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 clichés 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.

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.

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..).

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.

Wide Angle 39 - Lords of Finance - The Great Depression Explained - Part 1

Back to sermonizing people. Long weekend in the UK and I am at home doing not much, reading and sleeping. BTW, go watch Piranha 3D, it is awesome – not for the faint hearted of course. Today’s Wide Angle is about the Great Depression. Everyone has read about the current credit crunch and has read and re-read analyses. The Great Depression was the big daddy of them all – the world has been living through booms and busts through centuries but nothing has come close to the Great Depression in terms of scale (destroyed most of the big economies), impact (quarter of the American population became unemployed during the height of the depression) and duration (lasted almost 10 years). In my quest for finding out answers to why this happened, I read a book called “Lord of Finance: 1929 The Great Depression Explained and the Bankers Who Broke The World” by Liaquat Ahamed. Ahamed has been a successful investment manager on Wall Street. And is currently an advisor to several hedge fund groups.
The book is the story of four Central Bankers – Montagu Norman the Governor of the Bank of England, Hjalmar Schacht of the German Reichsbank, Benjamin Strong – the Chairman of the Federal Reserve Bank (Fed) of US and Emile Moreau – the head of the Banque de France. These four were the heads of the Central Banks of their respective countries between the end of the First World War and the beginning of the Great Depression around 1929. It was their actions taken in concert and individually that led to the Great Depression. While these four cannot be held totally responsible, the policies and principles that they stood for and propagated eventually led to the world going into Depression pretty much the way the bankers today caused the recession with the “toxic” investments. I am going to lay out in a simple manner what exactly happened back then that caused such a massive debacle in world finance. For ease of reading, I will break this up into parts since the topic is long and needs explaining.

Some Concepts to Start Off With:
Here are the main concepts that I thought I now understand and that results in financial problems in the world. Firstly, inflation – this simply means rise of prices because of more currency being becoming available in the market due to either lowering of interest rates or through printing of more money by the government. If interest rates are lowered, more people opt for loans since the interest is less, banks lend freely and hence money supply in the market increases. If money supply increases, the thing that cost X would cost X+Y because of more currency in the market.
Conversely, if inflation is too high either due to high prices (maybe because of shortages e.g. the prices of food grains) then the government increases the interest rates to reduce the money supply in the market thus reducing the prices of things (or so they aim for). This is called deflation. Deflation can result in less demand for goods (more demand – more price, less demand – less price) due to which industries cut production and unemployment may rise. Governments and central banks always have to balance the interest rate against prices and demands in order to make sure the economy is neither too overheated nor too slow. This is what is typically called credit policy which our RBI governor announces from time to time.
Another concept is of exchange rate of the currency. In simple terms, if your currency is valued lower than others, your prices will be cheaper in the world market and hence your exports will be more competitive. If your currency is higher in value, imports will be cheaper because you will pay less for the goods. Every government is free these days to determine its currency value i.e. internal and external considerations are applied to discreetly decide on the currency rate.
However, before the Great Depression, there were a handful of powerful economies in the world (US, France, England and Germany) with lot of small sized ones and they all adhered to something called the Gold Standard. This simply meant that the value of your currency was in direct correlation to the amount of gold that your country had. The higher your gold holdings, stronger would be your currency. Also, currency could be interchanged with gold, for example France could hold a million pounds in its accounts which were secured by gold in the vaults of England. Theoretically, France could pay the million pounds back to England and demand its gold in return which under the laws of the Gold Standard was an automatic assumption.
The Gold Standard was a matter of high principle for most of the bankers of that era because it tied down governments to a tangible asset i.e. gold thus limiting their powers of printing money at will and thus maintaining fiscal discipline. This also worked beautifully because through the nineteenth century and up to World War 1, the discovery and production of gold was able to keep pace with economic growth so the currencies could be pegged to gold. Before the war, US owned 50% of the world’s growth while Germany, England and France owned around half of it thus maintaining a delicate balance in the currency and trade world.

Impact of War:
Before the World War 1, London was the financial capital of the world and acted as the bank of the world. It borrowed, lent, insured to the world economies and industries and the pound was the prime currency of the world. The economies of the four main countries were intertwined deeply with German assets in the Bank of England and French holding English assets etc. Most of the bankers thought that a war was simply impossible since the world depended so much on each other. However, the World war did happen and for four years, the battles were bloody and costly in France and Belgium. America was the one who profited most from the war since till 1917 they were outside the war and thus able to act as suppliers to the warring nations. This trade gave America significant amount of gold (transferred from UK and France) and they also ended up giving debts to UK and France. The economies of France, Germany and Britain were hammered because of the war and the dollar became more pre-eminent because of the surplus gold that America now held.
Some figures to quote before we move on that will give a view of the situation – the economic impact of the War on the major countries was that German and French economies shrank by 30 percent while Britain’s shrank by 5 percent. Before the war, the GDP of America was $40 billion per annum and was roughly equivalent to that of Britain, France and Germany put together. After the war, it was more than 50 percent larger. The gold held by America increased from half of the world’s supply to more than 75% of the world’s stock.
Additionally, to finance the war effort, different countries adopted different methods. The simplest method was to raise taxes on the population that would pay the bill but that was impossible. None of the governments even tried this, they resorted to borrowing first, then they resorted to most common technique used by governments at war – inflation, they simply printed more money to pay for the war effort. The supply of money in England doubled by the end of the war, it tripled in France and quadrupled in Germany. All these countries ditched their link to gold and resorted to inflation. Britain was the most responsible of the countries and thus ended up borrowing mainly from banks and the US, they resorted to less printing of money. France was between UK and Germany, they spent $30 billion on the war, $15 billion was raised through selling bonds to the middle class savers (French were notoriously good savers), $10 billion came from UK and US and the rest through inflation. Germany was at the other end of the spectrum, it simply did not raise taxes nor could it borrow from rich allies, so they printed money. Prices quadrupled and they ended up losing the war which made them subject to reparations.

Case of German Reparations:
The situation at the end of the war was thus – France owed Britain some money and owed lot of money to US. Britain owed money to US. France was extremely insecure about gold hence they had simply removed their gold and stored it elsewhere and resorted to government bonds for financing. Britain had gone the straightway and in the transactions with America, lot of its gold had gone to America. The bankers i.e. Strong and Norman (UK Bank Head) became good friends and they began to collaborate to bring the world back to the gold standard. Norman was the voice respected in the financial world and he was a fervent believer in the gold standard and the pound’s pre eminence in the world. Both France and UK wanted Germany to pay reparations for the war since it was the loser, they expected to pay off America’s and internal loans by German money. The mood in Germany was completely against reparations – France was more belligerent since it had suffered many casualties. This question of reparations haunted the world of finance for the next two decades.
Around this time, John Maynard Keynes rose to prominence by writing his treatise “The Economic Consequences of Peace”. In this book he argued that Germany was in a bad shape and to ask them for reparations would only cause bad blood. Since America was the richer power, it could simply loan Germany the money which Germany could pay to France and UK as reparation which France and UK could use to repay America’s loans. This would ensure all were satisfied and America got their money back after circulating. However, the Americans did not agree to forego the Allies loans and France did not agree to let go of German reparations. The demands being made on Germany ranged from $50 billion (German GDP was $12 billion) to $100 billion. Finally, the Allies settled at a first payment of $5 billion before May 1921. The Germans were also treated badly at the peace talks (no chairs were given for them to sit). This led to anger in the German nation and it was this anger that eventually caused the Second World War.

Path back to the Gold Standard:
If the main countries had to return to the Gold Standard, they would have to do a lot of restructuring since the situation with the gold reserves had completely altered. Britain had much more currency in comparison to the gold they held so they could not have their currency rate at the same level as pre-war ($4.86 per pound as against the rate of $3.2 now). To move towards parity, they would either have to reduce the currency in circulation (deflation) or reduce the exchange rate of the pound (devaluation) to reflect its current gold reserves. England chose deflation since Norman wanted to maintain the pound as the primary currency of the world. This caused recession and the British economy went through pain (job losses) for the next few years (till 1923) but the currency circulation was back to normal.
France had significant gold reserves and more inflation which it brought under control by putting a lid on more currency printing. It ran a budget deficit but its army of middle class savers ensured that the country was in good fiscal shape. Its only problem was the debt to America which it hoped to pay for by German reparations. The French were also mentally reconciled to devaluating their currency once they went back to the Gold Standard.
It was here again that Keynes came back with a stinging pamphlet called “A Tract on Monetary Reform”. In this he argued that the gold standard was now a “barbarous relic” which should be now be discarded because of the skewed distribution of gold and governments should be in full control of the decision to peg their currency rates in accordance with the domestic fiscal situation. His views were met with derision and especially opposed by die hard Gold Bugs like Norman and Strong. Time was to prove him right.

So much for this week. Hope you found this interesting to come back next week for the next part of the story. It gets fascinating to say the least.

Wide Angle 38 - Cats in the Cradle and Work/Life Balance

Had a “Marathi Manoos shopkeeper” moment in Stratford market today. For those of you who are not Maharashtrians, we are supposed to suck at business and the shopkeepers especially in Pune think the customer is the most “ignore-worthy” object in the shop. The entire attitude is, we have this much to offer, if you want to, take it else leave. The fate of such shops of course is “Sell them to a Gujarati/Marwadi” and then you are free to give lectures on why “Maharashtra lags behind in business”. I am quoting the God of Maharashtrians late P.L.Deshpande (humorist of extremely high caliber). So back to London, I walked by this open-air sort of shop which was selling fruits very cheap. I started picking up pears, the Englishman owner came over and told me curtly “Mate, go to the counter, they will serve you, don’t touch the fruits here else the arrangement will be disturbed.” LOL.
Today, I write about a very famous song which I think many of you may have heard. It is attributed to Cat Stevens but has been originally written by Harry Chaplin. It is called Cats in the Cradle. I am not going to write much about it, will just print the lyrics down here and then put my thoughts up on it. If you don’t have the song, please try and get a hold of it, it is not only well written but well sung as well. So here goes:

My child arrived just the other day
He came to the world in the usual way
But there were planes to catch, and bills to pay
He learned to walk while I was away
And he was talking before I knew it and as he grew
He said, "I’m gonna be like you, Dad,
You know I’m gonna be like you"

And the cats in the cradle and the silver spoon
Little boy blue and the man in the moon
When you comin home, dad, I don’t know when,
But we'll get together then, Son,
You know we'll have a good time then.

My son turned ten just the other day
He said "Thanks for the ball, Dad, come on lets play
can you teach me to throw?" I said, "Not today,
I got a lot to do" He said "Thats okay"
And then he walked away but his smile never dimmed
And said "I’m gonna be like him, yeah
You know I’m going to be like him"

And the cats in the cradle and the silver spoon
Little boy blue and the man on the moon
When you comin home, dad, I dont know when,
But we'll get together then, Son,
You know we'll have a good time then.

Well he came from college just the other day
So much like a man I just had to say,
"Son, I’m proud of you, can you sit for a while?"
He shook his head, and he said with a smile

"What I'd really like, Dad, is to borrow the car keys
See you later, can I have them please?"

And the cats in the cradle and the silver spoon
Little boy blue and the man on the moon
When you comin home, Son, I dont know when,
But we'll get together then, Dad,
You know we'll have a good time then.

I’ve long since retired, my son's moved away
I called him up just the other day........
I said "I'd like to see you if you don’t mind"
He said "I'd love to Dad, if I could find the time.
You see my new jobs a hassle, and the kids have the flu.
But It's sure nice talking to you, Dad,
It's been sure nice talking to you........"
And as I hung up the phone it occurred to me
He'd grown up just like me,
My boy was just like me..............


And the cats in the cradle and the silver spoon
Little boy blue and the man on the moon
When you comin home, Son, I dont know when,
But we'll get together then, Dad
We're gonna have a good time then.

END SONG

Sounds familiar? At least does to me. The Dad can obviously be replaced by Mom now since so many moms are also away these days (and consumed by the guilt of not being there for their children etc.). So what is the holy grail, is there a work-life balance that can be really achieved or is this simply a fad that has caught on. A lot of youngsters (at least in Infy) tend to quote this famous article by NRN that stresses about Work Life Balance (WLB) etc. I am not sure whether he really said or wrote it but I am sure it may have been in some context. I was asked by Venkat when I met him before joining UBS what I thought about Work Life Balance (first time I had even thought about it). Thinking about playing it safe and since this was Infosys where they seem to be touting this concept, I said “Yeah it should be there”. Venkat’s answer was interesting and something close to my thoughts which I will lay down here. You are free to disagree and follow your own path, like I said, there is no silver bullet for achieving this “balance”.
First and foremost, the entire term seems to divide one’s mental canvas into two distinct areas – work and life. So it assumes that there is no life when you work and there is no work when you are in your “life”. I think this is plain misleading, work is not something you are forced to do simply to make money. There is a degree of fulfillment associated with work. Don’t we feel good when the project is delivered, CSAT is high, attrition is low, engagement feedback is 7 or one wins a deal. I believe work defines life or at least the purpose in life and hence is extremely essential. Also, isn’t there work in the “life” outside work. There is the tidying of things, polishing of shoes, even driving to the mall which one may not like but has to do. So if one is to be objective, these two are completely diffused areas. When people think work-life balance, they mean more like work-leisure balance.
Now leisure is essential, but you cannot enjoy leisure unless you have worked and achieved. Doesn’t a drink with friends or a movie on weekend feel better if you have had a full week submitting proposals, delivering code or anything else you do and you have received reward for it. So there is no escape from work if you ask me.
Now for the neglecting children part and this is only relevant to people with kids here. I grew up watching my father work a lot, he travelled 2 hours one way in the Mumbai local trains and then came home and did some more work. I didn’t hate him for it, the image sits in my mind and drives me to achieve. Same for my mother who used to take penicillin shots every week but taught in school, won prizes for her projects at State level and yet would come home and crash because she was very tired and ill. Believe me, these images stick and inspire. So if you think that your kid is not happy with you because you are working too much, I say bunkum. Your kid will hate you if you sit around at home and do nothing but gossip or have fun (this is not a reference to house wives, they do much more “work” than us). So get rid of that guilt, it is not a crime to want to get ahead in life and wanting to achieve something and I firmly believe your kids will understand and respect you. And please for God’s sake, don’t try and compensate the kids with gifts for the time you are away from them, they don’t need stuff, they need you and you are simply teaching them bribery.
Finally, the panacea to guilt pangs that driven folks do face and which a lady friend of mine was distraught about is what I would venture to suggest. I had told her the same, don’t know whether it worked for her but I think it makes a lot of sense. It is actually based on a dialogue from the movie “Bluffmaster” where the doctor tells Abhishek Bacchan that he is going to die in 3 months. He also explains to him that he has spent 30 years with his daughter but what he tends to remember are maybe 30 really good moments that they had together e.g. a picnic, a movie seen together – it is not the quantity that matters but the quality of the time. Try and fit in those 30 great moments in whatever time you do spend with your child. In my case, it was the concepts that my parents taught me through stories/examples – self reliance, common sense, probity etc. which have stood me in good stead. I hope in my son’s case, it is the time the both of us played Mini-Golf together, the stories that I conjure up for him out of thin air and many more such moments. You can pick your moments too – your work life balance would be easily attained if you achieve glory (and gold) at work and spend those special moments with your loved ones in life. And of course went drinking, bungy jumping or whatever else that suits your fancy.
Please let me know how you found this thought. I have tried to be audacious and offer unsolicited advice here, hope it helps you .

Wide Angle 37 - Portuguese fervor and the conquest of the Indian Ocean

Interesting visit by David Cameron – most of the Indians in UK and US vote for the liberals i.e. Labor Party in UK and Democratic Party in US and ironically it is the right wingers i.e. Conservatives in UK and Republicans in US who court India. Anyway, did I tell you about an interesting encounter I had. Me and my family had gone to the Indian High Commission in London to get my family’s passports renewed. That day being a Friday, a protest by “Kashmiri” people was stage managed in front of the consulate. A group of about 20 girls and boys (girls in head to toe burkhas) were holding placards saying “India Quit Kashmir” etc. They were also holding posters with pictures of young men apparently “killed” by Indian Army. They had of course been limited to a fence and there was a cop standing next to them. There were video cameras and photographers shooting them and these folks were raising a huge ruckus. “India – Quit Kashmir” and of course “Allah-ho-Akhbar” etc. I don’t know what got into me, me and my son walked up to a distance of 10 feet of them and I started staring them in the eye. Most of them did not meet my eye, the policeman standing there (he was an Asian) got very nervous and was looking at me as if to say “Please don’t create any trouble”. We did that for 10 minutes, my son kept asking me “Dad, why are they shouting?”. We went back of course, but I felt great doing that.
Anyway, today’s Wide Angle is about something relatively unknown in Indian history. We of course know of the East India Company and how they eventually defeated and impoverished us. The precursor to that was the arrival of Vasco Da Gama in Calicut which we read as a sentence in our history books. However, I own and have read this book called “Empires of the Monsoon: A history of the Indian Ocean and its invaders” by Richard Hall who was a historian specializing in East African history. This book vividly describes the process of European conquest of the Indian Ocean and the complete alteration of world maps because of this. The process was started by the Portuguese and of course culminated in English dominance on sea waves for the longest of times. In today’s column, I will write about this process right up to the Portuguese dominance of our ocean.

The Ocean before European advent:
The Indian Ocean is relatively smaller in size and depth than the Atlantic and Pacific Oceans. It is also surrounded by the older civilizations i.e. East Africa on its western front, Arabia and West Asia, India and stretching on the East to Indonesia and Australia. The Ocean served as a major facilitator of trade of all sorts between these regions due to a major geographical factor – the monsoon winds. As we all know, the monsoon winds blow from the African coast to the India during the summers i.e. when we have our monsoons and they blow the other way during our winters. These winds were propellants for all the ships that traversed the ocean using pre determined trade routes. There was exchange of slaves, gold, precious stones, cattle, grains and everything else. The earliest voyagers included a highly placed Eunuch from the Chinese court called Zheng He who went as far as Africa from China (the Chinese have resurrected this figure to start laying claim to lands which he conquered – the Chinese believe that whatever was ruled by them once belongs to them).
The travel across the Indian Ocean was mainly anchored by Arab traders who had specially designed smaller ships called Dhows. These were made of wood and tied together by Coconut hide ropes. These could not be used for combat – they were only good for trading. Since the entire life around the Indian Ocean was fairly settled in terms of agreed treaties, exchange mediums and non aggression, the boats could afford to be non-combative. In addition, there were prominent coastal towns along these routes like Kilwa, Mombasa, Zanzibar, Calicut, Aden etc. This way of life that existed for centuries was soon to be shattered and completely overturned by a new pestilence – the Europeans.

Portuguese Fervor:
Portugal is a small nation and doesn’t count for much now. So why were they the first to find this route to India. We all know the story of the fall of the Byzantine empire (The Eastern Roman Empire) and the capture of Constantinople by the Turks which led to the closure of the overland trade routes to India for the Europeans. In about the beginning of the 15th century, the Portuguese, won an important victory in Ceuta which was near Morocco and a trading port in the hands of the Muslims. When the Portuguese saw the riches in this city, they could contrast it with the pigsties that were their homes and this aroused their curiosities to seek a route to the Indies.
The Pope had decreed a bull by which he had divided the world into two halves – the West for the Spanish and the East for the Portuguese. The Portuguese kings though being poor decided to go East. There was a general consensus that if one went down the African coast, the continent would end somewhere and the route to India would be found. About this time, Henry the Navigator began his rule of Portugal and it was under him that the fervor of ship building and undertaking voyages down the coast of Africa began. The whole nation was devoted to this task and newer and better ships that could have bigger and powerful guns (cannons) on them started being built. Each year, different Portuguese captains went farther down the African coast. Many lost their lives and ships but Henry’s persistence and inspiration drove them on. The ship building was a communal task and utmost secrecy was maintained by even the lowliest of citizen so that none of Portugal’s rivals could get access to the technology and more importantly the new maps that were being charted.
Eventually, till the time Vasco Da Gama made his ground breaking journey, the ships were big and well armed and the Cape of Good Hope had been found. The path was cut out for Da Gama to take it to its logical end. One more reason for the Portuguese push eastwards was the search of a mythical rich and powerful Christian king called Prester John. Henry and his successors wanted to tie up with this king and thus dominate the East for Christianity.

Conquest:
Da Gama first reached Kilwa after a lot of struggle. The locals welcomed these “Franks” but were only interested in trading. Da Gama was not interested in trading, he wanted loot and so when the locals refused to comply, the ships let loose barrage of ammo on the town. The locals had never seen such fire power and they simply gave up. The balance of power in the world had forever shifted by this one incident. Da Gama continued the same story by bombing one coastal town after another in Africa till he reached Calicut. All the while the Europeans collected as much stuff as they could. When Da Gama reached Calicut, he and his band went ashore. When they saw temples and images of Devki and Krishna (which they thought were different shaped churches and Mary and baby Jesus), they believed that this was a Christian kingdom and had to be Prester John’s kingdom.
Da Gama met the king Zamorin who was laden in jewels. The meeting was cordial, Zamorin gave permission to set up a trading base in Calicut. Da Gama was only scouting of course. The Portuguese realized that this was not a Christian population but a “heathen” one and so had to be destroyed. Da Gama went back to Portugal and reported all that he saw. He was commissioned a bigger fleet and this time he came back to Calicut well prepared. He docked near Calicut and asked Zamorin to surrender and convert. Zamorin simply laughed him off. The answer was a barrage of firepower that led to most of Calicut being flattened.
Now Zamorin was frightened and sued for peace. He sent a Brahmin lawyer for negotiations – Da Gama cut his nose and ears and stitched a dog’s nose and ears to him and sent him back. Eventually, the Portuguese cut a huge deal with Zamorin and took over all rights to trade from Calicut.

Aftermath:
We all know what followed, they found Goa and set up their rule there. The Indian Ocean was now dominated by the Portuguese ships which issued a pass called “Cartaz” to ships that wanted to trade. A ship without a Cartaz was looted and sank. Many a times, ships with a valid Cartaz were also looted. Eventually, the Portuguese were surpassed by the Dutch in Naval power and then the British who came to rule over the East. However, the process of colonization was started by the Portuguese who despite being a small, poor and ignorant nation dominated the coast of three continents and an entire ocean for two centuries simply on the basis of their ambition and fervor. Therein lies the lesson for us, this is what I lay out in my analysis.

Analysis and thoughts:
We have all heard of our rise now and all that. I have a simple concept to put forward. The Europeans were poor and it was the Portuguese fervor that led to them working hard and smart and taking risks and winning. During this time, India was rich and complacent, the people who mattered i.e. the rulers were busy in cavorting and having a ball. Having travelled so much, I see the reverse today – the Europeans go home at 5 in evening, what time do we switch off from work – I think never. This is where the nub lies – they were poor and hungry so they worked hard and won. Now we are poor and hungry – and we are working hard. If we play it straight, we will eventually dominate. Simple example – my son who is five years old beat the pants out of every kid in his class in reading – where other kids read 5 books, he read 20 and was given an award by the Principal. And the fun part was all my acquaintances expected this, “He is from India so obviously he has to”.
Bottom line, we i.e. us and the next few generations but especially the IT sector have a task of nation building, we are creating jobs for our people and transferring wealth back, if we believe that and keep at it, our mental health will be much better. This is our higher purpose in life – it is not only about buying the latest car, a bigger house or settling down abroad – our mission is to make our country rich again and like I said before a “Great Power”. For that, we don’t need chest thumping jingoism, just the quite confidence of the able who believe in themselves and their abilities. It is our time now, better believe it.
Please let me know your thoughts.