chinese leaders have shown great strategic depth. I believe they are already working on shifting their economy towards a consumption-oriented economy. However, as I said before, I think consumption driven economy is fundamentally incompatible with restrictive political system.

Indian Bank Scams
Debasis Basu asks the right questions whether RBI is powerless or not. And rightly highlights that there is finger of responsibility points to babus from Finance Ministry too. Must read.

Ajay Shah weighs in on how to manage the bank reform. I agree with him in some aspects. Here is the quote:
A comparison with the experiences of 2008 and 2013 is instructive. India was one of the worst-hit emerging markets immediately after the Lehman failure. Each crisis is different, and this one had a combination of stress in mutual funds, real estate companies, Indian borrowers in the overseas money market, ICICI Bank, etc. The key factor that led to good outcomes was the capabilities and teamwork between the Ministry of Finance, RBI and SEBI. The day to day actions mattered, but even more, the market was reassured that there was genuine capability and teamwork.

Objectively speaking, the difficulties faced in India in 2013 were smaller than the storm of 2008. The difference lay in the capabilities and teamwork. In 2013, we came across there as a jittery government coming out with one new action every day, and lacking an understanding of what we are up against. This converted a small shock into an outsized problem.
This evokes mixed feelings for me. First, Government is coordinating the various banks and their ensuring that at least there is some coordination between smaller-bank-group vs large-banks-group. It is good for efficiency. But retail credit need not be good credit. It has to be good credit first and retail credit is secondary.  

 Tyler Cowen highlights an interesting paper. This applies to "sons" not daughters. It is triggering many thoughts as to why it should be so. Read the comments too. Not much discussion can be carried out without sounding racist so be careful.

Former Additional Solicitor General of India Biswajit Bhattacharya has written a good piece. But like a good lawyer fails to explain the other side. Supreme Court, despite being cognizant of this, has granted custody for many politicians. Mind you this is mostly in case of politicians accused of scams. Others like Salman Khan tended to get off easily. The CBI, government officers and corrupt politicians have extremely tight nexus. It is being sought to be broken and it is not going away without a fight.

World War Watch
Mint believes in pragmatism. But two-front war is something we need to prepare for. General Bipin Rawat is right. The points made by Mint are right too.

Excellent article by C Raja Mohan. I think, India must consider the possibility that China is playing the same game US played with Soviets and the game is economic and not related to armed intervention. Luckily, India has US on its side in this game. The Quad is necessary reality. Shinzo Abe was right and timely (probably late). India must accept this reality.

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