A peerless life

''There is a difference between a politician and a leader. A politician asks for sacrifices, a leader makes sacrifices''-- Benazir Bhutto

By making the ultimate sacrifice in a life full of great sacrifices Benazir-an Urdu word that translates to peerless- once again showed what a peerless leader she was. It is a tragedy not only for Pakistan but for the whole world that has lost a leader of stature and much promise for a region that needed her more than ever in these perilous times. I hope her sacrifice does not go in vain; I hope it strengthens the resolve of the People of Pakistan and their friends to fight the Jehadi forces that are hell-bent on tearing apart the fabric of civilizations to fulfill their nefarious desires of Islamic rule; I hope her life may mean something, if not in life then at least in death.

Rest in Peace, Daughter of the East.

Another egg on the face

This is got to be some sort of record-- the number of mess ups that Bush administration has made over last 6 years or so. Barely one month after Bush and his cohorts' saber-rattlings concerning Iran, comes the report that Iran actually halted its nuclear program in 2003 and is years away from any sort of capability for a bomb. Just last month Bush had made his now infamous World War III comments regarding Iran and today once again he is made to look like a fool wrapped in an idiot inside a Moron. I shudder to think that there is still one full year to go before this nightmare ends.

As sick as it can get

I finally caught Sicko on DVD today. I have heard a lot of people complain about how broken american healthcare system is; its been a strong, emotional issue for the general public for more than two decades and right now after the war in Iraq ranks as the second most important issue in the public consciousness. However, it is all well and good to hear about how bad things are and it is quite another to actually see and hear the stories of the people who have experienced the dark side of the system in all its gory details. Those horror stories are eye-opening and make your heart bleed and as a citizen of a developing country make you wonder - how is this possible in the richest and most powerful country in the world? A country that can come up with hundreds of billions of dollars to fund a war it should not have raged in the first place but can't seem to have enough money to solve its healthcare problems. One statistic sums up the story, America is ranked 37th -yes, not 5th, 10th ,20th or even 30th, a lowly 37th- judged according to the quality of its health care system in the world. It is ranked the lowest in the developed world right beside Cuba at 39th. Costarica, Malta, Portugal, Chile are among the few countries ranked above the most developed nation in the world. A statistic such as this is mind boggling for a country like USA and it should be enough to convince all concerned that there is something very seriously wrong with the healthcare system over here.

How did this sad state of affairs come about? Can America not afford to provide Universal Health Care to all its citizens, most of the developed nations do, so why not America. The reason is that many americans love the idea of universal health care but there are many more that love the idea of low taxes. The Universal Health care systems all over the world have been financed by the higher tax rates in those countries, which means more government control, more government spending and a bigger pay cut for the average worker. Americans want to have their cake and eat it too, lower taxes but universal coverage which certainly does not seem plausible. The market based system in US does not seem to doing its job so is there a market failure in this case? Is it possible to put right incentive structures in place so that the market-based health care system would work as well or may be better than the universal health care for the majority of people or is the health care system is something akin to Police protection which can best be provided by only the government and nobody else. These are the questions, that the hidden economist inside me raises and on the answers a lot is at stake. I hope that somebody soon finds out these answers and put something in place so that sick Americans -and foreigners in America I may add- don't have to cross borders to Canada or worse commit crimes to get into Guantanamo Bay so that they could get decent affordable health care. On that note, Hillary Clinton's plan certainly looks promising.

Nehru's India

I am currently reading Ramcharan Guha's India After Gandhi, a comprehensive historical account of the modern indian nation state. I have not finished reading it, for at 700+ pages this book is no sunday afternoon light read; it is a book quite ambitious in its scope and extremely detailed in its research. It will surely rank as one of the most important books on the history of modern india. I am still around the 200th page but so far what has caught my eye and the imagination is the detailed account of the early events immediately after independence. The partition of India and the consequent large scale violence are fairly well-documented episodes in history. What is less well-documented and consequetly less well-known is the enormity of the task that the leaders of the new-born nation faced in building a united india. There was the enormous task of convincing 500+ princely states to give up their hereditary privileges and be part of the secular, democratic india; there was the matter of drafting a new constitution; there was the dispute of Kashmir and then there was the task of uniting a nation that was perhaps the most culturally diverse nation-state mankind had ever known. The task was enormous, perhaps the most arduous nation-building exercise ever undertaken, but as Nehru- the principal nation-builder- put it ," We are small men and the cause in front of us is great, but since the cause is great, some of that greatness will fall upon as well."

Nehru was right about the magnitude of the task, but he was self-deprecating while referring to himself as a small man. Great causes need great people to achieve them, and Nehru was exactly the sort of a man this exercise needed. He was India's equivalent of Thomas Jefferson and possessed many of the same qualities the great founding father of democratic ideals did.
He was a master orator, staunch nationalist, committed to secularism, a tireless worker, a wonderful writer and a gifted statesman. During his 14 years as Prime Minister- he strengthened India's democratic institutions, founded modern India's great educational institutions, propelled India towards its irreversible march on the path of a modern, secular, democratic republic and most importantly strengthened the idea of India and democracy in the minds of poverty-stricken, illiterate millions prone to violent outbursts in the name of caste, religion and language. He was a worthy heir to the Great Mahatma and successfully realized many of the ideals that Bapu himself envisaged.

Nehru was a giant of a man and if it were not for men like him India may not have even existed for so long. The fact that India has managed to survive despite proclamations to the contrary among many a great experts- prominent among them being Sir Winston Churchill- and not only it has survived, but despite enormous odds, its march has steadily been forever upwards. India's successes in its short history have been impressive but given its potential not truly spectacular, it could certainly have achieved much more. Many among Indians have blamed Nehru and Gandhi for India's failures in achieving more, they have painted Nehru as a flawed politician who in his hunger for power plunged India into communal chaos and then with his failed economic policies kept India into the darkness of poverty whereas if they had followed American capitalist system India would have been much better off, they argue. To the proponents of the first assertion, I say read your history first but for the second their is much fodder for thought. Nehru got a lot of things right in his tenure as Prime Minister but what he got disastrously wrong was in following the socialist, central planning model to the latter. However, for the critics of Nehru , it would help to have a little historical perspective. Central planning and socialist economy were the zeitgeist of post World War II years. Certainly, indians were justified in distrusting capitalism as they were at the receiving ends of western capitalism for a century or two, but as it were unbridled capitalism was out of favour even among the western economies. Post Great Depression, Roosevelt's New Deal and World War II, 'everybody was a Keynesian' meaning a believer in the policy of active government intervention. Free markets were viewed with distrust even in the bastion of capitalism- America and most economists agreed that active state planning is necessary for better economic development. In fact, P.C. Mahalanobis , architect of India's five year plans, actively sought the advice of western economists for India's economic policy decisions. The only lone voice of some standing who still advocated free markets at that time were great economists and future Nobel Laureates- Friedrich Hayek and Milton Friedman. Of course, now we know who was right and who was wrong but this we only know with the benefit of hindsight. Nehru's policy actions at that moment were exactly those that any good economist would have recommended. The only lesson that we can draw from this is that even the greatest of men can not do everything right, they are human too. This is no reason to castigate Nehru for he truly was one of the greatest leaders of modern human history. The ones we should truly be blaming are the subsequent generation of leaders who failed to see the changing paradigms and failed to embrace free market capitalism even when the writing was on the wall. If a person of the stature of Nehru was still around during the 70s , I am convinced that India's economic history would have been very different.

Meeting a Nobel Laureate

Oh, the joy of unexpected pleasures, what is life without them? Thursday night, the day before Diwali, was probably the only time I truly regretted not having a camera with me, but that regret was more than compensated by the accompanying overwhelming joy I experienced on having a dream fulfilled. Everybody who is remotely interested in finance or economics has certainly heard of the giant name in this field- Nobel Laureate Robert Merton, one of the co-discoverer of Black-Scholes option pricing formula and the founding father of modern finance. Yes, I had the honor of meeting the Robert Merton in a dinner party, standing along side him, hearing him speak and lo and behold having the courage to ask him for an autograph on the back of a ticket stub. That ticket stub is now one of my prize possessions, a better gift for Diwali could scarcely be imagined. Now if I could meet Warren Buffett for next Diwali..

Return of the blogging days?

Its been a long time since I put a pen to paper for a blog post (No, a few short posts in the whole year do not count). A lot has happened since then - I got a dream job, moved to The City and got a PhD proposal out of the way. Predictably, the turmoil accompanying all these events has left little time or inclination for blogging. However, to the rejoicement of the admirers of this little nook of the cyberworld -which is not an empty set by the way!- this draught of blog posts is about to end now as I have geared myself to be a more frequent contributor to the vast and growing fast world of blogs of no particular importance or interest to anyone. Stay tuned.

America's Burden

Consider a hypothetical but plausible scenario : A man and a woman are locked in holy matrimony. The marriage actually happened because the man in question is a powerful alpha male who possesed the woman, despite her wishes to the contrary. It is little wonder then that the marriage was an abusive one, the husband made the wife her slave, and regularly gave her deep physical and mental scars. The woman, despite such a horrible life, still was able to eke out a living largely because of the self-interest of the husband. A sworn enemy of the husband saw this as an opportunity. He was a more powerful alpha male , but he also proclaimed himself as a benevolent one. He did not care much about the woman but in fact was eager to get rid of the husband and so he claimed that he actually wishes to rescue the woman from such an abusive relationship and despite good advice against any hasty judgment, gets rid of the husband. So far so good, the story gets complicated when it turns out that the man who died had a number of other enemies who now want to ravage the woman and her children. The powerful victorious alpha male did not anticipate such a turn of events and is wondering whether he should just abandon the woman to her fate and take the exit. The question is -- is the man morally justified to take such a course of action? The answer is obviously an emphatic NO. It is clear who is who in this tale. The woman is Iraq, the husband is Saddam and the benevolent alpha male is America. The most powerful nation in the world, despite all the noises emanating from Washington, just can not abandon its moral responsibilities in Iraq. Iraq is a moral burden for America, it can not be wished away. Of course, people are known to short change morality when facing an adversity and I suspect that this is exactly what America wants to do, shed its responsibility and leave the poor woman to her fate. The story will not end there though, this country will no longer be able to seek a moral high ground for any of its actions and, however cliche it may sound, president Bush is right in saying that it will "embolden the enemy". No matter how bad it gets in Iraq, how much money it costs, how many americans have to pay with their lives for Bush's follies, Iraq is firmly America's responsibility-- they broke it and they have to fix it.

Buffett-speak

I am an avid admirer of Warren Buffett and his way of life. In addition to being the third richest man in the world, he is the biggest philanthropist the world has ever known and a delightful elocutonist of philosophy of economics, business and the business of life. A completely self-made man, his self-deprecating sense of humor rivals that of the best stand-up comedians in the show business. I had first heard about him back in India and gradually heard and read more about the man as I started to get more interested in finance and economics. I had the occasion to watch him give a speech, or more accurately- a performance, when he came to Georgia Tech as an invited speaker. I fondly remember a very entertaining afternoon when he had audiences in splits with his quips and wisecracks punctuated with his trademark pearls of business wisdom. Warren is known for his unpretentious, bucolic and a very humorous persona which immediately makes his audience drop their guard and drown in his charm. Behind that charm, however, lies a very astute businessman and investor whose grasp on finance and investing is simply peerless. He is famous for his firm understanding of even the minutest of business issues and such a memory for detail that he can reel off all the balance sheet information- from memory -of the companies he has ever bought or is planning to buy . Despite all his wealth and fame, he remains very humble and still lives in his birthplace Omaha in the house he bought about 50 years ago.

Here are a sample of some of his quips that I like and that have been delivered in his speeches and his immensely popular shareholder letters-

• 'In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without the first, you really want them to be dumb and lazy.'

• Energy and drive may be the essential qualities for success in many other walks of life but in the business of investing they are likely to get you into trouble. Lethargy, bordering on sloth, should remain the cornerstone of an investment style.

• What is popular is not necessarily good. Public opinion poll is no substitute for thought.
• When a good manager tries to turn around a fundamentally bad business, quite often it is the reputation of the business that remains intact.

• I like to hold stocks for the long term. My favourite holding period is forever.

• Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

No Credit for you

Its here finally. After months of speculation and expectation that troubles in the housing market, in particular the subprime market, catch up with the booming stocks , the prophecy seems to be coming close to being fulfilled. Growing worries on the spill over effects of the subprime mortgage market in US have sent the american stock markets in a tailspin and the effects are being resonating all around the world. Indian stocks were down about 3% in one day, Japan's Nikkei shed weight to the tune of 2.36% and British markets were under water 3.5%. It is another stark reminder that in today's globalized world, financial problems have lost their local character. Just a few months ago, when the chinese markets tanked momentarily, the markets all over the world felt the tremors. On the face of it, it seems that markets are only recovering from a hangover after the late night drinking binge of cheap credit and the resultaning M&A activity. As the credit markets tighten a little more and the private equity premium starts disappearing, the stocks should come down even further from their previously unsustainable levels.

Miller on Investing

Legendary investor Bill Miller has some sound advice on the art of investing. Must read. My favourite nugget, ""There ain't only three things to investing. Knowing the 60/40 end of a proposition, money management, and knowing yourself." As an aside, why is that many of the legendary investors were also philosophy students or enthusiasts, examples- George Soros, Ben Graham, Carl Ichan, Charlie Munger along with Bill Miller. Is it because study of philosophy enables people to gain some special insight about the way the world operates? Who says Philosophy does not pay.

Attack of the Mogul

Beware, the dark Sith Lord is fast closing in to conquer the poor Jedi Knight. Rupert Murdoch, the big daddy of all media moguls; owner of such fine shining armours of journalistic excellence such as News of the World, Fox News, New York Post is finally close to realizing his long standing dream of owning a major financial newspaper and critics are crying hoarse. Is this another blow to quality journalism? Is WSJ going to go the southbound ways of the New York Post when Murdoch acquired it? These are genuine worries and Murdoch's record does not inspire confidence. He is a staunch conservative and his media outlets have a strong conservative bias to put it mildly. However, whatever Murdoch's personal leanings may be , first and foremost he is a businessman and he is not going to do anything which will make a respected newspaper such as WSJ a losing business proposition. WSJ is the premier financial newspaper in the world and, just like Murdoch's other outlets, is strongly conservative. As far as political leanings go, the Murdoch empire and WSJ are a perfect match. So the worries that the Journal will become yet another vehicle for Murdoch's agenda are not well founded as the journal and Murdoch have the same agenda to begin with. The real concern is whether the quality of journalism at WSJ will suffer for which there is no clear answer. It depends on what Murdoch's ideas are for converting it into a profit making machine. WSJ is one of the few genuine newspapers that are profitable, even though only moderately. Just like all other newspapers, its margins have been under seize from the relentless competition of cable news networks and internet. Still, this new media attack has been less severe on WSJ than it has been on the other major newspapers as the journal dominates the financial news landscape and the readership for this bastion is strongly upper class who want quality financial news. If Murdoch decides to increase WSJ readership by taking it downmarket as he did with New York Post, he risks losing a strong and lucrative readership that is loyal to the journal for its USP, strong financial reporting. Having said that, it seems inevitable that things are going to change at the Journal. Murdoch is certainly not paying a 65% premium for this paper, if he intends to keep the status quo. He will try his best to make a much more profitable business out of it than it currently is, and being a consummate businessman, if that takes a little compromise on journalistic ethics then we all know that Murdoch is no stranger to it. So, am I renewing my subscription to WSJ? Not yet; I will wait and watch and sign up for the Economist instead.

Jhoom with JBJ

Never ever have I seen a movie so whole-heartedly rejected by the audience and critics alike and still loved it so much. Jhoom Barabar Jhoom has to be the most pleasant surprise of the year since nothing prepares you to expect its dazzling brilliance. To start with, JBJ stars some Bollywood biggies hithertho only known for their eye-candy power (also known as star power) and not their 'acting talents'. The director Shaad Ali is the one responsible for such regular bollywood stinkers such as Saathiya and Bunty-Bubli. And to top it all, which really is a deal-breaker for many movie lovers, the movie is a product of Yash Raj stable who is to the genre of bollywood NRI movies which Ford was to the assembly line production of automobiles.

Jhoom Barabar Jhoom is one of those movies for which the term 'Ahead of its times', if it did not exist already, will need to be invented. The movie dares to be different, too different for its own commerical good perhaps, and in the words of Baradwaj Rangan 'takes the Bollywood song and dance routine to its most logical conclusion--surrealism'. The movie is a joyful ode to the bollywood musicals and you can feel the joy that has gone in its making. Just about everything in the movie shines- the direction is brilliant, performances from the stars are game with Lara Dutta being the biggest pleasant surprise in a movie full of pleasant surprises, music is fitting and choreography is sensational. Most significantly, JBJ is another sign of growing maturity and adventurous spirit among big-budget bollywood film makers; perhaps, a harbinger of even greater things to come in coming years. It is one of those gems that make you fall in love with bollywood again, in true bollywood ishtyle.

A capitalist monk?

How can this man manage to do what he does? A selfless dedication towards the betterment of capitalism can scarcely be found. Future generations may very well rememberRam Charan as the Buddha of management consultancy.

Demographic-dividend and Infrastructure-deficit

In my view the recent cover stories in The Economist (subscription required), Fortune and Business Week, focusing a glaring spotlight on India's infrastructural and institutional problems , is a positive development for atleast two reasons. First, one lesson to be drawn from these stories is that India's awe-inspiring economic growth is no longer a news that is worthy of being adorned on the covers of prominent business magazines anymore. Media does not thrive on good news for long. For media, there is no good news like the bad news. As Indian growth story seeps firmly into the western consciousness, the real scoop is to be found in what can possibly hamper this elephant with wings as it seeks to emulate the upward flight of the giant dragon. Secondly, Indian media and politicians have been in the self-congratulatory mode for far too long. They seem to think that high economic growth and rising living standards are foregone conclusions which are going to be achieved under any circumstances. In this tsunami of optimism, some incovenient truths are being conveniently brushed aside and make-believe hyperbole like demographic dividend is ruling the roost. In such an environment, somebody has to provide a much needed sanity check and remind everyone that we are only getting started towards the long road to economic prosperity. The demographic dividend can as easily become a demographic disaster if we fail to do what is needed to be done, namely- improving the quality of country's creeking physical infrastructure and accelerating the economic reforms process. By some estimates, the country's infrastructure-deficit causes it to lose atleast 2 percentage points from its potential GDP growth. If the scatching criticism in the world's premier news publications adds even a 2 percentage points in the sense of urgency to address this problem, then it would have served its purpose.

Joy of India

Vishy Anand has (finally) become the Number 1 player in the cerebral game of 64 squares and infinite possibilities. The king of intellectual sports finally has a king from its own birthplace. Anand, true to his name, has again brought joy to a nation starved of any notable international competititive sports achievement. Incidentally, I think this is also the first time in a very long time that an Indian team or individual is ranked number one in any international sport ( even if you include a certain sleep inducing pseudo-international sports played seriously only by 3-4 countries). This is a spectacular achievement and a truly fitting culmination of an extraordinary career.