Thursday, December 18, 2008

satyam eva jayate : An issue of corporate governance

Embarrassed by the incongruity of the company's name for doing business, the promoter family (Rajus) of Satyam Computers floated two more companies Maytas Infra and Maytas Realty by name reversal. The family owned a substantially larger share of Maytas companies than of Satyam Computers.Satyam is cash-rich unlike Maytas.Rajus planned to do what many promoter families do.That is, transfer the wealth from Satyam to Maytas or to the family. Satyam's Board adorned by biggies like ISB's Dean, Rammohan Rao, Krishna Palepu and Vinodh Dham "innocently" decided to buy into Maytas companies utilising almost the entire cash holdings. Stated reasons: to develop two more verticals and to derisk business.The illustrious Board was unable to spot any business worthy of purchase in its own industry! This issue has raised hackles on corporate governance front.The Board has since reversed its decision.Isn' t reversing decisions child's play like reversing names? Is corporate governance an oxymoron?

Friday, August 22, 2008

"On Being Certain"

Certainty has always been a mirage. Ancient Indians prayed that they be delivered from untruth to Truth, darkness to Light and from mortality to Immortality. They did not seek deliverance from uncertainty to Certainty. They had the Wisdom to seek only what was possible.

It is exciting to be introduced to the book written by Robert A.Burton, a neurologist entitled 'On Being Certain : Believing you are Right even when you're not'.

It is counter-intuitive that 'certainty' is just another 'feeling' like anger, pride etc.It is incorrect to posit a choice between reason and sense of purpose. One without the other is barren and irrelevant. "Cynical zeitgeist of valuing science over compassion" is good word-play, but misleading. Science is not a compassionless monster.To claim that the belief regarding soul outlasting body is counter to the evidence is dense and imprecise.What evidence do we look for in a matter of faith that cannot be disproved either? If "studies have shown that sham arthroscopic surgery can allow some patients to walk comfortably again", either they were not real patients or the studies lack credibility.Fitzgerald is right in saying that the test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function. The caveat that these ideas must both be yet to be disproved remains conveniently unsaid."Our knowledge of the world around us is limited by fundamental conflicts in how our minds work" is a partial understanding of man's modest endowment vis-a-vis mystery of the universe. "The need to tolerate the unpleasantness of uncertainty" is a meek acceptance of reality. The book is thought-provoking.

Sunday, July 06, 2008

Who is out?

This is a question for those interested in cricket.
Dhoni and Pathan are batting. The bowler makes an LBW appeal against Dhoni. Before the umpire responds, batsmen take a run. There is an appeal for running out Pathan. The umpire lifts his finger. Who is declared out, Dhoni or Pathan?
Answer: It depends on who is the umpire. If Steve Bucknor, he must be responding to the first appeal belatedly, true to his style. If someone else, Pathan is considered run out.

Saturday, June 21, 2008

Misunderestimated President

During a recent visit to England, George W. Bush warned that he would soon start writing a book. Covertly, he did interview a few ghostwriters and historians. None of the ghostwriters could come up with even a single statement that came upto his standards. Predictably, the historians were incapable of twisting and turning the past enough to capture Bush's contribution. So, Bush has decided not to seek anyone's help. He is on his own.

I was lucky to be offered a preview of opening chapters of his "bioautography". He starts with a typical challenge to his detractors: "I want the enemies of our country who think they are capable of destroying USA to know that I am even more capable of that". I am permitted to share a few more glimpses:

"Was I ever against African Americans? Never. I am proud of my successor. I thank the African state of India for gifting the Obama family to America".

"Sonia Singh, the Prime-President of India was always a well-wisher of America. It is a pity (s)he could not sign the ABC agreement and take the nucular proliferation forward".

"Will I invade Iraq again? Certainly. Our enemy is becoming stronger with every invasion".

"What is my advice to American childrens? They should do what I did and also what I did not do and I repeat, both".

Sunday, April 20, 2008

Economic crisis: The easy way out

Life is basically simple. Unnecessarily we complicate it. Even a just-born baby would know that complex derivatives have landed all of us in a deep mess. How to get out of this pit? Again we are looking for a complex solution. Central bankers are revisiting Keynes, Milton Friedman and others. Some governments consult the likes of Alan Greenspan whose words are as incomprehensible as their actions. In the process, we overlook an easy solution at hand.A 359-word thesis from John Coates and Joe Herbert of the University of Cambridge has demolished both fundamental and technical analyses of financial markets. Their answer to the ongoing eco-financial crisis is amazingly uncomplicated. Take the help of doctors. Administer extra dose of testosterone to all dealers in the money market. Market will immediately turn bullish and everyone,including synthetic hormone producers, will live happily thereafter.Here is an extract from the redoubtable New Scientist: "Financial markets driven wild by hormones 19 April 2008 Jason Palmer Magazine issue 2652 THE behaviour of impetuous teenagers is often blamed on their hormones, but could these same chemicals drive the economy? The suggestion is that the movement of money in the markets correlates with traders' levels of testosterone, a hormone linked with aggression, and cortisol, the "stress hormone". John Coates and Joe Herbert of the University ofCambridge monitored hormone swings in the saliva of 17 male traders on a London trading floor over eight days. The swings were compared with the sums a trader made or lost, and with market variations. When the traders made more money, their testosterone levels were higher, the researchers report in Proceedings ofthe National Academy of Sciences (DOI:10.1073/pnas. 0704025105) . When markets were volatile,they had elevated levels of cortisol. But which is the cause and which the effect? Furtheranalysis showed that traders who started their dayswith extra testosterone made ...The complete article is 359 words long."

Saturday, April 05, 2008

Rationale for Group Discussions in MBA admissions

IIMs have been using Group Discussion (GD) as a part of selection process for their 2-year post-graduate programmes for more than three decades.There has recently been a rethink on usefulness of GD. IIM, Ahmedabad has done away with GD altogether in its selection process for the 2008-10 programme. IIMA has effected this change without much publicity thereby giving the impression that the institute is perhaps tentative about this change. GD has been maligned by its detractors on various grounds. Some believe that GD favours those who outshout others. Business schools in the US generally do not conduct group discussions. Should Indian business schools be different? Selection process forcivil services like IAS, IFS and IPS does not include any GD. Civil services have produced some of the most outstanding managers. Therefore, what is special about MBA course that necessitates GD as a part of its admission process? Though there is some merit in each of these arguments, we cannot deny that GD is an effective selection tool especially when it is used alongwith, and not in substitution of, other criteria like academic proficiency, CAT score and interview performance. Group Discussion is a useful tool to assess students' clarity of thought, logical analysis,cogency of argument, presentation skills,quick-wittedness, ability to convince others and willingness to listen. All these attributes are supposed to be measured during discussions. These typically are the qualities that distinguish successful managers from others. Though business schools do try to develop and strengthen these skills among students, an entrant who already shows promise in these attributes will benefit much more from the course than those who lack these essential qualities. If entrance examination is a test of one's academic skills, GD is a test of one's attitude. Those who are able to build a consensus opinion through team building and leadership skills stand out in GDs. Rigidity of thought and inability / unwillingness to listen to contrary views result in poor performance in discussions. GD should not be mistaken as a test of one's decibel levels. Pithy sound bites which result from spontaneous thinking and not garrulous expressions of entrenched views carry the day. Thosewho prevent other participants from voicing their opinions are rated low by moderators / monitors of discussion. IIMs and other prestigious business schools encourage students to be active in class participation. This is done only in recognition of the merits of discussion as a tool of learning. Such discussions will enable the teacher to understand how successful he / she has been in imparting knowledge to students. Group Discussions conducted before admissions reveal how much the participants have assimilated from their school and college education. GDs also indicate what the applicants with prior work experience have learnt from their jobs. The US parallel: It is true that American business schools rely only on exam scores and references from known authorities for admissions to MBA courses. Participation by foreign students is much higher inAmerican colleges. Conducting GDs may pose some logistical problems there. Apart from this practical reason, it is worth appreciating that Indian students by nature are more loquacious and therefore ability to discuss is valued much more in the Indian milieu.(Remember Amartya Sen's "Argumentative Indian"?) As an aside, it is said that the challenges faced by a teacher in a typical American business school are twofold: one is to make the Japanese student to talk and the other is to stop an Indian student from talking! Since GD as a part of selection process has stood the test of time in IIMs, the American parallel can at best be only an alibi for discarding GD. Group Discussion is not a part of selection process for India's "Steel Frame". Competitive exams for civil services include written essays which capture the applicants' capacity to express their views cogently. Analysis of pros and cons of an issue is valued much more than expression of polarised views. There are no such essays in Common AdmissionTests conducted by IIMs. Effective articulation of one's views is a sinequa non for a successful manager. Clarity of thought and lucidity of expression enable a manager to negotiate successfully with a team of auditors or union leaders or vendors of materials. Purposeful participation in Board meetings also requires these skills. Therefore, it is not advisable to scrap GD which tests the potential for these skills in an aspiring manager.

Saturday, January 26, 2008

Societe Generale- Rogue Trader

In response to a report in The Independent:

Rogue traders, by definition, are irrational. They are like suicide bombers.Their malevolence goads them to destroy others even at the cost of destroying themselves.After every rogue trade that is identified (and after every suicide bombing), security measures are streamlined in some ways. Rogue traders and suicide bombers keep an eye on remaining gaps in the control system and continue their heinous way of life. Can we ever have fool-proof controls? I bet not.