A TRUMPET WITH THE WRONG NOTE

“Donald trump calls for a total and complete shutdown of all Muslims entering the Unites States”. Could not believe these lines. Since these were spoken by a person who is a candidate for American Presidency.

It is not about Donald Trump or America, it is more about America and the world. If he would have said those lines earlier it wouldn’t have mattered. What matters is, now he has a significant support base, because of which he is a candidate. And hence these are the lines not from a fringe politician but almost from a significant segment of informed people in world.

There is a segment of Americans supporting him and there is a large segment of Americans who are silent. These two make a huge segment of American population. And that is most worrying factor. What come to mind often is the lines by Albert Einstein “The world is a dangerous place to live; not because of the people who are evil, but because of the people who don't do anything about it”.

And then there is another segment of Americans who are more ‘caring and humanely’ and they like Donald because, he is honest about his opinions and is very forthcoming about it. What it means is, there are lot more people with concealed venom, but he is one who is spewing it. So better to be declared poisonous than conceal the hatred.

This trumpet is no more fringe politician, he is closer to mainstream. And you, American people have made him travel the distance so far.

American values do stand as a lighthouse to the world. Lot part  of the world is in darkness. This hatred spewing is no more happening in some corner of the world. But in America, and that is a worry. It is a worry for people like us, who are non-Americans.Because having an island of hope is very important, because it can be the destination to which rest of the world can travel to. And that hope is the driving force in our lives when we face hatred around us.

Dear Americans don’t destroy our hope. Time to keep off this trumpet with the wrong note.

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END GAME CHINA VERSION 1.1, ENTER THE DRAGON 2.1

Over good part of last quarter the thinking part of the world was busy analysing the Chinese stock market crash and what the future beholds for the middle kingdom. We have done our bit of analysis and it is as below.

China and Chinese economy was the result of a globalised economy. The then Godfathers of the world economy prescribed nations to produce only what they are good at, and import stuff if it was made cheap somewhere in the world. Asian tiger economies were the first to make use of this precription, but China perfected it. China became the manufacturing back yard for most of the goods consumed in the world. The scale allowed it to reduce cost and supported by cheap credit the export boomed and so the economy.

But everything in world come with a shelf life, even economic models too. It now seems that this strategy has run its course and shelf life for this model is now nearing expiry date.

China mostly operated at the commoditised technology. Unlike Japan where the products are of high end technology Chinese products were mostly low end mass produced stuff. The driving edge of these products was cost. But increasingly nations found that this Chinese intervention in market was detrimental in the long term. Take an example of a case where a country is manufacturing ceramic cutlery. Now there are hundered or more companies making the same stuff. But a single trader importing the stuff from China disturbs the whole market. A single consignment from China kills the price in market. And margins of all the local players are eroded bringing hardship to employees and other stake holders. Obama was the first to realise it and gave thrust for manufacturing in America. Other countries followed. As more and more countries venture out to protect the local players and create jobs in their country it seems the whole Chinese economic model has run its course.

So what is in store for China?. The Gurus now started predicting the fall of communist party and even chaos in China. Is all that gloom for china? It doesnt seem so.

China has learnt that dumping cottage industry and low end technology stuff only antagonises communities and governments. The solution lies in moving up the technology ladder. For example today there is not a single Chinese company that come to our mind when we think about companies like GE, Siemens, Boeing, Komatsu, Caterpillar, Hitachi, Philips etc. These must be the new targets that China must now focus on. Nations also will welcome these products, unlike the commoditised low end technology products. High end Chinese products will drive down the prices of these MNC’s and these are products that play as a input role in the economic growth. And this will herald a new era of technological leadership in world. Life will not be same for so called todays developed countries.

But it will not be easy for China to make this transition. An authoritarian system is good for a assembly line economy, where there is no originality in output generated. Pundits say that to move up the technology ladder and innovation a free thinking society is must and not one which is trained to think through established matrix.

Chinese are one of the most practical societies in the world, and they will find their own ways.

Lets await for a China version 2.1 , because that is good for the developing part of the world..

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TECHNOLOGY AND ARTIFICIAL INTELLIGENCE CREATING A CEMETRY OF LOST LIVLIHOODS

In future if many do not get a job or do not even get called for an interview, Amelia and Watson may be blamed.

Amelia speaks twenty languages and can read and memorise a hundred film scripts in seconds. Watson has defeated many a quiz champions by huge margins.

It is obvious that prospects with these type of qualities can qualify thumbs down in any interview. Only that they are not humans. They are artificial intelligence software created by the tech bigwigs. Who can do multiple jobs at alacrity that will outmatch hundreds of brilliant engineers put together.

Robotics mixed with artificial intelligence is already wiping out huge number of outsourced basic jobs in Europe and US. Europe learnt its lesson hard when China flooded their market with cheap products. Many European businesses suffered due to the high cost of manufacturing in Europe due to the relatively huge cost of labour. Now the tables are getting turned back. Cutting it short many a jobs in flesh and blood will be replaced by codes and machines!!.

The web based selling platforms have now started selling also services on their platforms. Overall there is going to be lot of better ‘expertise discovery’ happening more efficiently through these companies. So first it was the turn of the small business to get hurt but now also the blue collar jobs. One may argue these platforms will help in better job discovery and more employment. The counter argument to it will be when more information efficiency is attained there will be also some resource reduction.

It is true that technology and net usually deliver more efficiency and create growth in business. But there is a certain amount of replacement happening with these and the problem is when the job creating is at a slower pace than the job destruction. The symptoms show that world is at the cross of this inflection point.

It is not that all on a sudden the roads are going to be filled with driver less cars driven by Google, but these successful demonstrations signal the extremes to which the things can go.

The bad news is all these are happening when the commodity markets are going through a bad period. So now all the positive sounds are going to be negative noises about the BRICKS..

There will be challenge for countries like India where huge number of young people are joining the workforce. Today, two-thirds of India’s population is under the national average of 26. One billion jobs need to be in market by 2022.

The impact of technology is much deeper than we think and has entered all segments. Machines and chemicals are replacing increasingly agricultural labour in all parts of the third world. So long as they were absorbed in the booming housing and real estate segments it was ok. But the problem starts when the spending is cut down by the young population impacted by technology and internet. Here is where instead of benefits now pain starts trickling down.

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THE TWIN VICIOUS CYCLES STOPPED BY PRESIDENT OBAMA

Much has been written about the vicious circle which the US was in while issuing the govt bonds which were lapped up by China. And the ever present budget deficits required even more govt bonds and more market access to China in return for purchase of the govt bonds.

Barak Obama put an end to it by supporting manufacturing activity in US. Making it less dependent on Chinese imports. Manufacturing helped create jobs in U.S and increase govt revenues. Reducing the need to feed on chinese financing in exchange for market access.

It was another time matured vicious cycle operating in the energy markets across the world. Oil , War and military industry. It was hugely economical for the oil producing countries to have always a burning pit in their backyard. The investment needed for the scale of violence was always very small. Small dollars here and there. And this always kept the oil prices very high. A perceived tension in middle east always cast a risk on future supply of oil and this increased the oil price. The perceived threat due to the small small smoking boulders helped the middle east countries to justify for the heavy military spending. Big ticket military purchases helped steady flow of grease money from the armament companies. U.S arms industry was happy, shareholders were happy, the Sheikhs were happy ( Read good revenue from oil and ‘side’ payments), Israeli was happy because American Jews were happy, American Jews were happy because their shares in military industry gave good returns and they are also in energy trading. A small round of shell cost nothing but a shell going off in Beirut or Syria gave huge returns to all the above stake holders.

Problem started only when someone else also started playing the same game. And this time it was Russian president Putin who wanted ticket to play the same game. He already was a player with his own play in Syria with some flying birds there.

It was then Putin realised lobbing a dozen shells to Ukraine cost nothing for him, but it will keep the CIS, Caspian energy markets to boil. Good returns to Russia. And good excuse increasing military spending too. He realised this was a all profit game with little loss.

Any game has no value if the trophy is not coveted anymore. Obama decided to stop playing the game. There is no more fun when others understand the trick of the game and start playing the same. He decided to kill the trophy. And here the trophy was Oil. First step was to make it plenty available. With good institutional support domestic production exceeded U.S demand. And the next big step was to release Iranian crude to market. Now this meant if someone plays to cut short supply he will lose the market share. Israelis, Sheikhs, Jews Russian all are unhappy. But unlikely that this is going to be like this for long…too many unhappy people….and the investment needed for the happiness is too small ….a couple of shells to lobbed here and there….Putin had only begun his game, he will not allow the game to be over soon……That is why I started buying energy shares…..

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MOON-SHOT STRATEGY FOR GREATER VISIBILITY

Google declared that it scrapped the Google glass strategy. However, the driver less cars and balloons to take the internet to faraway places is continuing. Amazons drones are still hogging the limelight. For laymen the Google glass project will look like a project gone waste with lot of money wasted. And the balloons and drones will look like ‘ideas of the imagination gone wild’ and a waste of shareholders money.

But lo…some of the brilliant minds in the world, are they wasting money? Answer is no.

There is where we need to understand about the moon shot strategy.

In nutshell this is nothing but publicity efforts of the company. What come as a news item about a company gets more attention from the stakeholders than the paid advertisements. The business media is always on a prowl for news for their consumers. As the ‘reading quotient’ or the attraction for these news is big for their readers the media laps up on the news about these net gen futuristic looking consumer items.

If organisations are to spend for advertisement, this is a lot of money and the impact is always not as big as it can be with the lime light from the “moon shot strategies”.

In addition, occasional news springs about these futuristic ideas in ‘flesh and blood’ like drones or wearable computers give a huge credibility to the company. Investors are on the lookout for the companies that can last next couple of decades and a foot print for the company in the next gen ideas give boost to the ‘pipeline product’ case of the company.

Time to think what if your companies ‘moon shot strategy’?

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HUMAN MATTER IN ORGANISATIONS

It was particularly distressing news in some in media and the followed by clarification of a technology company, on people retrenchment. Many are waiting for cues from the leader and the action from leader become an excuse to let loose trigger happy people managers. What was more disappointing was that the company in midst of the controversy is otherwise a most respected group. And this has given more legitimacy for rest of the crowd to take sword. Today it is possible to get an office boy and an IT professional at almost the same salary level. Huge number of professionals is on the road looking for the jobs.

The biggest and the cheapest raw material that a country like India has is Humanity. And all these ‘Human Waste’ expelled out from all these ‘respected’ companies is creating a different type of pollution.

We need to understand the reason for these announcements.

Historically market cheers to cost reductions. It is a regular feature for the wall street companies to announce cost reductions when the environment is challenging. Analysts focussed on profits always love these announcements.

Only way to stop this from happening is to disincentivise this action and reward the reverse of the same. Ie organisations need to be rewarded for their ‘human matter’.

It is a high time that an independent agency does a rating of the companies on their ‘Human Matter’, beyond those big sounding lines in the front page of the websites.

And if general public who are the retail investors give a thumps down to those stocks with less ‘Human Matter’, there the organisations will become more respectful to the People.

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ADULT IS CHILD OF KID

In olden times, means two decade before, funny the rapid change in world around us makes a twenty years like a two century gone by, and in those times knowledge and information had a gradual linear growth for human beings. A child will know much less than a teenager and teenager will know less than an older adult. Technologies remained static for a long period of time and mostly did not change between the generation levels. The number dialling telephone remained same between the father and son and son learned the use of it from the father. A chid remained a child concerning the quantum of knowledge and information he was having. With the type of disruptive technologies around all that have changed. Father and Child is both a child in front of a new technology today, both are learning many new things same time today. And many cases father is a child to a kid, when coming to new technology and application. Today parents are introduced to many new things by their kids, in other way, child is becoming adult of parent.Type your paragraph here.

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ZUCKERBERG- THE CEO WITH THE BEST ‘FUTURESCOPE’

Telescope, Compass, Rudder are instruments used by sea going captains from the ancient times to steer their ships. A telescope gives a good idea to the captain on what lies ahead. And compass and rudders helped to steer the ship direction to avert dangers in the path.

More or less same functionalities are used by the today’s business captains to see what lies ahead and change course directions to avert catastrophes.

The sea of business is full of wreckages of once business powerhouses but today floating debris. Reason being the captains did not use these functionalities.

One such organisation where the captain is constantly using the ‘futurescope’ is Facebook. Zuckerberg is constantly scanning the environment to understand what can be a potential threat to his business in future. A testimony to his vision is the acquiring of WhatsApp. This was one potential business that could have killed Facebook like its predecessors Orkut etc.

Yesterday it was widely publicised Zuckerberg’s New Year resolution to read more books. In his own words as below..

“I’ve found reading books very intellectually fulfilling,”, sharing the challenge he has set for himself for 2015. “Books allow you to fully explore a topic and immerse yourself in a deeper way than most media today.

And the post also mentioned the books that Zuckerberg chose to read…and on special mention was ‘The End of Power’.

First let us see why is this resolution to read more by Zuckerberg?

Big businesses first build up successful products fulfilling basic wants or luxury needs…

The challenge is when the products start getting into habits in the customers. Examples are the negative comments about the burger and the fizzy drink companies. The recent promotional and endorsement visit of one CEO to an elected politician became an unintended publicity catastrophe, when the politician asked to reduce the sugar content in the company drinks.

Unfortunately these ‘opinion trends’ in the consumer ecosystem are not easily predictable. There is no analysis software or algorithms that can help here. Only the CEO’s “FUTURESCOPE” can help.

And in many cases even the respectable companies are reactive than proactive…

They start talking about the low calorie versions, healthy foods and healthy eating habits, sponsoring related talk shows, marathons etc….

However, a reactive strategy is always very expensive and may not give the intended results.

Here is where Zuckerberg is really admirable…

World over there is a lot of clamour happening on the way the social media is impacting the personal relationships and some habits. Reading books is one habit which is very seriously going to be impacted with the explosion of the social media hangouts…

The most read author in recent times in India, Chetan Bhagat said that he thinks the social media as his main challenge and not other authors. If this is the case of the successful popcorn fiction writer then what is the case of others?

Zuckerberg realises this. World over book distribution and brick and mortar stores are blaming the e-book sellers for the reduction in business. But the fact is books are competing with the social media for the free time of the readers and the former is losing the fight to later.

Zuckerberg understands this and the reason for the sudden interest of him in reading the books. A very proactive tactics to diffuse a potential future negative public opinion.

And why the chosen book End of Power?

In Zuckerbergs own words “It’s a book that explores how the world is shifting to give individual people more power that was traditionally only held by large governments, militaries and other organizations,”

And who is giving the individuals this power? No one else than the social media. Therefore, the Facebook CEO tries to endorse the importance of his company by projecting it as a tool of common man’s power.

Well done Zuckerberg …well done…

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SOME NON OIL LUBRICANTS FOR THE SAUDI ECONOMY

Now it is universally acknowledged fact that oil prices will remain depressed for a long time for not one but a variety of factors.

Global experts are predicting a gloomy situation for the oil dependant economies. Their predictions ranges from getting bankrupt by 2018 to regime change in some countries.

In the light of the above what are the steps that need to be taken by the oil dependant economies.

Before getting into solution mode, it is good to start with a story. In the state of Uttar Pradesh, in India is a huge building complex called Bara Imambara built three centuries ago. The story goes that the complex was built during a ravaging famine. And it was built to provide employment to the poor people. And during the day, while the poor buil the complex the king directed the noble men and elite to destroy it in the night. An earliest and crude form of fiscal stimulus....

The moral of story is, in times of impending crisis , conserving resources and cutting down spending may not work. As of now public domain is full of spending cuts planned by the kingdom. Actually what is needed is redirecting the resources from the traditional areas to new areas.

Another news is about expelling the foreign workers and filling the posts with the nationals. Here again what is actually needed is the repalcement of skills. The skill set required today is different from what is availiable in country. So a new set of people are needed while oppurtunities may cease for traditional jobs. Infact this is the time the country needs good talent who can help the country ship out of the crisis. And if Indians lead Microsoft, Google, Pepsi means there is talent in India. Only that these are a different class of people. But the type of employee unfriendly messages in public domain only will repel these class of people. National competitiveness will be severely hurt if skilled and talented people are not part of the game. Innovation will thrive only in a diverse ecosystem.

World trade today is about a lot of give and take. While countries like India are trying to derisk and diversify their oil basket, India also can be reminded about a large population of its countrymen making their livelihood in the Kingdom. Kingdom also can invest in the people intensive industries in India to get brownie points from the government which will help Saudi retain its market share.

Also the sovereign investment from many of these oil rich countries are not countercyclical in nature. If one invest in agriculture with the oil money, this essentially is not a countercyclical investment. Because the commodities always will be together whether they are in the upcycle or downcycle. But if the investments are in the fertilier or airline industry. These are investment which will give good returns when oil is turning bad.

Infact a lot of this might be happneing in this direction, but only the kingdom is missing in projecting it in the right way. To put it point blank, what is missing is the branding of the efforts.

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THE BREWING FINANCIAL TEMPEST

Did the world really face a economic disaster after the great depression? All the issues that the world faced post WW II like Asian crisis, subprime crisis are all minor tremors when compared to the great depression. But if we look at the disruption the market places are going through in this decade, it seems there are many a reasons to believe that something is in the making. Let us take each one of the factors that may contribute a very big shake up.

The E-commerce revolution   

What it seems end of the day E-commerce will take out more than that it gives. Imagine thousands of people shopping while sitting at the comfort of their home. No vehicle and driver needed to take them to the shops. Hypothetically If all these 1000 people went same time for purchasing several shops are needed to cater to them. Since at a time there can be only a dozen people that can be entertained at the counter. But now all that needed is a small screen and a internet connectivity and in five minutes thousand people can complete their purchases. Only people intensive part here is the delivery boys who bike to serve the customers. But with integration and sharing happening there can be theoretically only one huge logistics behemoth catering to all the E-commerce companies. (This may be the reason why most of the ecommerce companies are spinning off the logistics as a separate company). And when people go to market to buy the things they need, they also end up spending money on other things like food. But now with less travel needed to buy things, there are other businesses also that can be a dampener.

Traditional brick and mortar shop have no idea what the sales of the day will be, and hence they stock the products based on the best of the forecast possible. But in the case of the e-commerce companies the forecast of very often to the 100% accuracy of the demand. Since they cater to an order which is already placed in the system. There is need for less storage place and less of wastage. Or due to the removal of these inefficiency there is additional buffer released to market , which is further increasing the supply.

Imagine what online booking has done to the air travel. There was great price discovery and airlines had to compete on price to get passenger load. This ate into their margins and resulted in the current decade long loss for the airlines.

Within and in between the online marketplaces, there is great opportunity for price discovery and this making the traders cut the prices to bottom. While customer is making a killing margins and getting thinner and thinner for traders.

Oil and commodity crisis 

All of the above factor is leading to a lower requirement of energy and resources. The commodity economies like the brazil, russia and the middle east are in trouble because of this. This is impating the welfare profgrams of these counteis and demand in general. Further stifling the few avenues for releasing the glut in supply.

Energy efficiency 

Prospect of 200 Dollars a barrel for Oil and Ukraine crisis taught Europe one critical learning, that energy dependancy on fossil fuel can be a very big strategic threat for them. And dependable energy supply was always a big gap for Europe. And Europe wanted to bridge this gap and they have used technology to bridge this gap. Technology and mastering of science is one area where traditonally Europe has been a winner. Automobiles and fatories started reinventing process and procedures to consume less energy. Also big time effort was to harness energy from the nature, be it sunlight, wind, nuclear energy or tidal waves. There are cities and town in Germany which are powered by the offshore wind farms.

Europe and aging 

Wants for old people are less, their spending habits are much humbler than what they were in their younger days. And if rich people get old, already they have seen most of the luxuries in their younger days and some of them develop an aversion to luxuary. They become less interested in experimenting. For example very rarely they do change their car which by now they are used to. And so goes with the coooking range and T.V. They seldom change what they have used to live with. This is exactly what is happening in good part of europe, Japan, Canada, Russia and U.S ( Except for its new immigrants). Unfortunately these are also the richest nations in the world. And if the rich man do no spent the poor go out of work.

The only exception to all these was China and India. Where there are a lot of young population and become the consumption centre for the world. For a while it looked that the centre for consumption has just shifted from other part of the world to these countries. Malls and housing complexes came at frenetic pace in these countries. But now the population in China is aging and there are four people saving for one child. Grand parents and parents taking care of a single child.

Both in China and India the economic development did not help in greater income distribution. The tickle down impact of the economic development was not as impactful as has been projected. So the new wealth got concentrated wiith only few hands and few mouths. And there are limits of consumption for a single individual.

Automation and artificial intelligence: 

During the millenium decade, walk into any malls in mumbai or gurgaon and one will see teaming population of young men and women chilling out . Both the partners will be earning on an average 800 USD per month and the money was in the hands of segment who was throwing it as soon as the salary touched their bank account. They thought the bliss is for ever and saved very less. The same people are now in their thirties and they face a different world. Suddenly automation and artificial intelligence started taking away their jobs. And then there is almost twently million new mouths entering the market who are willing to work at much lesser salaries. Many lost jobs and who are employed are now employed at much lesser salaries. With a retrenchment looming over their head and lesser salaries the new mouths spent much less than their previous colleagues.

The Ecosystem which was depending on these spending youngsters began to suffer. Now the malls bear a look like the honey comb without of course the bees.

There are lot of paper works in the reasons behind the great depression. If we read , what we can make out is the root cause was overproduction due to technology improvements. There was a glut in almost all products which could not get into the customers.

And if we read through the above part what is clear is, there is soon a glut in production inventory in making.

Technology is creating huge synergies and glut in market places. But there are demand dampeners killing avenues to dispose these glut in inventory.

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KERALA- A GREECE IN THE MAKING IN INDIA

When a big tree fall the ground shakes, so goes the saying. Also going to be applicable to some satellite economies hitherto dependent on the big oil countries.  The state of Kerala in India is a similar case. For close to two decade the wealth in the state was all from the expatriates living in the GCC. Both the ‘left’ and the ‘left of the Centre’ governments used to take credit for the better human development indices the state was enjoying. World renowned economists many often praised the Kerala Model of Development.

But in actual terms all of those were the ‘trickle down’ effect from the revenue flow from the rich expats in the GCC. Now with all those economies going to have tough time due to low oil price, revenue for the state is going to be a trouble.

Unfortunately the political brass is like the musicians on the deck of sinking Titanic. Still dolling out goodies for the population.

Serious problems ahead for the state

·         Remittances to the state are going to be a trickle now due to the serious financial trouble in the oil economies. All those countries themselves will struggle with their budget deficit. This will have a cascading impact on the several livelihoods, direct and indirect in Kerala.

·         The revenue for the state will further chill down due to the reduced real estate and other ancillary activities.

·         The fall in income from the gulf cannot be substantiated from the now increasing keralites opting for Europe and ANZ. This is creating a reverse flow of capital from the state. The second generation is completely shifting to these countries selling off their properties in Kerala.

·         Government will find it very difficult to manage the various social spending wisely and unwisely started over past one decade.

·         There is a huge middle and lower middle class now coming back from impacted countries. And there are others who lost their livelihood due to this impact, like the taxi drivers who used to ferry these past rich NRI’s. They will start soon burning in their mind.

·         Social tensions will increase between the classes and castes in state. The impacted population will not like the govt spending on other listed castes and categories. Hitherto no serious issues were in state due to seemingly unending money flow from the GCC. This helped the large part of population who were not in government spending schemes.

·         It will be like burning at the two ends of a candle since the rubber prices are also down and not going to increase in the near time, again due to the oil related issues. Synthetic rubber will be cheaper than the natural rubber.

·         A huge number of small and medium startups in the state, which are still in the nascent stage like the kudumbashree projects also, will fail due to the demand dampeners mentioned above.

·         India seems to be a bright spot in the world but unfortunately Kerala will not get any dividends from the India growth story. Also remember the state did not suffer in last five years when it was a painful time for Indian economy. Kerala has since long disconnected from the rest of India and is part of the world economy now.

·         All this really do not mean that people are going to be poor all on a sudden. Over the past two decades there is a full generation who got wealthy and can withstand many bad years. But very soon the poorest man in the state is going to be the government. A poor state housing some of the wealthiest people in the country.

·         In other way Kerala is going to be the Greece of India...


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