Defeat of a Nemesis from Childhood

In my early years, I would spend countless hours in trying to get my head around solving the Rubik's cube puzzle. Unfortunately, none of my attempts resulted in a line-up of the right colors on all six faces - The ultimate glory in the "cubing world". The repeated frustrations led me to abandon the game in its entirety. That is, until now.

On a recent trip to Hong Kong, I was in a toy store picking up a few toys for my kids. When I accidentally ran into a Rubik's cube shelf, the constant struggle that I had faced in trying to solve the cube in my childhood re-emerged. I immediately picked one up hoping that I could perhaps conquer in my adulthood what I could not achieve in my childhood. Well, it was not easy, but I can finally say that I now can solve the cube. The difference this time in my approach was the level of determination, and getting myself familiar with cube algorithms, which can be found online. I am attaching a couple of photos to show that the proof is in the pudding :-).

If you are also stuck in trying to conquer the cube, my success hopefully can fuel your desire and determination. Good luck!

-SP

Mystery of Capital Remains a Mystery

"Many westerners have been led to believe that what underpins their successful capitalism is the work ethic they have inherited, in spite of the fact that people all over the world all work hard. Therefore, a great part of the research needed to explain why capitalism fails outside the west “remains mired in a mass of unexamined assumptions labeled ‘culture’” - De Soto

I recently had an opportunity to write a book review on Hernando De Soto's "The Mystery of Capital". The author is one of the better economists of our time and has been an influential figure in changing Peru's economic system. More can be learned about him here.

I found the book to be very well written, and thoroughly enjoyed reading it. The book was convincing to me in many ways, especially since I have lived in both the developing countries as well as in the west for considerable periods.

De Soto's central claim is that it is not culture that prevents the developing world from turning into prosperous capitalistic societies, but rather the informal allocation of property. In other words, the disparity of wealth between the West and the rest of the world is far too big to be explained by culture alone. Because there is no formal property recognition system in the developing world, assets cannot be turned into capital to generate surplus value. After all, the poor in the third world already possess enough assets, generate enough savings, and have vibrant commercial industries, talent, enthusiasm and the “ability to wring a profit out of practically anything”. De Soto claims that the poor of developing world own $9.3 trillion worth of real estate. But their countries remain poor. Why?

What the author claims as the major impediment that keeps the developing world from capitalizing on their assets is that these assets are hidden in nature, and are not properly represented in the legal property system. In other words, these countries do not have a proper representation process to capitalize on their assets. Especially the real estate properties are built on land whose ownership rights are not adequately recorded. Without representations, their assets are dead capital. The author claims that capital is the force that raises the productivity of labor and creates the wealth of nations. The inability to create capital roots purely from the fact that the developing countries hold their assets and resources in defective forms.

The author summarizes years of research into the reality of life in places such as Haiti, Peru, and Egypt to demonstrate that the poor inhabitants “have houses but not titles; crops but not deeds; businesses but not statutes of corporation”. Without an integrated formal property system, no matter how many assets the developing worlds accumulate or how hard they work, most people will not be able to prosper in a capitalist society.

In addition, the author also mentions that the developing world is now benefiting from the communications revolution. As information and communications continue to improve and the poor become better informed of what they do not have, “the bitterness over legal apartheid is bound to grow”. Compounding the problem further, the economic reformers have left the issue of property for the poor in the hands of conservative establishments uninterested in changing the status quo.

I found that certain steps prescribed in the book are not concrete enough for concerned individuals to take advantage of. For example: To overcome the legal and political challenges of property reform, the author suggests that the leaders and the politicians need to visit people on the streets and communicate in language familiar to those at the grass root levels of society. The author suggests that once the benefit of property reform is well explained to those living in the extralegal sector, they will convincingly adapt to the reform proposals. The author does not talk about situations where there might be resentment towards such reform from the extralegal sector. What immediate benefit do the extralegals see in integration, when it is evident today in the third world that the amount of money being circulated in extralegal sector is huge? The extralegal sector doesn’t keep their money in their houses and they do circulate it to run vibrant economies. What negotiation tactics can the governments use to get the extralegals to build a vision? Would they be open to suggestion by these same leaders that have tried to suppress them in the past?

The author compares the situation of the developing world to that of the US history during the era of mass immigration from Europe. At that time, the US was plagued with lawlessness, anarchy, and huge number of people that disregarded the law and created their own social property contracts. The importance of this historical perspective is that the US government slowly began to adapt to the social contracts that were constituted by illegal settlers and squatters, and were able to bridge the gap between formal law and social contracts by carefully combining the two. The author suggests that the developing countries can learn a great deal from this lesson and try to enact similar laws that take into account the aspirations of the extralegal sectors and bridge them into the formal law.

Disregarding the extralegal sector as irrelevant can be disastrous and some level of compromise is needed, mentions the author. My view is that governments in the third world need to be careful in this regard, because the extralegal sectors might not have noble intentions for the common cause, but rather might try to trick the government for temporary monetary gains.

In the developing countries, the land that the squatters have occupied is usually owned by someone else within the legal means. It is just not possible to adapt a model from the US history and draft a law that transfers ownership of these illegally occupied lands to the squatters as long as they develop it into a capital generating machine. In the US historical context, awarding lands to squatters was possible because of the abundance of it; there was plenty of it to go around. In contrast, heavily populated developing countries are deprived of acres of land luxury and have to fight for every square inch of what they own. Giving away land to illegal occupiers for the benefit of society is therefore just not practical.

The book’s central merit is that property can be used as the means of obtaining credit in order to generate surplus value and further investment. Property can therefore be seen as generating a multiplier effect that produces compounding growth. He claims that through property reform, the poor too can use their assets to generate further capital, and if this continues, the third world will no longer be the third world.

Another interesting noticeable pattern in the book is that the author pinpoints the mass migration into cities resulting in extralegal activities as the root to untapped capital. The author does not provide much insight on rural poverty, or the cause of it. If extralegal activities in the urban settings give us a clue as to the underutilization of assets, what is to explain the capital generating inability of rural agricultural lands that these settlers have left behind? Surely, these agricultural lands would not have been used in extralegal settings; therefore what might be the explanation for rural poverty, which is much more prevalent in the developing world today than is urban poverty?

In other ways, I find this book to be a rare collection of convincing arguments. It provides for a fresh thinking as to what might be the root cause of the difference between the western world and the developing world. By painstakingly digging for details in a number of the third world countries, the author and his researchers have established that the third world does have a large amount of property. They have flipped through the history books to uncover the genesis of real estate as the capital generator in the western world. In spirited language, the author provides a blue print for a new revolution – property revolution. He states that one of the greatest challenges to the human mind is to realize those things we know exist but cannot see. The creators of wealth were able to reveal and extract capital from assets by devising new ways to represent the invisible potential that is locked up in the assets we accumulate.

Although a fabulously written book, an argument can be made that property rights alone will not propel the third world into a first world status. The issue of dead capital is only one aspect of the entire spectrum towards prosperity. Other pressing issues in the developing world such as lack of human rights, striking rate of unemployment, high rate of infant mortality and trade imbalance in favor of the developed world are all standing tall and need to be dealt with.

-SP

In the news

Dropping to this corner after ages it seems..

Some creative culminations from a batch mate (SG) that I thought I would put up here:

"

There's an imaginary management institute by the name of FIMWI (Fictitious Institute of Management in Western India). Some of it's popular faculty members have some specific traits which they display while teaching. Please use this quiz below to see if you are able to identify these "famous five" who are describing themselves.

1) I know that people buy a brand of shirt because the advertisement shows a female hand sliding down a masculine chest adorned by this brand of shirt. But they will never tell this reason, when questioned. I still want you to go out and find from people what makes them buy different products. While discussing a case in the class, whenever someone makes any statement, I have this habit of questioning it with a "therefore ?". When they come out with subsequent statements, I keep repeating "therefore"... "therefore".... After three or four "therefores", I suddenly rise from the instructor's table and say "why do you keep making things complicated yaar.. think basic. Are you an engineer ?"

2) Most of my conversations follow this typical sequence -

"This is bullshit.. pure unadulterated bullshit"

"I studied in IIM Calcutta"

"You have learnt nothing"

"I studied in IIM Calcutta"

"You guys are fools" (and be grateful about the fact that I told you this)

"I studied in IIM Calcutta"

"You make my blood boil"

"I studied in IIM Calcutta"

Do not go by my voice. I am a very aggressive person (like a doberman whose tail has been cut). Please be very scared of me.

3) Remember I told you "Nash was not well when he was working on his theory. But when he got Noble Prize for his work, he became allright". Didn't recognize me? Oh c'mmon, I also told you that I wanted morning sessions for my classes but this manager of PGPX first ignored my mails then messed up the schedule. Still not there? OK, I was the one who told you that "if I did not perform market will kick me or not", while making a backward kick gesture. "Kilear now" ?

4) When someone asked by Reliance do I mean RIL or RCOMM, I told them "No I took this data from Vault. Else it will become just..."
One of my famous quotes is "people do not leave organizations, people leave managers, so it is... upto the managers... to....."

Upto the managers to... what ? Are you telling me that I didn't make any sense. I don't know. I don't like to complete my sentences. I am from the HR area, not from Communications.

5) I worked for many years in industry before joining FIMWI as faculty. Whenever I ask a question in class, I follow it with a "quickly !".
For some reason (some people say it's the evening tea in dining hall), I want to meet students personally. My body has six degrees of freedom and I walk in all directions when talking to the class. I may tend to run into the instructor's desk when I am walking backward and talking to the class simultaneously. Sometimes, I may also walk sideways while talking and hit instructor's chair. Thankfully the ceiling of CR11 is quite high.

Please rush in your answers but do not expect a prize as we have a PND (Prize Not to be Dispatched) policy at FIMWI.

Disclaimer: This is purely a work of fiction. Similarities to any person are purely coincidental. This note has entertainment value only."

Oblivion at Its Height

After just having submitted a report at 2:30 am in the morning, I needed an outlet to vent, and thus am scribbling down a few points of discontent.

It has been roughly 1.5 months since the inception of term I and the brutality that we've had to undergo as a class has been second to none. For example, in the mentioned period, we've had:

2 Final Exams
1 Midterm Exam
6 Surprise Quizzes (with 1 hour advance notice)
10 Report Submissions

The endurance is being stretched beyond limits, and so is the patience. I have digested the extent of sleep deprivation to the point where going to bed at 3am, while waking up at 7:30am is now the norm.

Culmination of this madness leads to a fitting title 'Oblivion', as a result of not having set foot outside of the campus premises more than once in the last 1.5 months. Oblivion from the world outside, oblivion from society.

Raining Knowledge at IIM

It is only April and the heat seems to show no respite. Relief, however, is on the way in the form of a down pour of a different kind, down pour of induced intellect.

It is strange to be a student again, long after the mind has shut off or lost thousands of learning cells. Nine years in the corporate world seems to have done no justice to my analytical ability. The cold dose of reality was bestowed upon us the other day when after we as a class did not live up to professor's expectation while cracking a case study. This after burning the mid-night oil in preparation for the case.

Doing a course like this inundates an overwhelming feeling, and makes me wish that there was a guide on "How to Survive IIMA-PGPX". I might take up the initiative to write one myself and create ACCV, once I get through the program. What is ACCV, one might ask. Well, it is one of the new found jargons in my vocabulary, which stands for Assessing and Creating Customer Value. While we're at it, here is a list of rest of the jargons pouring down upon me in term 1.

Managerial Economics (Firms and Markets)
Organizational Behavior
Management Communication
Financial Reporting and Accounting
Assessing and Creating Customer Value
Strategic Human Resource Management

Absorbing this profound amount of knowledge in the time given is like asking someone to drink from a fire hose. Therefore, another critical skill I seem to have sub-consciously developed is the 'art of skimming' which, believe it or not, is an efficient variable of time management. Having said that, before I start to mis-manage my time, I better log off.

IIM Ahmedabad - First few days

I, along with family, landed up at Indian Institute of Management (IIM) Ahmedabad on a blistering hot afternoon, yesterday. Upon arrival, we were quickly checked into our MSH (married student housing) flat. After some initial disappointments related to the state of the unit, things are slowly getting to normalcy. We have been given a unit on the top floor, which surely is to get baked during the summer months.

I finished up my registration for the program earlier yesterday, and got my local banking needs taken care of as well. After getting some shopping for the household needfuls out of the way, I went and signed up for mobile phone service with Vodafone. Someone in our group orchestrated a group deal for the entire batch at quite an attractive rate, bringing smiles to all our faces.

I have met most of the partners in crime for the next one year. Having met so many people at once, I don't have proper recollection of their names but not too worried on that front since I practically will be living with them for the next one year. The collective mood is that of excitement, mixed with some minor anxiety related to the course rigor, and finally what sort of jobs we are to land thereafter. The placement statistics (quite unrevealing) have just been released for the batch preceding us and can be seen here. Naturally, a lot of discussions have revolved around reading in between the lines of this published info. Some additional statistics such as the min/max/median of the salary range, full list of recruiters, no. of indian placements vs. international placements have been omitted for reasons I am unaware of. Some information on this front will be obtained from the institute in the coming days.

The intense academic grind and the sleep deprivation that one is to face here is depicted in this video. Needless to say, there are sure to be memorable moments.

The message that the video portrayed was immediately confirmed when I was handed over an overwhelming collection of books (see photo) and other course materials that supposedly cover only the first term, two and a half months in length.

Xie Xie Shenzhen

I wrapped up my trip to Shenzhen, China on March 7, 2008. The city of Shenzhen, located just across the harbor from Hong Kong, represents a culmination of Hong Kong and of the not yet prosperous China. After boarding a ferry from the Hong Kong airport, I arrived in Shenzhen on a cool humid night. The immigration officials checked my passport for about 2-3 minutes, finally allowing me to enter.

Beginning the next morning, I embarked on a city tour to grasp what it had to offer. Part of the city claims to be new China, only to be taken aback by reminiscence of communism (lack of political reform). While exploring Shenzhen, a striking image that repeatedly presents itself is of officers in uniform, be it at the super market, traffic crossing, park, theaters, restaurants. Such an image could give a tourist such as myself a sense of security, while on the other hand, the paradoxical Pandora that surfaces is, are the uniformed officials really there to build a sense of security or do they reflect the image of a communist state that needs to monitor activities of its own people at all times?

It is worth noting that once a small fishing village, the transformation that Shenzhen has gone through is nothing less than remarkable. The infrastructure display in highways, buildings, bridges, the socio-economic factors, the professionalism, are all part of Shenzhen's success story. The point becomes even more important when one is reminded that all of this development was visioned by a government that is non-transparent, and the one that discourages innovation and creativity in its people. As has been the case under the government, the Chinese are still very much the type that like to 'follow orders', than to opt for creative solutions. Most of the multinational enterprises that have set up shops in Shenzhen have come to be realize this deficiency first-hand, while dealing with their newly hired cheap Chinese workforce.

The bureaucratic gridlock that plagues the government can be felt on the streets of Shenzhen. There are five people assigned to do a job that could easily be managed by one. There is someone at the front door to swipe your residence card on the machine, whereas the swiping could easily be accomplished by yourself. Given this, a question that begs for an answer is, does China have only manpower (its most abundant commodity) to offer as its contribution towards globalization, and towards attracting MNC enterprises?

Unless there is some transparency in the government, and unless the beaurocratic ways are tamed, I cannot imagine China on the same wavelength as Japan or as the US. It is unrealistic to expect China to continue to grow at 9% annual up tick on its GDP while in communism. However, credit does need to be given to the Chinese for crafting ideas such as special economic zones and tax free zones. This foresight, one of its kind, is now being adapted by other countries as well to attract MNCs. The country's accession on to the World Trade Organization (WTO) a few years ago, surprised a lot nay sayers, and while there is pessimism on China's continued progress, the country might have something up its sleeve to continue on, leaving all the pessimists behind.