Sunday, September 26, 2010

Wide Angle 41 - CWG, execution and cleanliness of Indians

Apologies for the break in writing. I know the third part of the write up on Great Depression is due. However, this particular thing has dominated the headlines so much that I am too tempted to add my two pence worth of thoughts on it. So breaking with the routine to write about the CWG mess, the Indian execution abilities and our general aversion to cleanliness. Once I am done with it, you will see what I see and that is all these are related to each other and have their origin in the way our society is and the mode of society/government we have followed since independence. Before we begin, this post is slightly radical and may offend you, if it does, good, it is meant to, to get a message across, sometimes shocking people works.
I am not in the least bit surprised by the CWG fiasco since we in Pune saw what happened on a smaller but rather accurate scale before the Commonwealth Youth Games. If the manager is same, you’d expect more or less the same results from the team right? I also believe that the foreign press jumped the gun, they should have waited for the last day to report – it would all have been cleared up by the last day – they were too impatient weren’t they?
Before I begin, please don’t conclude that I am one of those NRIs who think they are successful just because they have left India and thus seem to have “solutions” to all of India’s problems. On the contrary, I think of everything from the Indian perspective (since I plan to be back in some time), I feel proud that we have achieved some success in IT, auto manufacturing, space and some other stuff. I also believe that the demography is to our advantage for the next few decades as well – that is mightily under-recognized. I also believe that despite all its imperfections, our democracy and open society in the midst of so many problems is very encouraging. The only problem with India is its government – it does everything it is not supposed to do (for example running hotels and bread factories) and does not do pretty much anything it has to (example sanitation, providing security, making lives of people easier). Since we are improperly governed, we do not have rule of law as it should be and hence things are haywire the way they are. More on less government (which is my pet theme) later.
Back to today’s topic, the CWG is an example of how we are not at all good at execution. We are great with thoughts, excellent at planning and very insightful with our observations and comments. However, all that is left out at the door once you start execution. While we have been pretty good at execution in the private sector, I still feel we are not there. With such a big government presence in all aspects of life in India, we cannot expect the private sector to execute and improve everything. How does one define good execution? I simply define it as finishing something before time (at least 2 days in advance of the deadline), with good quality and within the cost defined at the start – cost, schedule, quality – the old chestnuts. Does anything in India that gets done (except for the Infosys “block” buildings) this way. No is the answer.
Before moving further, I would like to say that there have been instances where I have achieved good execution and sometimes bad and hence that gives me the authority of experience to talk about good execution. Execution is simply about getting things done. You need a plan, which most of us have. This part many get right but the plan is more often than not loosely defined and is not really a plan but a scheme of how to do things. Till here, the Indians are well ahead of anyone else since we create some excellent plans and great reports. So why does execution become such a problem? Very simply put, it is the lack of monitoring and re-planning and monitoring and re-planning again – essentially being on top of things.
Now since we often come close to good execution, someone at some level is being on top of things and working his butt off but it is obviously not the people at the top. My firm belief in these matters is that unless the leader (s) monitors all the time, things will not get pushed – like Lou Gerstner says “People don’t do what you expect, they do what you inspect”. The second very important thing that is missing in good execution is the unwillingness of leaders to get their hands dirty if need be. This is where the entire Wide Angle series more or less compresses it’s message and gives you – leaders cannot afford to live in ivory towers, cannot talk in the air and cannot simply expect that things will move along because they are in charge. Wherever that does not happen, things will go wrong.
I know I am talking tired old management clich├ęs here so let me get right back to my analysis and my original thought. I think good execution fails in our country because “work” is looked on only as something that buys you basics (if you are at the bottom of the pyramid) and luxuries (as move you higher). Work has to be to achieve something, it has to be an end in itself. If work does not have an element of “I built that” or “I created that” element attached to it and if it does not have “pride” associated with it, it will not motivate, it will only impose. One has to gauge work, look for gaps, fix gaps, pitch in if no one else is doing it, use the stick, yell, grovel, call 10 times a day if the work is to be done well. The only person who can do this on the team is the leader because everyone else is supposed to execute and won’t have the time nor the inclination or the abilities to do this.
The reason why people don’t “work” enough in India and many other countries also is about the PDI (Power Distance Index) concept from Wide Angle 23. The boss is supposed to be in the cabin with a PA (remember the imagery from Hindi movies) and barking orders, he cannot be seen to be creating slides or code for example. To reach that cabin is what work is for according to us (a prime reason why kids in Infy want to do a MBA and get out of coding?). Essentially this is associated with dignity of labor which is absolutely not present in Indians. There are “good” jobs and “bad” jobs and if one is stuck in a bad job, one is either doomed for life (in which case one will not work and probably drink and curse) or else one will change the job. As long as this is the view, “work” will not get done the way it is supposed to be. And this is what the caste system is about isn’t it? People will be stuck in their jobs because they were born like that and there is no chance of moving ahead, without that why would anyone be motivated.
The caste system is an extreme form of such a society but I hope you get what I mean. If the feeling of “hierarchy” exists and if that is too rigid, the people below in the hierarchy have nothing to gain by working for the sake of an outcome and will only look at it as a money making device. To not have this feeling in the team, it is the boss who has to stoop and be seen to be shouldering an equal burden with the people, if this does not happen, no one will be interested in executing well, they will just wait for a final yelling and grumblingly work. Hasn’t this been seen everywhere and isn’t it the same in CWG?
One last thing, folks, when you get a project with a deadline, please finish the bulk of the work in the beginning so that you can sleep at the end. I have learnt a lot from my spouse here, whenever we have a project like moving home (which we have done 6-7 times since marriage now) or anything else, she makes lists of tasks, then she makes a smaller list the next day and so on. The list is revised, reviewed and re-done every day or sometimes hour. We completed a move from Swindon (when she was 6 months pregnant) to London (for me) and Baroda (for them) in 1 week and we were idle on the last day because we had used this approach of execution.
So what does this have to with cleanliness you ask me. The whole execution bit completely ties up with the visible lack of cleanliness so visible in the public domain in India. I had gone to China Town in Central London and was extremely surprised to find it spank clean, well laid out and without any chaos (as opposed to Eastham). That pretty much sums up the difference. We have unclean public domains, it is because the cleaners are doomed to these tasks which are deemed to be “dirty”. The so called “leaders” of society, government, business in India are mostly men who would not lift a finger at home. If one cannot do one’s own work, how will one know how to execute complicated projects, all one will know is to talk big. The reason why me and my brother have been relatively good at execution is because we grew up in Mumbai (which is the most egalitarian city in India) and considering that our mother used to be ill, many times we had to do many of the chores at home for example cleaning the basin, toilet, tidying the house, dusting the house, sometimes doing the dishes, unfolding the folding cot every night and folding it back along with the “gaadis”. That brought the “instinct” of work within us and that is what helps us.
Did you get it, if you want your children to grow up and work well, have them do manual work sometimes, make them in charge of projects and give them responsibility. Finally, expose them to physical hardships, only then will they understand the “value” of each job (including cleaning the toilet which I think is one of the most noble job to do). The simple thing about dirt is, it is just dirt and gets cleaned by the brush – most of the Indian gentry likes to avoid dirt. I feel good looking at a sparkly bathroom or cleaned utensils or clean floor – isn’t a completed project or proposal the same thing – equivalent to a clean bathroom/floor/clothes? If you get what I mean, I think you will realize the reason why executions are a problem in our country.
I know this is a very radical thought, had to be said though, if we have to move forward, this has to change else we will see stinky photos all the time that the foreigners will throw in our faces.

Monday, September 20, 2010

Getting old, am I?

God save me, i am turning into my parents (if i can be them, that would be awesome, but that is besides the point). My dad and mom dont drink tea/coffee in the evenings because they cannot sleep if they do. I used to think that happens when one gets old but has started happening to me. Slept only 3 hours last night because i had coffee at 9.30 pm last night after having a couple of beers. Has happened a couple of times before as well (the coffee-sleep thing, not the beer thing). On the upside, had my first good dream in ages, where i built a very successful Consulting company and was being interviewed by Simi Garewal on TV with the wife.

Saturday, September 4, 2010

The Last thing i want for my child

Is what cooed one of my wife's "lovely" friends (her "friends" are typically the mums of other kids studying with him) while they were waiting to pick up their respective royal ones outside the Sapling Nursery in Pune a couple of years ago. Little Vedant (my royal one) was in Nursery then and the great race to join a "proper" school at Junior KG was about to begin. The topic under discussion was which school should our "special" kids go to. One of the schools under consideration was XYZ where apparently the teachers spoke to their kids in Marathi (The Horror!!). That is when the "lovely" friend said "That would be the last thing i want for my child".
So what is it about Indian languages that gets us "Arrived" crowds in India so riled about. To put it another way, what is it that everyone suddenly has this compulsive need to speak to everyone else who is from this class (wives of IT folks mainly) and to their little ones in English at home and everywhere else. I have seen this enough to rant about it. I am assuming this is going to get us Kothiwales less invitations in the "lovely" wives' homes but i have to say it.
I think the whole premise is that one should speak to their children in English because apparently it would give them a better platform in life and "improve" their spoken English and thus make them successful in life. Poppycock!! The entire Indian Junta successful abroad speaks excellent English and I can only hypothicate with empirical evidence that they speak native at home. I read only Marathi books till 12th though i studied in English medium where the language of conversation was Marathi, Hindi and sometimes Malayalam (when i was in Cochin). If i had spoken English at home, my granny would have given me one tight slap.
Folks, jokes aside, please consider this - your home is the only place where your kid will learn your mother tongue - do you hate your mother tongue so much that you want to deprive your kid of that learning experience too? Secondly, 95% of the Indian population speaks native, so are you raising your kid to only converse with the 5% that are like him/her? Of course, you assume that the child will get out of India after a while (as his destiny would be according to you), but what if the future belongs to India and the world comes here in 2030?
Our languages are rich in literature (every one of them), history and science (of the language) as well. English is like Java, a good language to conduct business in. Your kid will learn it and be fluent as well. Please dont deprive them of the richness of your culture which is translated to you via your language. I'd say more power to your kids, why stop at English and your mother tongue, let them learn as many languages as they can Tamil, Telugu, Haryanvi, French, German (Aah, i got your attention on the last two ones didnt I?).
Now, not mentioning the unmentionable, is this some sort of colonial hangover still within us that we think languages that whites speak are "superior" and the ones that us natives speak are "downmarket".
Hell, i believe my invitations have already dried up since i have spoken the taboo subject in our "Class". Ouch the kick on me behind hurts. Cheerio then, i am going to watch my English programs while reading my English book probably afterwards will watch my English movie (Oops..).

Thursday, September 2, 2010

Wide Angle 40 - - Lords of Finance - The Great Depression Explained - Part 2

Will not waste much time, moving on to the next part of the story. Bear with me for this entire feature will be long, I will make a third part of this and it will end there, hope you will find it interesting.

German Hyperinflation:
This is one famous story that you may have heard. As part of the Versailles treaty, Germany had to cede Alsaces and Lorraine provinces to France, it also had to cut down its army to 100000 and finally agreed to pay $12 billion to the Allies as reparations. However, due to weak coalition governments, country on brink of revolution, large residual expenses from the war i.e. pensions to veterans and war widows and compensation to those who had lost territories, the German fiscal position was precarious. In addition, the democratic governments took up new social obligations like an eight hour workday, insurance for the unemployed, health and welfare for the sick and poor. This led to an even bad fiscal condition on top of which they had to stick to the reparation payment schedule. To finance this gap, the different governments simply resorted to printing money.
Figures again – in 1914, the mark stood at 4.2 to the dollar, by 1920, the mark had fallen to 65 marks to the dollar. Over the next 18 months, the inflation slowed down and foreign currency speculators moved in $2billion into the country since this was Germany, the epitome of discipline and orderliness and it had to perform well right. A series of events in mid 1921 (French intransigence over reparations, political murders by right wing death squads) changed the tide and broke the confidence of public in the mark who abandoned it in droves. As the mark went down, Germany got caught in a downward spiral. Prices rose forty fold during 1922 and the mark fell from 190 to 7600 per dollar. By 1923, the inflation had acquired a momentum of its own and the demand for Germany to print currency was a major logistical operation – 133 printing works with 1783 machines and more than 30 paper mills. In a country awash with paper, the demand for currency could not be met by the official press hence towns and private companies began to print their own notes.
Over the next few months, Germany experienced the single largest destruction of monetary value in human history. By August 1923, a dollar was worth 620,000 marks and by early November, 630 billion – to think this had happened to the third largest economy of the world was what made it horrendous. Basic necessities were priced in billions – a kilo of butter cost 250 billion marks, a kilo of meat cost 180 billion and a simple ride on a Berlin street car, which had cost 1 mark before the war now cost 15 billion.
The impact of all this was that the middle class lost most of its savings and was reduced to penury, discontent rode high in the populace and foreigners made hay by buying major German assets because of the currency rate. For one hundred dollars, a Texan hired the full Berlin Philharmonic orchestra for an evening. This difference in living rankled the Germans and agitated them further against the Versailles Treaty.

Schacht to the rescue:
In stepped Hjalmar Schacht who was made Currency Commissioner by the Government to supersede Von Havenstein who was the Governor of the Reichsbank and ardent supporter of inflation. Schacht convinced the government to launch a new currency the Rentenmark which would be backed by something tangible – Land. The whole idea was to make the currency stable. Schacht waited for the mark to fall to 4.2 trillion to the dollar and then set the conversion rate of Rentenmark to 1 trillion Reischsmarks to 1 Rentenmark. The Reischsmark became so worthless that the government was able to buy back its trillions of debts valued at $30 billion when first issued for 190 million Rentenmarks equivalent to $45 million. This signaled to the world that the new currency was stable and the German public which had simply got rid of cash before now started to began to buy it back. Farmers, their confidence in money restored, began bringing produce to the market, food reappeared in shops and queues began to melt away. The currency was stable and hope was back.
The question of reparations still remained which was solved by a group of Americans led by businessman Charles Dawes. The brain of the group was Owen Young, the chairman of GE and now the president of RCA. The plan mainly laid out that the total figure of $12.5 billion be kept aside, Germany was to pay $250 million in the first year, to be progressively increased to $600 million by the end of the decade. In addition, a loan of $250 million was to be raised to help Germany pay the first installment and kick start the economy. If Germany failed to pay, they would get a year’s break so the currency would not be impacted. The result of all this was that the confidence was back in the German economy and soon, American money began pouring into Germany in form of loans thus swelling its currency reserves and making it increase its interest rates.

The French story:
France was in big fiscal trouble around 1924 with its currency dropping in value. This was mainly due to the short term bonds and loans that had become due for payment, chronic political instability (6 governments in 5 months at one point) and German reparations not coming through any time soon. Another reason was the unearthing of an accounting scandal by the Banque authorities in order to cover up for deficit in revenue by printing money but not showing it on the books. This was a temporary solution but it never stopped and when unearthed amounting to 5 percent of money in circulation. The government refused to raise taxes and the Banque refused to let go of some gold to balance the deficit. This led to confidence dropping in the Franc and the currency slipped from 5 Francs per dollar before the war to 30 francs per dollar. The currency was in balance now but the money was short. French efforts at raising loans came to nought with both UK and US refusing to lend them.
It is at this point that Raymond Poincare took over power in France and appointed Moreau as head of the Banque – the franc was at 50 per dollar. This appointment provided a turnaround in confidence and brought back speculative attentions and financiers’ money to the franc. The Franc started rising and went rapidly up to 25. It is at this time that Moreau decided to cap the rise of the Franc by fixing the rate of the currency. If the franc had risen too high, the value of French goods in the world market would have risen thus making exports uncompetitive and leading to recession. The Franc was kept in control by buying up other currencies with the enormous gold that France had. By mid 1927, waves of French capital that had fled to London or New York came back home with the foreign exchange held by the Banque at $500 million in pounds. At 25 francs to the dollar, French goods were the most competitive in the world and France was back on the Gold standard.

The British story:
Last week, I had mentioned that Montagu Norman not only wanted to return Britain to the Gold standard but also wanted to not devaluate the pound so that it could retain its prime status. Like mentioned before, between devaluation and deflation, Norman chose deflation thus leading to a recession. After 3 years, the currency had come back to within 10% more than the dollar. In 1924, the socialist government fell and brought the Conservatives led by Stanley Baldwin to power. Baldwin appointed Winston Churchill as Chancellor of the Exchequer. Meanwhile, most of the other countries had moved to the Gold Standard and Britain (Norman) was being pushed to join by Benjamin Strong. Keynes opposed this tooth and nail because he believed that joining would join Britain too much with American fortunes since they owned most of the gold. Instead, he recommended devaluating the currency so that British exports could be competitive again. At 10% higher than America, British prices were still too high and this would cause a problem when tethered to the Gold Standard, Britain would lose control over its currency.
The debate raged far and wide and ultimately Churchill called in a conference of a handful of colleagues and intellectuals representing both sides – Keynes being one of them. Everyone agreed that the prices were a bit too high but also that the best time was now since the economy was in good shape (Pound was at 4.3 dollars, though British hold over manufacturing had been lost) and Americans could help Britain with $250 million in loans. Finally, Churchill decided in favor of the Gold Standard, Norman was the Hero of the Hour as he promised to make Churchill the “Golden Chancellor”. The Pound went to Gold and its value was raised to 4.86 i.e. pre-war levels. Because the exchange rate rose, the prices of British goods rose outside as well and the staple export industries of coal, steel and shipbuilding were hit. Strikes resulted and tempers flew. This did not lead to flight of capital because there was continued inflow of capital was because of the high interest rates in London market and escaping the escalating crisis in France.
To keep this “hot” money from flooding back out, interest rates had to be kept higher than other countries for the rest of the decade. Everyone realized in 1927 that the return to Gold was a mistake because British manufactures were losing steam and competence in the international market whose prices were falling every year at 5 per cent. In addition, Britain was now tethered to the health of America which was now in boom and had lower interest rates thus keeping money in Britain, but the day the interest rates had to be increased due to domestic considerations, all this hot money would have to flow back due to Gold Standard adherence.

The American Story:
The country that came out the strongest of the war was also now in command. Its chief banker Benjamin Strong was also a very strong character who ran the whole show on his discretion. He was directly beholden to the other three bankers i.e. Norman (who was his closest friend), Schacht and Moreau. America had plenty of gold, its manufacturing was booming and its economy was going great guns because of new inventions e.g. the Ford Model T, the radio, the washing machine etc. The biggest thing that was booming was of course its stock market. The situation pretty much became like what we saw before the current crash. Stock prices went through the roof since money was cheap and everyone was getting rich. Every person started investing in the market and there were specialist loans offered by banks to stock brokers called broker loans. This was accompanied by land price booms, a strip of land in Miami that cost quarter million dollars before the boom was priced by early 1925 at close to $5 million. Everyone was getting in on the action and magazines were being run for housewives on how to invest in stock etc.
Keeping this boom going was the decision of the Fed to keep lowering interest rates in America so that Britain could keep on the gold standard with higher interest rates. This caused money to become freely available. There was a lot of resistance in Washington on the speculative “orgy” on wall street and in the country but Benjamin Strong felt that as long as prices were falling (there was a worldwide drop of prices of commodities due to more gold being available and good harvests) and the demand was high he could afford some inflation. Till 1928, everyone was expecting a crash and the Fed tried a couple of times to increase rates to dampen the market but could not succeed much. Any negative sentiment against the roaring stock market was seen as a statement against the American economy. Worst, this boom meant capital from all over the world was getting sucked into the stock market vortex in America thus resulting in a recession in Germany due to flight of capital. It is very telling that most of the bigger stock brokers liquidated their portfolios around the end of 1928 since they expected the market to crash. Joe Kennedy (JFK’s father) liquidated his holdings in the market because he heard his shoeshine boy giving tips on stocks which prompted him to say ,”The day I heard my shoeshine boy and my butler know as much as me about the market, I knew something was wrong and I had to get out.”.
The world was coming closer to a precipice, Britain was sustaining higher interest rates despite being in a slump, Germany was tottering on bankruptcy again due to flight of capital and America was living in a dream world from which it was about to wake rudely.

So much for this week, will conclude the story in the next part.