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Morally bankrupt

Jan 072009

While I was shocked at the goings-on at Satyam Computers as reported in the media over the past few weeks, today’s news that the founder and Chairman B. Ramalinga Raju has admitted to grossly inflating the books comes a thunderbolt. As a shareholder in Satyam Computers, I am appalled at the moral bankruptcy of this man. Moneycontrol has a copy of the letter Mr. Raju sent the members of the Board as well as SEBI, in which he has tendered his resignation.

The details are saddening. For example, the Q2 operating margin was reported at Rs. 649 crores, while the actuals were less than a tenth of this. Cash and bank balances have been grossly overstated, while loans arranged for the company have not been disclosed.

Mr. Raju’s statement in his letter that his actions were not with a view to increase his personal wealth in no way justifies his actions. As Warren Buffett once said (and as has been quoted numerous times in the even-more-debilitating Madoff affair), “Only when the tide goes out do you learn who’s been swimming naked.” I wish that the other swimmers are adequately covered.

What is inconceivable in this whole affair is Mr. Raju’s claim that he is the only person responsible for all of this, and that no one else even knew about this fudging. That can be true in a one-person business, but this is an organization that is effing 50000-strong. Do you want me to believe that the internal auditors did not know anything was amiss? Or the auditing firm that certified the company’s finances? It doesn’t take a CPA to understand that it is impossible for one man to mislead an army of qualified accountants, who are oblivious to the goings-on in the firm. They can’t be so dumb. While the case against Mr. Raju is strong, one wishes that the investigative agencies bring these auditors and auditing firm to light.

P.S.: Ironically, the name of the company, Satyam, means truth!

Playing Narada

Business, Miscellaneous No Responses »

Nov 252008

Cheap might mean inexpensive. It also means mean. I’m convinced it also means Airtel. Here is an ad that appeared in my Gmail Inbox a while ago. (Click on the image to enlarge it.)

Airtel acts cheap!

The ad is (presumably) run by Airtel, but the anchor text reads “Reliance User Call India”. Isn’t it outrageous to advertise one’s product or service using a competing brand’s name? What is funny, nay stupid, is that one can see the URL right next to the text. Airtel can spin this any which way it wants to, but either their copywriter must be fired, or they really are one cheap company.

I decided to play Narada, and sent emails to both Airtel and Reliance informing them of the matter.

Thoughts on Facebook advertising

Business, Tech 5 Responses »

Nov 212008

Image representing Facebook as depicted in Cru...

Image via CrunchBase

I have been dabbling with Facebook Ads for some time for a class project, and I thought about jotting down some of my experiences.

Facebook Ads v/s Google AdWords

The first question that arises whenever you thrown in a new product into a crowded field with established products is “How does it compare?” In this case, the obvious comparison is against Google AdWords. The difference is also obvious. Facebook lets your target your ads much better than does Google. Both services let you target based on geographies, but on Facebook, you can target based on many other parameters. For example, you can show your ads just to those in high school, or in college. You can choose your audience based on their (disclosed) age, gender and interests.

This level of targeting is awesome if you have a product or a service that specifically caters to your audience’s needs. To put this in perspective, think of a family watching prime time TV, and each member sees a different commercial – like the parents see an ad on Cialis, and the children see an ad about Xbox!

But Facebook exacts a premium price for this kind of targeting. While you would normally pay less than 5 cents for a click on contextual Google ad, Facebook’s suggested bids for most targeted ads is around 35 cents; and 60-70 cents isn’t an uncommon suggestion either. So while Facebook helps you reach your intended target, it does make you cough up for it.

Make a bigger impression!

The other advantage of Facebook ads is the number of impressions – that is, the number of times your ad is shown. Probably because there aren’t as many advertisers hawking their stuff on Facebook (compared to Google), you will find that your ad might crank up over 100000 impressions in a day, if you care to pay the suggested price. Ours did, and we were targeting only high-schoolers and college-goers in the Delaware Valley region. Compare this to a meagre 500 impressions per day on Google!

Bid price gaming

While impressions and clicks are fine, we were still worried about the cost per click on Facebook. We were only conducting an experiment, and 35 cents a click or more is a princely sum in the world of online advertising. We progressively drove down our maximum bid price for a click. For one ad, we went from 62 cents down to 17 cents. The max bids for our other ads were also in the 20-cent range.

Surprisingly, the impressions DID NOT come to grinding halt. Facebook was still serving our ads, but only at a slightly reduced rate. I don’t have enough metrics to conduct a detailed study on price elasticity, but suffice it to say that we did not feel that our revised max bid rates greatly affected the serving of ads. Interestingly also, for those ads which we bid 16 or 17 cents, we see a “Price too low” warning, but these ads are being served up nevertheless!

The long and the short of this is that Facebook is a fabulous advertising medium if you have a great product or service, and you want to pinpoint your target audience. Though it compares unfavorably with Google in terms of pricing, you can expect a significantly higher number of impressions. And you would do well to bid lower than the suggested range, and adjusting your price depending on the rate at which your ads are served up.

Big Three Bailout

Business, Miscellaneous 3 Responses »

Nov 202008

While I’m personally opposed to the US Government bailing out the Big Three automakers, I find one line of reasoning ridiculous. It runs something like this

Should taxpayers in Alabama be required to bail out automakers whose plants are concentrated in Northern states like Michigan and Ohio?

So when Louisiana, a Southern state, is hit by hurricanes, the Federal Government should use only taxpayer money from the South to carry out relief efforts?

China: a superior economic model?

Business 1 Response »

Oct 102008

Yesterday, a friend commented that the economic troubles that the United States is faced with is largely because of the deregulated market in which the Government has very little control. He then went on to claim that China’s economic model, an object of criticism over the past so many years, has proved to be superior to most other models.

I would think that such an argument is rather too simplistic. China has had a long history of Government bailouts of banks. So it is not as if the system is perfect. Far from it. But the control that the Government has on the system makes it easier for the Chinese to make light of such problems.

Extending the control argument into a different sphere, one can say that the Chinese Government controls the media in that country, so, even if there were to be a systemic failure in China, the Government can stage-manage it to create an impression as if all were well.

In countries, like the United States or even India, where the media is not a mouthpiece for the Government (OK, I’m not talking about Fox News), systemic failures are covered in all their gory details. (The downside is that a such coverage deals blow to the public’s confidence, and feeds into fears and causes a vicious cycle of fear-induced-fear.)

Lastly, China is a net exporter. According to Wikipedia, in 2007, China’s exports, of over $1.2 trillion, were $262 billion more than its imports. The US alone accounts for a fifth of these exports. If the economies of the US and Western Europe spiral into a recession, Chinese exports would be hit, thus crippling its economy. That the Chinese are not big domestic consumers doesn’t help at all. Nor does the fact that they like to save their money rather than spend (all of) it.

But yes!

That is not to say that the United States’ model is superior. With a growing external debt, and population that has a negative personal savings rate, the country is a model for how not to be. The public can criticize Washington for its problems, but it wasn’t the politicians who goaded the commoners to spend beyond their means, and wind up with massive credit card debts.

The people worked themselves into the mess, and only they can get themselves out of the hole. This does require massive governmental intervention, but what is more important is an attitudinal change towards personal finances. That said, to point to China, growing economic superpower as it may be, and call its economic model as superior is simplistic and ill-founded.

Wall Street 2.0

Business 2 Responses »

Oct 022008

The crisis on Wall Street is symptomatic of a larger problem in the United States, argues Prof Youngjin Yoo, in an article titled Wall Street 2.0, where he also proposes ways in which Wall Street can redefine itself given the changing dynamics of the global economy.

A fabulous read.

Eye-opener

Business No Responses »

Sep 302008

From an 1998 interview with Michael Dell:

“… That means we have to stay on top of our customers’ needs, and we have to monitor and understand the innovations in the material science world- everything from semiconductors to polymers to liquid crystal displays. You need to track anything having to do with the flow of electrons, and you need to keep asking how these marvelous developments might be useful to customers.

The customer doesn’t come to you and say, “Boy, I really like lithium ion batteries. I can’t wait to get my hands on some lithium ion.”

The customer says, “I want a notebook computer that lasts the whole day. I don’t want it to run out when I’m on the plane.”"

Reminds me of a quote from Henry Ford: “If I asked my customers what they wanted, they would have said, “Really fast horses!”"

“The economy is like a bathtub”

Business 1 Response »

Sep 242008

Speaking on MSNBC this morning, Warren Buffett was all praise for Treasury Secretary Hank Paulson, of whom he said he was “thankful Paulson had the imagination to come up with the plan.” When asked why the taxpayers should foot the bill, Mr. Buffett replied “The economy is everyone’s problem…”

And he continued, tongue-in-cheek, “You see, the economy is like a bathtub – you can’t have cold water in the front, and hot water at the back!”

Grasso’s paycheck

Business, Media No Responses »

Jul 022008

Today’s Morning Joe on MSNBC had some of the funniest moments on a TV news show since Chris Matthews took conservative radio talk show host Kevin James on the issue of appeasement.

The topic of discussion this morning was the money that former New York Stock Exchange chairman, Richard Grasso had taken home, roughly $190 million. Pat Buchanan launched a tirade on CNBC’s Lawrence Kudlow for his unabashed support of Grasso’s compensation.

The funniest part comes after Kudlow opines that Grasso must be lauded for his “Herculean” efforts to restart the operations of the NYSE in ten days. Buchanan shoots back saying, “Now, that’s what he got paid a $5 million bonus for. Did any of the New York City firemen get a $5 million bonus?” The other rib-ticking moment came when Buchanan asked, “Why does he get so many million dollars when he leaves? What did they pay him a salary for?”

While I disagree with Buchanan’s views on executive pay, I must say that the way he argued against it was funny. Incidentally, Kudlow chided Buchanan during the discussion for sounding like Obama’s echo. Jack Welch was also at the discussion table.

Here is the video of the episode from MSNBC.

Goldman Sachs…

Business, News No Responses »

Jun 172008

… is a company sans pareil. (Here’s one reason why.)

Interesting question

Business, Personal 4 Responses »

Apr 112008

A question I encountered in an article I read this past week:

Can organizations motivated by the need to make profits and please shareholders successfully conduct basic scientific research as a core activity?

There is some personal significance to that question; hence categorizing it under “Personal” as well.

Innovation

Business, Miscellaneous 1 Response »

Apr 102008

Is in-house innovation at companies so critical as we are made to believe?

My take is that it is not. Because we confuse change with innovation, we think that the one is the other. Companies should be nimble-footed, so that they can absorb innovations* that are not theirs and move forward. In my opinion, rapid and ruthless execution of a beneficial innovation is more important than the innovation itself.

* The argument does not extend to industries driven by patents and regulations.

Eye-opening quote

Business 3 Responses »

Apr 062008

“The corporation is not a social experience.” – Albert J. Dunlap in “Mean Business”

Why criticising the Rs 1-lakh car is right

Business 10 Responses »

Jan 042008

Mritiunjoy Mohanty, Assistant Professor at IIM Calcutta, writes in Rediff in an article entitled “Why criticising the Rs 1-lakh car is wrong“.

Whereas the author (selectively) makes a case for car from the economic and energy pespectives, he does not at all address the issue of India’s urban infrastructure, or the lack of it. Cars, as we all know, are owned by people who think they can afford them, and need fuel to operate. But they run on roads. And pray someone tell me which Indian city has the roads to withstand an explosion in four-wheeled vehicles.

As someone who has used Chennai’s roads for almost 7 years, years that coincided with Chennai’s IT boom, I can vouch that by 2005 the city’s roads were choking. Fat paychecks and friendly loans had loosened the purse strings of conservative Chennai, and the result was obvious on the roads. While I do not have the necessary data to back my assertion, anyone who has been in Chennai would know this to be true. The same can be said of Bangalore too; my friends from Bangalore would agree that their situation is worse.

Transport statistics for Chennai city on March 31, 2002 reveals that the city has about 2700 kilometres of road. Non-commercial motor cars on the same date in the city number 325000. One would not be wrong in assuming that the numbers today would reveal that the number of motor cars has gone up by a much higher percentage than the length of roads.

Throw in a 1-lakh rupee car into this equation. Welcome as it is for people who were unable to afford a car till now, it skews the balance even further. Not only does it mean cars for those who did not have one, it will also be ideal for families thinking about a second or a third car. Basically therefore, in the next few years, we will have twice as many cars on just the same length of roads. (To say nothing of the poor driving skills of these new car owners.)

In city after city whose roads are already at or beyond the limit, a more affordable car is not, as Mr. Mohanty thinks, a disruptive innovation. Whereas one cannot stop Tata Motors from selling a car, and one cannot stop people from buying it, one can only hope that it will at least bring about a retroactive thrust into urban infrastructure development projects. Not an elitist gag that labels all criticism as wrong.

Update: The car has been unveiled, and it is called the Tata Nano.

Credit crunch in the US

Business, News No Responses »

Nov 192007

The Hindu has published a long-pending editorial on the ongoing credit crunch in the US which is a result of housing lenders competing against each other in the recent past to provide home loans to unqualified people without properly assessing the long-term risk of their actions. Promptly, the editorial cites the chances of a similar crisis in India if the lending institutions are not careful enough.

A comparison with the developed world might not seem appropriate, given the vastly differing sizes of the financial systems. Yet, looking at the way things could go so horribly wrong in the U.S., it is time to wake up and strengthen credit evaluation systems and procedures (in India).

I remember a TV advertisement by ICICI Bank, in which a couple go to the bank in order to apply for a loan. Coffee is served, and by the time they have downed it, the loan manager is ready with their approval. Whereas one cannot read too much into this advertisement, it is not very far from the crisis-inducing behaviour that banks in the US are now paying for.

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