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Tragedy in Close-up, Comedy in Long-shot: A Matter of Perspective: Jigneshbhai and Swami

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infycrash“Is Infosys closing down?” asked my friend Swami as we met for our weekend coffee today.

I had heard of nothing like that, and so obviously was all ears to him. Not sure why he asked, even my broker friend Jigneshbhai said, “What nonsense? Where did you hear that?”

“No – looking at the extreme reaction to its results yesterday, it looked like everyone was selling their stock as if the company was going to either go bankrupt or close down. So I thought I will check with you, as you guys are knowledgeable about such things. Does it have a lot of unpaid debt?” explained Swami.

Jigneshbhai was ready to answer this one as I wasn’t quite so sure. “No debt. They never had any. And I don’t think they ever will take any.”

“So are they making losses? Or do they have some liabilities from customers? Or they are not getting business from customers? What’s the problem?” asked Swami, not quite sure why people were selling the stock.

“No losses. Their profit margins are almost 30%. They grew by 22% last year” the well read Jigneshbhai explained.

“So then what’s the problem?”

“Well, they did not meet profit expectations that they had promised” said Jigneshbhai. “They had promised an earning of Rs.147 and they earned some Rs.145.5 per share. And they said next year may not be great. Every one expected them to grow by 12-14%, they said it would only be 10% max. So they did not meet expectations of investors.”

“Hmm..Got it now. So they are not performing? Should I also sell it now?” Swami questioned.

“Well, I don’t know. That depends on you and what your perspective is” said Jigneshbhai, in a cryptic manner.

“I don’t understand. Why do you have to talk in riddles all the time? Tell me clearly, yes or no” demanded Swami, clueless about what perspective means.

“I cannot tell you that. I wish I had simple answers. You decide for yourself. I told you it is a matter of perspective” continued Jigneshbhai, still not ready to solve Swami’s quandary.

There was a silence for a while. I thought Swami had given up on Jigneshbhai, and vice versa.

charliechaplinBut then, my broker friend suddenly got up and said, “Charlie Chaplin had said once that life is a tragedy when seen in close-up, but a comedy in long shot. I don’t know the answer to your question. But if you think about markets like that, perhaps, you may get an answer. Specially when such so-called tragedies occur. After all, what you see is a matter of perspective.”

Leaving us perplexed, Jigneshbhai finished his coffee and walked away.

Save me Superman: The Bailout Business: Jigneshbhai and Swami

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[youtube=http://www.youtube.com/watch?v=MILArKLKUEk]”I am not normally a praying man, but if you are up there, please save me Superman” said Homer J Simpson. That was fine, but when my friend Swami sounded similar, it caught my attention.

“Jigneshbhai, I need a bailout” Swami pleaded as we were having our customary coffee over the weekend. “I have been investing in stocks of so many businesses for the past 4 years and still have losses. I also took some personal loans for a few purchases. These stocks are not recovering. I need a bailout now.”

I was a bit amused over his plea, but resisted a smile. Perhaps Swami was serious.

“I will buy your stocks at a small discount if you want, in case you need money” said my broker friend, maybe sensing an opportunity.

Not quite agreeing with it, Swami retorted “Arre no, I need more money from you to buy more stocks. Hopefully they will make money, and then I will pay you later. Maybe you can charge me interest, but then, what’s interest among friends? Isn’t that what a bailout means?”

“Good, you are learning fast my friend” my broker friend commented with a sly smile. “But I am not for these kind of bailouts. I am for the creative destruction kind of bailouts.”

Puzzled and not quite understanding it, Swami said, “But big businessmen nowadays get bailouts. Why can’t you bail me out then?”

As usual, I was watching both of them slug it out on another issue this time.

“That’s because you bought the stocks of the wrong businesses. I will buy the stocks of those businesses if I see value, but will not lend you more money to put into already failed businesses and then wait in hope. I can bail out businesses, not businessmen.” Jigneshbhai said with a tone of finality.

I realized that the discussion was taking an ugly turn now.

“But General Motors and so many US Banks also got bailed out. European banks are getting bailed out. And now they are talking of bailouts in India also. So what’s wrong with it?” questioned Swami, not quite convinced and now getting visibly angry.

Jigneshbhai was getting into one of his moods now. Getting ready for what I thought would be the next round of conversation, I was all ears.

profitloss“Hmm. You know the difference? In some of those cases, the ownership of those businesses changed. They did not find any lenders or buyers, and because their failure would have caused larger collapses that would not be in national interest – well that’s what they said at least – the government became the investor of last resort. Not the best thing to do, but it was still ok I thought, due to exceptional circumstances. And they made a killing on it, by the way later. But in your case, you are not giving me any ownership” Jigneshbhai informed Swami.

“How can I give up my ownership? That is sell my shares? What will I do then?” Swami asked, quite disturbed by now.

Jigneshbhai got up to leave and said angrily “Nothing, do something else. Businesses start and businesses fail. Your investments failed. So if you can’t see it through, give up ownership of your share, take whatever money you get and go home. Else close it down. But don’t ask for bailouts.”

Department of Internet Control: Creating Jobs by Screening Social Content: Jigneshbhai and Swami

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“Take the first left after the third signal from here” my South Indian friend Swami said to the person asking him directions in cold Delhi over hot coffee. “This is the 10th car since morning asking me for the address of the Ministry of Human Resources or Ministry of Information Technology” remarked Swami. “Looks like … Read more

Play for the Country: The Noble Intentions of our Cricketers: Jigneshbhai and Swami

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My South Indian friend Swami had just returned from Australia, and joined us directly over the weekend coffee, straight from the airport. My broker friend and I were discussing what’s in store for the markets, specially after this mass downgrade done by S&P to European nations, when Swami barged in. After a long time, Jigneshbhai … Read more

भ्रष्टाचार को पकड़ना मुश्किल ही नहीं नामुमकिन है: The unending search for catching corruption: Jigneshbhai and Swami

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“There is one thing tougher than catching ‘Don’. Call it Mission Impossible if you will, though it is tougher than that. Can you tell me what it is?” asked my South Indian friend Swami as we sipped an evening coffee.

I gave it some thought for a while and ventured a guess. “Beating Australia in Australia.”

“No, we have done it a few years back”, Swami said, rejecting my answer. “Any other guesses?”

Then it was my broker friend Jigneshbhai’s turn. “Beating the market index?”

“Naah, sometimes some people do end up beating the index. It is मुश्किल, but not नामुमकिन,” said Swami, like a quiz master, surprisingly using Hindi, possibly giving us clues.

When there were no more guesses, he finally announced in chaste Hindi, “Well, you may achieve Mission Impossible and catch Don, but भ्रष्टाचार को पकड़ना मुश्किल ही नहीं नामुमकिन है!”

He continued telling us that he had just finished watching three thrilling, adventure movies in the course of the week. He started with watching Tom Cruise jumping off buildings in Mission Impossible: Ghost Protocol, and was impressed with the thrills. On the next day, on the insistence of his wife, despite the Ra.One experience, he went and watched Don 2: The Chase Continues. He said he was impressed with the thrills, pace and slickness of the movie.

But the most thrilling of all was the movie he watched on TV spread from Tuesday through Thursday, in which he followed a bunch of talented artistes chase and nail down a known evil named ‘भ्रष्टाचार’. “It seemed a thrilling, almost non-scripted ride. It was never clear what will happen next”, remarked Swami.

“In fact, there was amazing suspense on who the heroes were, who the villains were, and viewers were left wondering whether they kept changing roles”, remarked my broker friend, Jigneshbhai who had partly watched some of the proceedings.

“Yeah – new characters kept coming in from time to time. The stage kept moving, new rules and equations between various characters kept on emerging. In fact, at one point, they even left the viewer guessing on whether the story was actually about nailing down this भ्रष्टाचार guy, or if the plot had changed to something else”, Swami remarked, confused as always.

“Hey, you must be joking about the Lokpal Bill”, I said.

“Yes, of course. But were the thrills in it anything less than MI-4 or Don-2?”, mocked Jigneshbhai. On second thoughts, he continued “Well – those movies at least have a happy ending. This one does not seem like it is going to end soon.”

“But they were going to pass the bill soon, I had thought. Perhaps this session or the next”, I said, trying to be a bit logical and patient. One better be rational and take a well-considered view, specially when it comes to issues of national importance.

But then Swami said, “Well, it is a thriller – so you never know what will happen. They may pass it, but most likely not. In any case, passing the bill is one thing. But catching भ्रष्टाचार is another. That guy will still get away. Don does not catch himself, right?”

He continued, “That’s why I said, Tom Cruise may achieve Mission Impossible. Don may get caught eventually. India may beat Australia in Australia. Someone might even beat the market index consistently. Those things are easy. But it has been 40 plus years now – in our unending search for catching corruption. So भ्रष्टाचार को पकड़ना मुश्किल ही नहीं नामुमकिन है.”

He who pays the piper calls the tune: The Importance of Structure

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I used to work for a company where my job was to set up a system that determines the efficiency and effectiveness of their marketing programs and hence marketing spends. Nothing wrong with that intent. But I was reporting to the marketing department itself.

So what would happen if I found that some programs were not performing well, and so it was not money well spent? Well, some marketing head somewhere would, perhaps, lose his budget. So unless I ‘showed some tact’, I constantly found myself to be at the receiving end of objections on formats, data sources and discussions on ‘whether we are measuring the right things’! That is after everyone agreed that this is important to measure.

So the good intent of wanting to assess marketing spends was of no use. Primarily due to the structure. Or so I thought – may be the intent was also not there. Whatever it was, clearly, my salary was being paid by the same people whose existence I was threatening.

Well, that may be a bit far-fetched, but the point is – structure is important. A few observations over the past few days suggest that a number of problems are structural. And designing structures for people to follow is a big problem. Specially if there is lack of alignment on what that structure is supposed to achieve, who it reports to, and who pays for it. And so people who design structures have to be extra careful, that they are not prey to the universal truth that he who pays the piper calls the tune.

Because no one generally wants to challenge the source of their dough. And if there is a conflict, well – generally, the source of the dough will win.

Like I have never understood how auditors – financial, process or any auditor for that matter – can be fully independent, when their fees are paid by the same management whose functions they are auditing?

Like I wonder how a financial adviser who is used to getting his fees from the fund house whose products he sells, or a stock broker whose revenues depend on how much you transact, can ever provide independent advice that is solely in the investor’s interest?

Even independence needs to be paid for. So unless someone is paying a piper to be independent, the tune he gets will not be independent. So be it policing agencies or regulators like SEBI or IRDA. Their tunes also depend on who is paying the piper and for what tune. And that definition has to be structural.

Like recently a set of cricket commentators were said to toe the administrators’ views in their supposedly unbiased commentary. Well, nothing personal, but how can anyone be unbiased if the structure of their contracts does not support it?

Like how can one expect newspapers or media who are dependent on advertising revenue say anything against the people who pay for the advertising?

Well, these are not unsolvable problems if you have the right structures in place. But they are structural problems, and anyone caught in those structures will face the pressures of conflict. And it is not easy to design such structures.

Like how can the Lokpal structure whose job it is to investigate corruption in government, report to and be paid by someone whom he is supposed to be investigating?

Well, it is a problem of structure. And structure is driven by intent. No easy solutions, but if there is no intent, the right structure will not evolve. And if there is no structure that allows scope for an independent voice, well, then there is no point in even expecting much. Because finally he who pays the piper calls the tune.

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