10 lessons from apple

Fantastic feature in Fast Company, on the lessons from Apple.  Not worth cutting this, read the full text here

Education: Worse to Bad

TIE has formed a special interest group (SIG) on education, which is great.  I wonder why we don’t have a lot more SIGs in Bangalore – ostensibly the silicon valley of India.  Perhaps entrepreneurial activity in the city isn’t all that it is cracked up to be?

Coming back to education.  A couple of quick observations:

1. Scale continues to be the biggest challenge for entrepreneurs.  Whether in terms of students, teachers, infrastructure

2. In the quest for scale, quality seems to be taking a back-seat – the general focus still seems to be on improving the masses and improving employability.   This is not to say that there are no quality players – there are several – but they are a marginal voice today.  This despite the relative lack of price sensitivity in the sector.  I see this with a lot of schools too – a desire to replicate the model, but not the soul.  Sadly, a DPS in Bangalore is not considered the same as a DPS in Delhi

3. Technology provides some opportunities to address both scale and quality  – but not many people have cracked the model so far

4. Regulations are improving, but are still a challenge.  Most entrepreneurs are forced to work outside the mainstream – or find areas where there are currently no regulations (e.g. e/m learning, test prep, primary school etc).  Alternately, you have to find a way to work extensively with government (e.g. Educomp)

5. Supply is improving.  We’re still on the upward part of the hype cycle – so there is a lot of entrepreneurial and VC activity in the space.  Several models are being experimented with

Overall, its not time yet to bring out the bubbly.  But things are improving.  As one panelist put it very well, things are going from worse to bad.

There’s still hope!

Independent directors

In a wonderful piece today, Prof Raghunathan argues that the concept of independent directors is an oxymoron.  And, that given their current state of involvement in the company, it isn’t reasonable to hold them accountable for the performance of the company

The very term independent director is a laugh! You can either be independent or a director ; rarely both!…many independent directors open their mouths in the meetings only to pop in a cashew…

When an independent director acts truly independent on a board, his infamy spreads fast, and not only is he out after his first term, he also finds himself unwelcome in other boards as well. So Darwinian adverse selection has mostly rooted out that breed already. Thus, if you are an independent director , chances are you are either a yes man, or a kin of the promoters, or a one far too busy in your empire to care much about what’s happening on one of the many boards sit on, or one who has self actualised because you are in a board room!

Thus, it is true that most independent directors will have little clue on what’s going on in a company. To hold such souls responsible for the affairs of the companies seems unfair.

Full text here

It’s a complex issue though.  You could argue that an Independent Director who toes the line, actually does a disservice to the shareholders and therefore must be held accountable.  Carter and Lorsch have argued that the core issue is with how board selections and operations are managed


Outsiders who are genuinely independent find themselves at an enormous information disadvantage.  Paradoxically, the more independent the board, the more it must rely on management for information about the business. 

 The average U.S. director spends only about 100 hours per year on the job. (European directors spend even less time.) So how to ensure that independent doesn’t just mean ignorant?

Sadly this is true for many Indian boards too.  Prof Raghunathan proposes one solution – an independent rating of boards by a credit rating kind of agency.  But I think the real awakening has to come from within.

Work+fun, funwork or fun*work?

What does fun mean in the context of the workplace?  Its nebulous.  I have three definitions:

1. Work+fun: Workplaces where one can have a good time.  Most tech/BPO campuses fall in this category.  The work may or may not be spectacular, but the average employee gets access to sports facilities, libraries, good cafeterias, the occasional music concert, team dinners etc.  All of this contributes to a feeling of well-being and that “life is good”.  But the fun is really outside the actual work.  Its a little artificial – but its better than work without fun.

2. Funwork: There are jobs which are (at least seemingly) fun.  Like Harsha Bhogle at ESPN – getting to watch every cricket match live and commenting on it.  One assumes that the folks in entertainment businesses have a lot of fun with their work (not always though – entertainment can be fairly serious business).  One also presumes that scientists working in high-end research labs also have a fair amount of fun.  By and large, though, there is a “star” element to this.  The top-dog gets to define his agenda, experiment, work with loose budgets and gets a disproportionate share of the glory.  Not everyone has fun, although there is a rub-off effect.

3. Fun*work: This is that rare category of companies where a person has the liberty to think creatively and do things differently even in his/her day-to-day job.  The workplace tends to encourage diversity of thought.  These companies thrive on incremental improvements and enhanced richness. For instance, Youtube has a vuvuzela button.  Google plays around significantly around its search function – building in little hooks (try searching for recursion in google).  Even among services firms, there are some which push you towards a template, and some which encourage you to change the template.  You don’t need to be a genius to express yourself at these places,  everyone can add their ingredients to the pot.

What kind of company are you at?  What kind would you build?

Acquisition governance

While on the subject of governance, lets take a look at acquisitions in corporate India.  Many acquisitions are of companies we never heard of, and probably with good reason.  They’re done to

(a) justify taking in investor money – PE or IPO

(b) give a struggling CEO breathing space – and a diversion – with the board

(c) siphon off money through a company that is owned directly or indirectly by the promoter

(d) make a CEO feel good about himself – and provide a talking point for the next party

At B-school, I tended to be dismissive of these kind of arguments – believing in the efficiency of capital markets and how they’d punish this kind of behaviour.  But, in reality, all this does happen.  And scarily, a lot of people engage in it.  What good is a CEO who doesn’t buy-out another company every few months?

So, what I’d like to see is a little more governance around acquisitions made by listed companies.  Specifically:

* A clear value creation plan for any acquisition – even the small ones.  How does this fit in the strategy?  What are the metrics that will get impacted?  What should we expect from this acquisition, by when?

* A clear picture of the (actual) ownership structure of the acquired company

* A sound valuation logic – including an NPV analysis (not just a multiplier based valuation) and cash flow projections for the business pre and post valuation

* A commentary on the funding mechanism and how the buyer traded off the use of cash vs equity

* An identified integration manager (ala Bharti) and his/her role in the new acquired entity

* Mandatory reporting of performance against the projected (post acquisition) numbers

* A report on the value created by the acquisition – plan vs actual – included in the annual directors report for a few years after the acquisition

Now put yourself in the shoes of the person trying to justify the Satyam-Maytas deal!

IPO governance

Many Indian companies raise money through IPOs for funding their acquisition plans.  The red herring prospectus (pre-IPO) specifies the intended usage of the proceeds.  It is not uncommon to hear that 50-70% of the money is to be used for “overseas acquisitions” – nebulous fluff which means little.   Analysts and investors seem to lap this up.  What seems to happen:

* The money was used on land and building

* A small unheard of company is acquired in some vague geography – ostensibly to open the market over there and provide the acquirer a foothold.

* Maybe the money was used to acquire a group company – at a crazy valuation – giving the promoter a happy exit

* Money is kept in the bank, and used for working capital requirements (also enabling false revenue accounting and valuations)

* Debt is retired

* The promoter and top management gets fancy new cars, “company guest houses” and a salary increase

You get the gist…

One report says that only one-third of IPO proceeds go towards capex .

For 47 companies surveyed, a little over 40 per cent (Rs 17,200 crore of the Rs 41,780 crore raised) of the total amount raised was parked in liquid assets (such as mutual funds and deposits with banks). Another 18 per cent or so was used for repayment of debt of subsidiaries, investment in these and for general corporate purposes.

The government wants SEBI to be involved.  Yes, but it’s also fairly difficult.  We need a far more activist analyst community (as happened after the Satyam-Maytas deal announcement) and a much more responsible I-banker community (maybe a “credibility rating” assigned by a credit rating agency to the banker concerned).  Perhaps we could also come up with a buy-back formula to force companies to return money to the public.

As Indian companies hire more global managers…

Now that Indian companies are becoming global with a vengeance, it’s becoming common for non-Indian managers to be hired into desi companies. This great inter-mingling of cultures is a reversal of the previous stereotype of desis joining western companies.

With this in mind, I was reminded of this hilarious sketch by the British-Asian team of “Goodness Gracious Me”. In this, a westerner joins a desi companies, and immediately runs into trouble for his “complicated English name”. The new guy- Jonathan- is told that his chances of progress in the company are limited unless he does something about his name.

Check it out!

Destination Bangalore, North Korea

Who’d have thought?

Think of North Korea, and repression, starvation and military provocation are probably the first things that come to mind. But beyond the geopolitical posturing, North Korea has also been quietly building up its IT industry.

Universities have been graduating computer engineers and scientists for several years, and companies have recently sprung up to pair the local talent with foreign needs, making the country perhaps the world’s most unusual place for IT outsourcing.

With a few exceptions, such as in India, outsourcing companies in developing nations tend to be small, with fewer than 100 employees, said Paul Tija, a Rotterdam-based consultant on offshoring and outsourcing. But North Korea already has several outsourcers with more then 1,000 employees.

Full article here

Desis in the American media…rising profile

America is thought of as a melting pot, or a salad bowl, where people with different ethnicity blend together to make a tasty, and unique, combination. American media (Hollywood and TV) is a reflection of this phenomenon. People with Indian ethnicity form about 1% of the American population.

Of late, however, there is a rising trend of desi names in the American media- mostly in a good way. The old snake-charmer and elephant stereotypes (along with the complex name structures and strange accents) have given way to the ultra-modern, ultra-American desi representation. Cool, very cool.

Here’s an article in the American blogosphere about the sudden increase of Indian actors and characters on American TV. The latest MTV Music Awards was hosted by a desi comedian- Aziz Ansari- and he was apparently a big hit! Likewise many other characters have been portrayed recently- and many in non-stereotypical roles. The Brits, of course, had their own impressive genre of Brit-Asian comedies a couple of decades ago.

Link to article by Nina Shen Rastogi (no relation) about Indian actors on the US Entertainment scene.

According to my count, primetime TV now has about a dozen South Asians in regular or recurring roles—and that’s after the loss of Kal Penn on House, Parminder Nagra on ER, Naveen Andrews on Lost, and Sendhil Ramamurthy on Heroes. Meanwhile, a handful of new South Asian faces are waiting to make their debut next fall, and NBC is about to out-Indian everyone with its new sitcom Outsourced, based on a low-budget 2006 film about an American novelty company whose call center gets relocated to India. Why are there so many Indians on TV all of a sudden?

Another thing to note has been the sudden rise of Indian-American politicians in America’s formerly-racially-divided south…where Nikki (Nimrata) Haley is a front-runner for Governor in one state, and Bobbby (Piyush) Jindal is already Governor of another.

Here’s an article (by another Indian author, of course), about the rise of these two Indian-Americans.

Nikki Haley, née Nimrata Randhawa, is almost assured of the Republican nomination for governor of the state of South Carolina. And if she does win her runoff on June 22, she is almost certain to be elected governor in November, which would give rise to the remarkable fact that two deeply conservative Southern states—South Carolina and Louisiana—will be home to governors of Indian descent, one the son of Hindu immigrants, the other the daughter of Sikhs.

And finally, to round up the other Indian-Americans in the American media recently, another desi kid won the spelling bee competition. This is not news- desi kids have been at the top of the Spelling bee since 1985, and are a disproportionate part of the finalists.  Here’s a post from Basab Pradhan from way back in 2006 about his theory behind this phenomenon.

How do you explain this mystery? Do Indian genes or the Indian family environment predispose us to be good at rule-based logical tasks (spelling bee contests are all about spelling rules and not about memorizing wayward English word spellings)? Does that explain the success of the Indian computer programmer as well?

And finally, here’s a more recent article wondering about the same question.

Consider the facts: Indian-Americans make up about 1 percent of the U.S. population; this year, an estimated 30 NSF-ers will compete at Scripps, 11 percent of the 273-kid field. Recent winners include Sai R. Gunturi from Dallas, who nonchalantly reassembled pococurante for a national title in 2003. Sameer Mishra from West Lafayette, Ind., nailed guerdon in 2008. And four-time finalist Shivashankar made it back-to-back titles for North South Foundation competitors last year, air-writing Laodicean for the win. If Shivashankar hadn’t come through, it’s possible another North South graduate would have: Four other NSF kids cracked the top 10 behind her.

India bound…Mathematics and Thematics for NRIs

Amit and I often talk about how more than half our MBA batch is outside India (though still contributing to the Indian economy, thank you). Over the last few years, many of our batchmates have returned “home” to India after doing their 5-15 year stints abroad. Here in silicon valley when we meet our desi friends, conversation inevitably swings around to the subject of returning to India, and how many people have made the trip back home.

Often, in the privacy of their computer screens, many NRIs have found themselves googling the phrase “returning to India”, in the hope of finding out answers to their questions, or even just finding the questions they must ask before making their decision. Often, Google disappoints. There are not many places one can find a reliable list questions for the tentative returnee. Here is a list. You’re all welcome!

Mathematics First

First, we will tackle issues that can be handled mathematically.

Potential to save: Salaries in India are rising at a very rapid clip – 10-15% every year. While inflation remains high in India, the increases in salary mean that the potential to save money on a monthly basis is increasing every year. Given that most of the people leaving India had left for economic reasons, this implies that it is now safer to return to India. If you’re Googling this aspect, look for (1) salary increase levels in India and the US, (2) inflation rates, (3) compute the increase in expected savings

Career Growth: The Indian economy is booming. Thanks to India’s “demographic dividend”, India will continue to grow fast over the next few decades at rates much higher than the western world. This means people who are now in their prime careers (25-45 years old) will grow faster in their careers in India compared to being elsewhere in the world. Economic growth would keep fueling the demand for managerial talent. This means faster promotions in India, as well as meatier assignments.

Social web: Look at your Facebook profile and see which of your friends are in India. If you’re moving to Delhi, Mumbai or Bangalore, it is likely that you’ll have a richer social circle than in your current phoren city. If you can find time to drive 50 minutes to meet them for a 30 minute $3 coffee at a Coffee Day in India.

Household help, cost of: The typical NRI doesn’t notice it, but every household needs a cook, a cleaner (x2), a driver (x2), a home-delivered grocery service, a clothes washer, a clothes ironing crew and a daily gardener. These *basic* needs of an urban life are not available outside India unless you’re Bill Gates. That means that the average NRI helplessly slogs away at these articles of domestic drudgery, while their desi friends in India have all the fun.

Cost of healthcare: Ageing parents and growing kids means that healthcare costs are on the rise for the 1990s era NRI (folks who emigrated in the 90s). US healthcare costs are prohibitive, while in India the healthcare costs are relatively lesser, quality care more affordable and available.

The rational compass clearly points towards returning to India.

We still haven’t taken into account some themes that tend to be more subjective in nature, but may be more compelling for some folks.

Thematics: Subjective evaluation

The doorbell tolls for thee: There is no respite from the ringing doorbell in India. starting with the early morning milk delivery, newspaper delivery, morning dishwasher, car washer, driver, bread-delivery, floor wiper, car washer (returning keys), kids driver, lunch cook, lunch dishwasher, driver, driver, kids, kids, neighbor’s kids, vegetables delivery, fruits delivery…it’s enough to drive a sane NRI ding dong. Ding dong. Ding dong!

Power corrupts, Power cuts Interrupt absolutely: So you’ve bought this fancy penthouse flat in a “24 hour power supply building society”. Well, when the 6-hour power cuts loom every day in the peak of summer, your society’s generator can only support two fans and one fridge. Go figure! Power supply in India is now 40% lesser than the need (by some counts). That means no power when you need it. There are some things money can’t buy. Continuous power is one of these.

Order, order: Despite the march of progress in India in recent years, things are still chaotic and rarely work as advertised. Service culture has yet to seep in, and Indian Standard Time continues to be lax. To to NRI mind, these could be mild irritants, or mind-numbingly irritating, depending on your personal preferences. The lack of order and control over one’s own destiny and phone service can get to one’s nerves.

Changing social mores. Believe  it or not, attitudes on dating can be found out through carbon dating. Most people who emigrate to another culture tend to “Freeze” their social values when they move. These social values are not updated on contact with a foreign culture. Meanwhile, values in their home country tend to evolve. The same is happening with India. When the 1990s era NRI left India, Times of India was the “old lady of Bori Bunder”, and not the purveyor of titillating content as it has become now. Item songs in hindi movies were not “better than Baywatch”. All these things have changed, but the old NRI mind-set has not kept pace. This means that when they return to India, they will face changed attitude towards money, fashion, sex and pretty much every aspect of life. They will likely find a more westernized version of the country they left (and carried in their hearts with them). The only fringe of society that carries their strain of moral values resides abroad.

Black Swan events

A black swan event is defined (by Nicholas Taleb) as the disproportionate role of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, and technology. Things that cannot be forecast, but those that will have a heavy impact on the future.

Mao’s se tung: There is a heavy Naxal outbreak in India and according to some reports upto a third of India’s land-mass is under Naxal influence. Whatever the reasons behind this rise, what’s possible is that this could explode into a country-wise crisis at any time.

Water wars: India is largely an agrarian society, and the maximum fresh water is used for agriculture. With one of the world’s largest populations and limited water supply, Indian states are already beginning to fight over water resources. As ground water levels continue to drop all over India, these skirmishes could take a more sinister tone. This could lead to an all out water war between states, cities, communities and families.

Geopolitical nukes: There’s nukes and inter-continental ballastic missiles on two sides of the country. Pakistan and China both have unstable societies (China has a stable government with an iron grip, but the poverty differentials are  very high there), and a war with India is a couple of mis-steps away.

Racism Redux: While US, UK and Australian societies are largely peaceful, if the world economy continues to be poor, there could be a situation where any of these countries might turn xenophobic. While Indians are not the largest or most visible minority in any of these countries, they are still a minority.

All in all, returning to India is a personal choice. Let it be an informed decision.