Sunday 15 March 2009

Some capitalistic recollect!

Well, this recession has given me a lot of time, thanks to the great capitalist concept of lay-offs. So I’m getting some time to do my favourite thing, rumination! I am prone to pretty weird ideas and people close to me can corroborate that. I have been saying in my previous blogs that, it seems the ‘self proclaimed’ greatest capitalist nation - USA has been trying to solve all its capitalist follies by finding solution the communist way. Just look at AIG, Bank of America, and not to mention GM asking for more & more Federal bailouts. All these corporations have been greatest loss maker in the current financial downturn. Well to be precise, GM has been the laggard for a lot longer time, making spectacular losses for nearly a decade now. The very existence of the firm amazes me. Why have they not filed for bankruptcy at the start of this millennium & handed over the assets to a more efficient user like Toyota for crying out loud? What’s wrong in that, especially in the light of US not minding in financing the Federal budget deficit by selling their papers to more efficient (capital surplus) countries like Japan or China (more than $1.5 trillion combined)?

This brings me to my prime objective behind this article, if you really believe in Capitalism then why on earth you are relying on the Communist way to fix up the mess you created with your belief. Why not go back to ground zero & start looking for the clues to rebuild it. I am a firm Capitalist believer & I can’t even stand the idea of Communism. Just to strike an analogy, Capitalism relying in Communism for rescue out of the current financial mess is like Man relying on God to rescue him from the global warming situation. If you have got yourself into this deep trouble then you better think fast & stick to the basics. Well, I’m not just complaining about the situation, I actually have a probable solution in mind.


The fundamental of Capitalism is the Capital of the organization, the entrepreneur willing to take risk for the ideas he believe in. Putting his money & skills to the work to earn profits & name for him. He also can avail loans from financial organizations like Banks or VCs/PEs for funding the cause, but even they ask for the commitment from the entrepreneur in the form of initial investment. Now just look at the Feds from Capitalistic point of view, they are an organization, they have objective, they have budgets, but where is the capital (I mean Owned funds, not Capital Receipts)? In light of the latest budget proposed by Obama Government, which predicted a deficit to the tune of $1.75 trillion or 12.5% of GDP, isn’t this the most inefficient way of running the organization? Now my question is who made the rule that Government has to run only on debt? Why can’t Governments have owned funds? Why Governments can’t be run like non-profit organizations where they are accountable, even though they are not there to make profits but they have to break-even their operations in a consistent manner? Why the same does not apply to the Governments?

Many developing economies are run in the same manner, Deficit budgeting & Inflationary economy are their USPs. Given the situation of global financial systems, there needs a lot to be done to make good the losses made in foolhardy ventures taken over by umpteen organizations. If the Governments are bailing those organizations out, they can ask for capital in return to fund all the deficits they are bearing for the bail-outs. Otherwise this deficit can lead to another calamity in making; we could enter into galloping inflation worldwide, given the short supply of the resources. The point of contention is why the Governments have to be Communistic in design when the whole economy is strong Capitalistic in nature? Desperate times call for desperate measures, but then why not be desperate the Capitalistic way? I believe there are still many strong Capitalistic believers in US who could be willing to take the risk for their belief. So why not let the entrepreneurs do their bit for the revival of the economy? Why not look at the option of running the Government the Capitalistic way? Worth a shot?

One of my friends suggested me this link which corroborates my view.

Sunday 8 March 2009

The Young Managers, Mentors & their values

I recently went through a case study in Businessworld about YMs (Young Managers). It is about the reckless behavior of the Young Managers, their complete disregard to the seniors' suggestions & lack of readiness to learn from & correct their mistakes. Although I agree with most of the views in that case study, the thing that I thought was missing is the wrong values brought forward by today’s corporate culture. Where is the long term view of the things? All that today’s Corporates are worried about is bottom-line growth (Q-o-Q & Y-o-Y) & share price appreciation, at the cost of anything (Remember RJR Nabisco disaster?). Energy situation, Global warming & Sub-prime lending / over leveraged use of Derivatives causing current financial crisis to name a few.

Whilst this is the picture of values that you demonstrate to the so called ‘cream talent’ without significant experience & adequate EQ to get hold of the situation, what do you expect them to learn? The purpose of acquisition of the talent, their utilization does not seem to have any long term view per se. All the chores are directed towards one thing & one thing alone, annual results! How else would you explain the behaviour of cream talent like B. Ramalinga Raju in the light of ‘satyam saga’? All he was concerned about was the Y-o-Y bottom-line with complete disregard to the long term view of the business & the whole industry in turn. Or did he actually think that he could pull it off eternally (or did he not believe in the principle of company as a going concern)?

If the Corporates today were concerned about long term talent retention, would they not spend a significant time on grooming the talent they have acquired? But that is so not the reason of talent acquisition nowadays. The talent is acquired to fulfil a short term requirement, beyond which the utilization of the talent is not known to them. They acquire the talent keeping in mind that they are bound to leave after some period. So no need to spend time on grooming them or inculcating some corporate values in them. Where is the need of mentoring? In light of current financial crisis, the Corporates are offloading the relatively inexperienced talent without even giving them fair chance to prove themselves (again to sustain the short term profitability of the business & to maintain share valuations or what is left of it). After such an experience that is imparted early in their careers, do you expect them to ever be faithful to any of their future employers? Do you expect them to have any values other than saving their own skin at the cost of others? What can a senior manager or a mentor do in a situation like this?

In my view to conclude, the behaviour of the Young Managers of today is not a micro level issue but a macro level one. There are some very serious issues that need to be tackled about the manner in which the businesses are run nowadays. They are quintessential for survival of growth economics & capitalism as we know them.