The smart cards in smart cities

Everyone is familiar with the oyster card in London and similar cards world over. Singapore has its own ez-link card. Yet, I carry few debit cards, few credit cards, School Access card (for parents), the Museum passes, Office access card, home access card and the works. There are simply too many cards.

Too many cards that I carry SIGH!

How about just 3?

Is it difficult? Not at all. Let us imagine 3 cards. One is your all-in-one Government ID. Second is high-security-access card (HS Card)— used for all debit card / credit card processing/home access and the like. Third is a lower security card (LS Card) — pre-paid cash card, travel, office access and the like.

Well, this system is in fact easier and more cost effective to setup. The service provider (say a bank, home security system) need to do is to add the card number and details present on the face of the card itself to their system and bingo your card can now function as a Citibank, HSBC or Chase or whatever card you prefer. On the back of the card they can stick a little sticker so that I remember what cards option I have. By limiting its access you can control what data the “swiping device” can collect. So one way could be to use photo of the card. Other way would be to simply tap that card — this would allow basic data for shopping say upto $2000/-. A swipe would let you swipe more than $2000 till your limit. A house access would require a tap and pin (say).

Same goes for the LS Card too. In fact all the shops who want to give you “points” and reward your “loyalty” can do so with this LS Card. Anyone wants you to give access can enter this card number in his system and you will have access to it. This could be transport systems including taxis and buses, boats and the works. It could also be your office door etc.

The government ID card can be kept separate because of the legal issues that result in case of mishandling of the card. If some vendor makes a mistake you may lose access to your insurance or something far worse — you may no longer be a citizen. The redundancy allows for the system to be more stable than depending on simply the transaction card.

Who mentioned Apple Wallet or Android Pay?

At its best I would have Apple, Android and mobile phone manufacturers do this. Just by getting my mobile number all the companies can give me access using the phone. I should be able to share basic data with companies wanting to reward me for my “loyalty” just by sharing my phone number and a sms based pin and then it should be easy for the companies to keep rewarding me.

However, I am wary of putting ever more power at the hands of these companies. For one, it seems difficult for these systems to work together at least till now. Therefore, we have cards that are not Apple pay compliant or the shops don’t have terminal for Apple pay. These problems are easily solveable — we simply need a will to do it. It would be beneficial if these companies adopt a universal standard for such operations.

This otta make cities Smart

Now I am not a fan of smart cities focussing on useless tech without convenience. But the smart card concept we discussed above seems to be practical and it should make cities smarter, peoples lives easier.

A city state like Singapore should initiate experiment in this direction. Singapore already has its own payment standard called NETS, formed by collaboration between various banks and adopted by monetary authority of Singapore. Now all cards should be NETS compatible — debit cards, credit cards and yes access cards, transport cards etc. With this in place we will take the first step towards card utopia.

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Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Reorienting Singapore - Ideas for a Future Economy

Singapore is unique country. The Singapore government works better and more efficiently than its corporates. So naturally, it wasn't surprising to find the Government of Singapore exploring new policy options to ensure Singapore continues its development. The urgency with which Singapore Government is looking for these new themes is indeed creditable.

There is a Committee on Future Economy. This committee comprises many thinkers and business leaders. The committees presented some ideas at the IPS CFE conference. I am parsing through the ideas in the sessions - all make interesting food for thought but not out of the ordinary. Be ready to sift through jargon and buzzwords while picking the best ideas.

Here are some of my thoughts on these things:

Keeping aging population employed, relevant and highly paid

First we need to abandon the concept of "job" or employment using same skills over entire lifetime. Some skills stay relevant and even appreciate with practise. Surgery, tailoring, etc come to mind. There not much is required to be done so long as the skills remain relevant. But even master tailors and surgeons will also need to be aware of the advancing robotics wave. Thus, we definitely need to reskill the greying workers. The question really is how to reskill in a way that augments the skills they have acquired and makes these workers into super-constributors. One way is to take the skills they have acquired over lifetime and let them impart these skills to new workers. In areas where robots are taking over, these workers can evaluate the robots or augment the research in robotics.

Opportunities for section of population with varying skills

How to ensure employability of part of population of varying skills? 

1. Take the art route. And we need not ignore the digital art - Singapore can become a hub of say world class web-designers, interface designers etc. The key question is what domestic set of skills can be made available to the world that will have sustainable advantage? 
2. Dragon purse effect: Allow citizens to create something artistic and using SMEs explore if it finds relevant demand in the world. If yes, then it can be expanded into a proper global scale product. This is like next step of kickstarter - a place where entrepreneurs can innovate new products and try it on smaller scale. A dragon purse was a hit world-wide. So what can be the next dragon purse.
3. The key question will be how to ensure that the core of what is found in Singapore can be deployed globally in such a manner that benefits will flow to Singapore? 

Reinventing Construction

Singapore is as unique as Netherlands in the fact that it has natural constraints to deal with and has the technology and capital to solve the problem. Netherlands also has innovative ideas. Does Singapore? I think so. Just that we need to look widely.

1. With an eye to global warming, Singapore needs to raise its height by about 5 meters above mean seal level. It means gradual planned buffer creation across most of the city. This area needs to be explored.
2. Singapore can invest in breathable green materials construction techniques for office and residential buildings. The idea is to use architecture, materials and structural engineering to reduce (and if possible eliminate) requirement of air conditioning.
3. Urban agriculture idea is not new. But creating enabling buildings is not given as much a priority. By the looks of it, the future buildings will have to work with plants, crops, animals and poultry. Again needs investigation and trials. A country like Singapore can effectively be leader of such technology.

Hi-tech Industries such as medtech, Predictive Tech etc.

There are a few hi-tech industries that can play to Singapore's advantage - high-tech manufacturing and pure high-tech industries.

1. Medtech is high-tech manufacturing type industry. What is unique about medtech type industries is that they are highly technology dependant and thereafter entire global demand can be serviced through small worker-less fully robotized factories.  Chip-design industry has similar characteristics. While, the intellectual property is difficult to replicate, the production is easily replicable with cheaper capital and easily available robotics. When medtech wants to retain its Singapore advantage then it must create a network of med-tech testing environment (can test in China and India - will be lower cost). Thus, you leverage proximity and access (to ASEAN, India, China, Indonesia - populus markets) for testing and deployment.
2. Similarly, a pure high-technology industry includes Predictive Technologies is rightly highlighted as relevant industry for Singapore. These are pure high-tech industries. Another like Algorithm design, data analytics, etc. will make high return, small team tech companies possible. 
3. For both types of industries, the research in engineering sciences and applied mathematics is essential. Universities can highlight potential candidates and these bright candidates may then be financed to create startups locally.
4. These companise individually may be small teams but collectively will be large employers and require plethora of suppert services that will be employment generating. 

Innovation - always by the SME   

SMEs are preferred entities to undertake innovation. Allow SMEs to fail fast, fail often and fail safe - and then wait that is all it takes for innovation to flourish. Celebrating failure is as important as celebrating success. Yet these three things - fails fast, fail often and fail safe require enormous infrastructure and social development. 

1. Principle-based regulation: The search for light-touch regulation is not easy. Light touch regulation implies a quicker resolution of liabilities and protection of genuine risk-takers from being unnecessarily hounded. That should suffice. Other aspect of light touch regulation are actually ease of doing business which are fairly well developed in Singapore. It is also better to guard against misuse of personal health and financial data than regret the "light touch" later. So right-touch is better than light touch. These aspects are easy to deal with using "principle based regulation" letting the courts follow the spirit of the law rather than rigid enforcement of letter of law. That is advantage of the common-law system as practised by Britain and US.
2. An evolved Intellectual property law framework: Hi-tech industries along with innovation as a focus implies creation of intellectual property. Intellectual property can quickly devlove into what is referred to as "problem of commons" or "gridlock economy". In either case the innovation suffers and the innovator lands in trouble. To counter this, a quick-resolution mechanism for intellectual property is required - starting from registering unique IP, resolving disputes and trading IP. 
3. Government contribution: Government can give access to the international patents database so as to prevent duplicate research and ensure that when IP is granted in Singapore (certain class of IP) then it is really at the cutting edge of the stream and thereafter can be traded across the world.

Future of Work - Implications

It is well accepted that future work will be more like a free-agent rather than life-time employment at specific skill. It will be multi-skilled (may types of work at once), simultaneously (many jobs at once) and within multiple teams that come-together and get disbanded at hyperspeed. All this requires development of infrastructure. 

1. A skill repository is essential: The construction value chain is an example - the developer knows who is best architect for the job, who is a good contractor, electrician, plumbing contractor etc. and they all come together for a project (while some may be working on more than one project) to deliver a unique product. The question is why cannot other businesses do it. It is because transaction costs are too high. If there were a skill repository (indicating who has the best skills for a particular job) and it was easily accessible, then you could hire these experts easily (band and disband easily). 
2. Legal innovation required for future work: Future work also requires development of standardized contracts so that both parties are protected in such transaction. It also requires grievance redressal and dispute resolution mechanisms. It also creates a new set of jobs that addresses background checking, feedback taking, maintaining work histories and customer reviews. Lets say Singapore were to partner with Linkedin and augment the database Linkedin has with fact-checked database. Wont it be easy for prospective employers and service seekers to hire those people? Data on new skills sought by the employers can be mined, appreciated for long-term skill development and it can become input into human resource policy.
3. Safety net: With firms not able to help create employee safety nets, it may be required of the government to create a mechanism for these free-agent workers to bolster their safety nets. Some hand-holding and some compulsion may be necessary so as to ensure that longer lifespans are happier lifespans.

Second mover/ Fast Follower strategy for innovation

Seond mover or fast follower strategy made famous by Panasonic case in business schools has some merit for flexible economies. But sadly the fast follower days are over. These days winner takes all approach is dominant. A more relevant model for this era is the "long-tail" model. There is only one facebook. Singapore may heed the story of mySpace which was the first mover, but lagged in innovation and quickly faded into obscurity. For most of the industries Singapore intends to rely on, this is the reality. In such a case, a fast-follower or second mover strategy cannot help Singapore. In fact Singapore needs to be a leader and additionally be flexible to keep its advantage.

Globalisation and Regionalisation

Singapore is welcome in China as well as India. Singapore should use this advantage to develop supply chains which are regional and supply global products with these supply chains. Just like the Apple HQ is at Cupertino but production is in China, we can have highly value-adding HQs in Singapore and production in China, Vietnam Indonesia, India tc. Engineering excellence is not geography centric. The passionate drive to make your product superior can be recreated anywhere. What you need is an environment where entrepreneurs can fail safely without being judged harshly (socially more than financially).

I think the Future Economy deliberation has just started. Maybe if they could ask me for what I think! ;)

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Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms". 

Systemic faults in Capitalism & Democracy

Brief synopsis of my book "Subverting Capitalism & Democracy"

A consensus is emerging that the crisis of 2007-09 was primarily caused by following seven factors: the property bubble; explosion in debt; fragility and dominance of financial sector; weak risk assessment; monetary policy errors; saving glut in developing countries like China; and complacency and incompetence of regulators including rating agencies. The scale of the damage has been attributed to a perfect storm – a concurrent failure of all the above factors. However, we should ask why these factors emerged in the first place and why did all of them fail simultaneously. These are symptoms of a structural decay of the democracy-capitalism system. 

Finance sits at the top of the bargaining power hierarchy. Through a multi-tiered incentive structure, financiers influence virtually every aspect of corporate decision-making. The financial innovations, riding atop asset bubbles, pushed expected returns higher. It pushed the corporates to take even more risks on their balance sheets as Wall Street cheered on. High leverage, currency exposure, cross-country acquisitions, unrelated diversifications, exposure to exotic products, reduced R&D spending, experimenting with buyouts and share buybacks, etc left corporate balance sheets vulnerable. These dynamics fanned the property bubble and led to an explosion of debt. 

The concentration of power is not a design feature of the capitalist system. Our transaction-based economic system is fractal in nature and the concentration of power was simply an emergent property, an unintended result, of this fractal system. Over time, as countless transactions aggregated, the bargaining power concentrated with the financiers. Occasionally when bargaining power does aggregate with certain economic agents, the democratic set-up is supposed to provide the counter-balancing force. Governments or regulators step in to level the playing field. 

But, government waited for markets to self-regulate. To understand government behaviour, we have to view government and markets as competing systems addressing citizens’ needs. Governments create services for few and charge everyone through taxes. Markets are efficient, they charge as per usage. Hence, in good times, there is pressure on government to step back. At times, governments even abandon areas where markets are ill developed. Only in a crisis do we realise the distinction between the two. Markets are exclusive, accessible to only those who have measurable value to offer. Conversely, governments, by definition, are inclusive. Government is the right of the citizen while market is just a privilege. Naturally powers of the government supersede those gained by markets. The question therefore arises, why didn’t government use its powers? 

The root of government problems lies in the broken political system. The political system had the incentive to be silent. The cost of politics has increased. It is kept high artificially to restrict the access to political office. Naturally, the politician is now very attentive to her campaign financers. In the process voters are being denied their right. Voters choose their candidate from amongst those pre-selected by influential contributors. The voters don’t have a real choice. 

Governments, globally, have a strong election focus. The lack of genuine upper house in parliaments may have caused this short-termism. In a bicameral legislature, the role of upper house was to bring strategic focus and act as a check on the lower-house populism. Sadly, many nations have actually abolished the upper house. Where it exists, the upper house has become an instrument to repay political debts. 

The surrender of politics compromised the government and the regulatory machinery. The laws have become vague allowing room for interpretation and, consequently, rent-seeking. Laws can be compromised using, what is called, the necessary and sufficient condition problem. No matter how elaborately necessary conditions are written, there will always be a loophole. For example, imagine a case where mugging is defined as stealing at gunpoint. Gun is the necessary condition for mugging. Now if a victim is mugged at knifepoint, can the thief get away just because he used a knife instead of a gun? This is exactly what is happening in financial crimes. That mugging happened is sufficient condition. Laws must be based on sufficient conditions. We are about to make similar mistakes when developing a regulatory framework for too-big-to-fail institutions. 

The intent of the law can also be compromised within the details of the wording. No matter how finely you read the law, if the intent is compromised, the wording is meaningless. During the crisis, many financial firms have abided the law in letter and violated it in spirit. Some have even blatantly violated the law by paying an insignificant share of profits as fines. The legal system has not shown true appreciation for the intent of the laws. Hence the weakened legal system must also bear part of the blame for the crisis. 

Finally, blame for the crisis must also be allocated to the observer i.e. the media. It was the responsibility of media to explore and expose the possibility of this crisis. It is clear that media needs to be cleaned up. We must separate journalism from what is essential gossip reporting. The power of media, the access, the privileges, should be limited to journalists. We also need new business models to fund journalists. The current business models create harbour conflicts of interests similar to rating agencies. The democracy-capitalism system was envisaged as a self-preserving, counter-balancing structure protecting the interests of citizens or commoners. The factors we discussed above structurally weakened the system. This system is definitely not going last this decade. Now is the time to set it right.

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My book "Subverting Capitalism & Democracy" is available on Amazon and Kindle.

Measuring real value

What is a measure of real value?

Now we cannot measure value but in terms of money. It means all our measurement of value is relative. It is like measuring time in terms of heart beats - 1 minute is 60 beats. Now if you start running (say printing more money) then will you have more minutes? Of course not! We will have to adjust the equation of how many beats make up a minute.

Modified Gold standard or constant money
Let us look at the modified gold standard - modified for simplicity. The total amount of gold in the world would remain constant. We would keep creating more value. So there will be natural deflation. The amount of deflation will tell us how much value we created. This is fine overall but total amount of gold is not fixed. It grows arbitrarily. So when Spanish empire discovered huge silver mine (also used like gold) they had a problem. So will we if some buried gold is suddenly discovered. Further, as I argued in my book, gold promotes hoarding while slight inflation promotes transactions (or velocity hence GDP). So gold may not be appropriate.

I believe real analysis will only come if we use absolute metric for value. Why can't there be a debate about possible metrics? It is remarkable that for all the human progress we are not able to create an absolute metric for value. 

Krugman, Ferguson and/on Zakaria

Fareed Zakaria is one of the most insightful host and journalist. In this episode, the presents the two sides of Austerity vs. Stimulus debate. I have already presented my thoughts about Austerity vs. Stimulus.

I want to make a few comments.

First, only certainty can fight uncertainty. In times of uncertainty, like today, the objective of policy is to increase certainty. So a roadmap for reform and policy changes for 10 years and a political consensus (bipartisan or multi-party political consensus as applicable in each nation) and commitment is essential. So Niall Ferguson is spot on with this point. I believe any reasonable certainty will work rather than a specific austerity oriented certainty.

Second, we can kill certainty by acting without a plan - or let me rephrase - by appearing to act without a plan. Conversely, just by acting decisively you can create certainty. I believe the US president should split his speech into two parts - the unchanging goals and course correcting strategies. In both aspects he should communicate decisive action communicating certainty. A plan will definitely help.

Third, Krugman is correctly pointing out that stimulus has not reached the masses. The objective of stimulus, to my mind, was to create income certainty. Whatever the reason, the stimulus has failed to achieve this objective. In this aspect, I think Keynes is being misunderstood and then derided for what may be out-of-context interpretation of his ideas.

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My book "Subverting Capitalism & Democracy" is available on Amazon

Government and Markets are competing systems

After I shared the list of ideas (download from Scribd) I discussed in my book "Subverting Capitalism & Democracy" (buy on amazon) I have received my first feedback. Ellen Di Resta, an innovation consultant and a dear friend, liked my proposition that Government and Markets are competing systems. Understanding the implied competition is critical to understanding role of governments and markets.

I believe that both government and markets are will of the people. People express their opinion through votes and through prices. Today, voting is limited - at the most about 50% people vote. while  almost everyone, including the poor, are connected to the markets. It appears that markets are better equipped to solve or do as people want. However, there are differences. 

Firstly in the way we pay for services of governments and markets. Markets use efficient mechanisms (pay-per-use) while government uses unfair mechanisms (everyone pays - as taxes).

Secondly, markets are exclusive. They are open to those who bring value to exchange. The influence on market is proportional to the value you bring to the market. Government, on the other hand, is inclusive, more just. Everyone has the "right" to participate. Everyone participates equally.

I argue that since people participate in both, they often confuse their roles. This allows, I believe, expanding governments, weaker regulations and general dissatisfaction with the government about taxes. I believe we need to fix this to get to a better system. 

We should interpret the responsibility of government in this context.

Links

My book - Subverting Capitalism & Democracy on Amazon

List of ideas discussed in the book - on scribd (free download)

Ellen Di Resta

My book "Subverting Capitalism & Democracy" Launched!

My book "Subverting Capitalism & Democracy" is now available on amazon (kindle version and paperback version). I am not yet sure why kindle and paperback version are shown as two different books but I think it will be sorted out soon. Here is a brief introduction:

Subverting Capitalism and Democracy

What caused the current financial crisis? A lot of answers have been proposed.  But do we know the root causes? This book looks at the causes behind the causes we know. The micro-faults that subverted capitalism and democracy are still overlooked.

Today, finance dominates our socio-economic hierarchy. Sadly, we know less about finance and economics than we like to believe.  We must relook at the basic concepts of finance and economics. We need to know how large pools of money create systemic weakness. We need to ask why the media and the regulators were sleeping at the switch.  

We have to go beyond lobbying, beyond “intellectual capture”, beyond exotic financial instruments and ask the next level of questions. Only then we will reach the root causes. Now is the time to set the system right. I hope this book will extend the discussion towards a solution.

Now that it has shipped I can see a million mistakes in it, a billion ways I could have made it better. But what the hell! I look forward to your feedback to make second version a better one.

Some ideas on analysing Real Estate Developers

Real estate developers have been a significant part of value creation for investors. And they will continue to be. However, as times get difficult, it is important to pick the right developers to invest in. While these are logical, they are often ignored in my experience. I present an idea-Book looking into some key ideas while selecting successful real estate developers. Key points include:

• I believe first thing a developer must be sensitive to is business cycle. Irrational optimism leads to a fatal failure in preparing for eventual slowdown.
• Similarly, land bank quantity, quality and cost determine the future earning potential and growth of the developer.
• Developers’ also need an ability to manage through-cycle earnings for the company. In search of quick profits, developers often condemn the company to future revenue de-growth and lower or negative profitability.
• Cash flow management and debt structuring is other critical part of real estate business that can make or break the company.
• Lastly, I mention some ways in which real estate developers prevent value realisations for the listed entity.
• I hope these learning’s will be helpful. These do not comprise the complete list and must be used in conjunction with standard investment and valuation procedures and practices.

Please find the ebook enclosed below.

IdeaBook on Investing in Real Estate Developers