About Value Systems and Economic Power

Extract from Thomas Friedman's Op-Ed in New York Times: We're No. 1(1)!
Who will tell the people? China and India have been catching up to America not only via cheap labor and currencies. They are catching us because they now have free markets like we do, education like we do, access to capital and technology like we do, but, most importantly, values like our Greatest Generation had. That is, a willingness to postpone gratification, invest for the future, work harder than the next guy and hold their kids to the highest expectations.

 

In a flat world where everyone has access to everything, values matter more than ever. Right now the Hindus and Confucians have more Protestant ethics than we do, and as long as that is the case we’ll be No. 11!

 

via nytimes.com

I liked this article that seeks to distinguish the USA of the early 20th century and now, and how India and China, demonstrating the same great values that the earlier USA had, are emerging as major threats to US economic dominance. Thomas Friedman has always been brutally honest with his opinions. Some may disagree with his conclusions (or the approach with which he arrives at them), but there is no denying that Mr. Friedman has admirably managed to simplify and put in context complex macro-economic shifts that we are all part of.

 

The India that he briefly describes in the above op-ed is the India that I have generally known; the India in which most of us grew up in; the India that thankfully still exists in many small towns and villages.

A common scene in most towns of India - amidst the chaos, institutes of English and Computer education stand out. 

My fear is that India is changing fast. Instant wealth / success and gratification are now more sought after than the rigour of education and hard-work. What was earlier perhaps limited to the glitz capital, Mumbai is now spreading wide across the country, thanks to televised shows and new media.

Will a Times of India op-ed in 2050 lament the loss of Indian values? Maybe these are the cycles of life, the ups and downs in the fortunes of various nations. Or can a nation's leaders and thinkers steer a different course? Governance in India, in the current times, does not give such confidence. We have many strategists; we are missing the leaders. 

India Spectrum Auctions 101

All you wanted to know about the India 3G & BWA Spectrum Auction process.

What is being auctioned

3G: Three slots of 5MHz spectrum in most circles; 4 slots in a few. That means, in addition to BSNL or MTNL, you will have at least 3 private operators offering 3G services in each circle.

BWA: This is Broadband Wireless Access spectrum... this is spectrum in a different frequency band where a few technologies like WiMax and LTE are available/being developed to offer very high speed data connectivity. 2 slots of 20MHz each are being auctioned. Again, BSNL and MTNL have already been allocated one slot of this spectrum.

Circles and Eligibility Points

India is divided into 22 telecom circles:. 

2 Metros
Mumbai and Delhi (NCR) 
5 Category A Circles
Rest of Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh and Gujarat 
9 Category B Circles
Kolkata, Punjab, Kerala, UP (East), UP (West), Haryana, Rajasthan, MP and Rest of West Bengal 
6 Category C Circles
HP, Bihar, Orissa, Assam, North East and J&K

In order to bid in the auction, bidders needed to obtain Eligibility Points. Each Metro and Cat A circle needs 32 points, Cat B 12 points and Cat C 4 points totaling 350 EPs. The EPs were obtained by paying earnest money in proportion to the number of EPs sought; most bidders obtained 350 EPs. The points are fungible across circles, i.e. if you had only 100 points, you could use them to bid for any combination of circles within that limit. Eligibility Points determine how many & which circles a bidder can bid on, at any time.

Bidding

Bidding for all 22 circles happens simultaneously in each "clock round" of bidding. The first round starts at the Reserve Price (Cat A: 320 cr; Cat B: 120 cr; Cat C: 30 cr for 3G..... half of this for BWA). About 4 to 6 rounds of bidding happen daily (based on the last 30 days of bidding.)

In each round, a bidder has to only say Yes or No for each circle at the current round price. 

The price for the next round is determined based on the level of demand (i.e. # of Yes bids) for each circle in the previous round. Excess Demand is calculated as Demand (# of Yes Bids) - Supply (# of Spectrum Slots). If ED is 0 or 1, the price increase is 1%; if ED = 2, 5% and ED>=3, it is 10%. If ED<0, i.e. demand is less than supply, then price does not increase. (Price increments are also capped at Rs 40 cr (20 cr for BWA) in each round.)

The interesting thing is that even if there is no excess demand for a circle in a round, the auction for that circle does not end... it goes on till all the circles have reached a point of no excess demand. So you could have a situation that demand = supply in a circle, but its price increases in the next round because some other circles still have excess demand. This is probably the only "flaw" in the auction design -- of course, it benefits the Seller (the Government in this case).

Activity Ratio

A bidder can bid for only those circles that are within the Eligibility Points that it has at that time. Thus, the EPs associated with all the "Yes" bids of a bidder determine how many bids it can place in the subsequent round. In the initial rounds, however, this is relaxed and a bidder can retain its EPs, if it bids at or above the specified Activity Level. So, the auction starts at 80% level, i.e. a bid equivalent to 280 points (80% of 350) retains the bidders 350 points in the next round. The Activity Ratio is increased by the Auctioneer to 90% at a later stage and then to 100%. At 100%, bidders have to bid (i.e. choose Yes) in order to retain the associated EPs. Unless they are a Provisional Winner in that circle. 

What! More complexity! 

During each round, the Auctioneer declares (based on pre-set rules) a number of Provisional Winners (equal to the number of slots). Being a Provisional Winner does not automatically guarantee the circle to a bidder; the primary benefit is that a Provisional Winner is deemed to have bid for the next round and can therefore retain Eligibility Points even when it chooses "No" for that circle. The Provisional Winner concept can be used by the bidders to "reduce" the demand level and consequently, the price increment in that round.

The End

The auction comes to an end when two conditions are met:
1. Activity Ratio is 100%
2. Excess Demand is 0 or less in all circles simultaneously

The Government has said that winners in the 3G auction will be allocated spectrum in September 2010. Based on that schedule, we can expect that services should be available in a few major markets in early 2011. The BWA spectrum is likely to be allocated immediately to the two winners; depending on their technology choices, wireless broadband services could be available towards the end of 2010.

(Note: I have tried to keep this quite simple and have not gone into all the details/complexities of the auction design. For those interested in the painful details, I am happy to answer your questions.)

Cracked the Scene. So?

My friend from school and I met for dinner after a very long time and got chatting about our other friends. He said, you know nobody from our 1993 batch at high-school has really cracked the scene. Is that really true, I countered, somebody had become a Partner at McKinsey, one co-founded a hedge fund at New York, some others were hot-shot investment bankers in India, Singapore and elsewhere and there were others moving up the corporate ladder. Seemed to me that everybody was doing reasonably well. But nothing spectacular, he said. 

Most of us have been working for about 10-11years, assuming that we spent 5-6 years studying further (BE+MBA, in most cases!), and are nearing our mid-thirties. Not bad, I'd say, if I compared this to what our parents' generation might have achieved. But nobody is a CEO of a big company yet. Or a well-known scientist or a management guru. 

You know, I have no idea what the hedge fund founder's kids' names were or what the Singapore I-banker did beyond I-banking... the occasional Facebook update tells me that most of us have put on weight, added new faces to the family photos and took an annual vacation somewhere. Everybody is happy. So it appears. 

If any of us had become the youngest CEO in the history of our companies, would it have made us happier than what we were now? We would have surely cracked the scene, but would it make our 3 or 5-year old kids happier? As CEOs, we might even install Telepresence at home, and meet the family face to face when on the road, more often now. Did we need the additional responsibility of being a CEO just when the responsibility as a parent was beginning to peak? 

Is it really progress (or cracking the scene?) if the envelope of a professional career is shrunk rapidly? Earlier CEOs were typically 50-year olds, now its passe to reach the top in the 40's and the target is to get there before the 40th birthday. So during the most productive years, all attention is focused on professional excellence and "success", with the hope that one can retire early and then enjoy life. But it is difficult to go trekking at the age of 45 when you are under medication for diabetes and hypertension. It is difficult to lift your fifteen year old child and fling her in the air while playing in the garden. So we cracked the scene at work but what about life, in general?

Anaggh Desai tweeted today, "Isn't it surprising that only Head Honchos talk and manage to practice Work - Life Balance?" I believe that though Head Honchos talk a lot about Work-Life Balance (WLB), most don't really practise it. There are very few who have the aptitude as well as an environment conducive to WLB. Balance is usually a euphemism for compromise; and when Head Honchos compromise between Work and Life, it is not difficult to guess which direction the scale typically tilts. 

I read somewhere, very long ago that the best way to plan one's life's goals was to write your own obituary. What would you like your near and dear, at home and at work, to think of you when you are no longer around? What are the first things that you want others to say about you? 

Are our actions today helping us achieve that "end-goal"?

Entrepreneur or Entrepreneurial?

Had an interesting discussion on entrepreneurship with my friend Janani who has recently started out on her own. In fact, she and her hubby (& my classmate) Marlee gave up fundoo MBA careers (bank/consult) to start an interesting concept in the education space. We were chatting about start-ups, and what helps/impedes their growth.

An important element of entrepreneurship, in my opinion, is the ability of the visionaries/owners to attract professional managers into what might seem like a 'family' concern. A successful start-up has to eventually morph into a large business/organization - that requires building a good management team. Can the entrepreneur attract, encourage and retain high quality managers who can help scale up the business? Can you share control with other qualified professionals and let them handle key elements of growing the business? 

This can become a critical issue if the business requires external funding to scale. Venture capitalists back entrepreneurs and concepts; private equity investors, on the other hand, back business models and management teams. The most successful Indian start-up (in my view), Infosys, made the transition from being an entrepreneurs-led start-up to a professional organization early in its journey. The founders behaved, through the company's history, as "managers" and not "owners". In fact, two of them have even "retired" from the company and let others take on leadership roles. At the same time, they created a company where many of the employees work in an entrepreneurial manner.

How can that happen in large organizations? How can thousands of employees/managers develop the same passion and innovation that entrepreneurs bring to a business? We need leaders/entrepreneurs/investors to create an environment where every manager believes he/she has an equal stake in the success of the venture. And this goes beyond stock options/profit sharing. It is to do with trust, delegation and respect. You have to make each employee feel that they have a say, the right to determine the future of the business as well as a duty to.

I have often been asked by friends, why don't you do something on your own? Perhaps it is a risk thing, but also, maybe because I feel that my "job" lets me do my own thing. Lets me dream big and go after it. How many entrepreneurs let their "employees" determine the direction and pace?

What do you think?

Note: I have no experience of being an "entrepreneur" though I have watched / heard from others. I have advised entrepreneurs and (through my company) invested in entrepreneurial ventures. I would like to hear other perspectives / alternative views. 

How many dissatisfied customers can you afford to have?

"You cannot satisfy every customer" the marketing manager said.

In a spirited discussion about the role of Web 2.0 in marketing, the conversation turned towards the large number of negative comments posted on websites and Twitter and such like. How do we know they are even for real? There are so many people out there saying what they want about our brand; we can't take everyone seriously. It could be competitors trying to malign us. Why couldn't the customer provide his mobile number in the complaint? Valid questions.

But are we trying to use these as excuses to delude ourselves that our customers are all happy and have no reason to vent their anger online? Are we using the (relatively) low penetration of the Internet (now) to treat it as a trivial medium? Most customers, when they have a problem, approach the traditional customer service channels. And most of them are willing to accept that a product or service could have a deficiency - nobody's perfect. What they do want are clear responses about what we propose to do about the situation and action to back that promise. It's only when they get automated responses ("thank you; noted; will get back; do not reply to this mail") or a stalling customer service agent ("our servers are slow/down; here's a trouble ticket #; pray") that some customers pour their sorrows in mails to the President of India or messages at mouthshut.com and Twitter.

In some cases, messages on Twitter / FB could cover issues / concerns that traditional customer service channels do not typically address ("xyz airline was late again #fail").

Marketers would do well to heed both types of messages. The first reflect angst or frustration that could lead to the customer not just complaning her case but becoming a brand un-ambassador (e.g. United Breaks Guitars!). The latter type are still not angry but gradually getting there. Registering the feedback and even involving the customer in designing a solution should be the proactive approach to managing the situation.

Every dissatisfied customer we leave out there is potentially raising an army of other similar people and can cause irrepable harm to our business. The Web provides them the platforms. Do we want to provide them a reason?

Business of Education

Why isn't there a national chain of K12 schools in India? In fact, why aren't there many?

I understand that education in India is for non-profit only but is there even a debate on the topic? And I can't believe that all the politicians who have set up schools in their names have been done out of only good intentions!!

When a manufacturing major decides to set up a mega-plant, it asks the Government for mines and power and other essential raw materials. They look for vertical integration to protect their long term interests. Then why are IT and BPO majors depending purely on Government action to provide them their essential 'raw material'? Every year they are hiring tens of thousands each, yet they have no control over the quality or mindset of the people they employ. No wonder they have to invest in almost recreating their education. The Knowledge Economy is predicated on India churning out sufficient numbers of well qualified youngsters. Note we are not just talking of call center execs or software code writers; the opportunity is in design, animation, law, financial analysis, research, education, management.... almost endless, if only we had the right talent. After years of suffering whimsical and incompetent people, the HRD ministry seems to now have a leader who appears to have his heart and mind in the right place. But can we let India's future: Vision 2020 and beyond, be left to the luck of the political draw?

Rising Intolerance!

Today's Pune Mirror carried a story on how an author has got into trouble for using the "G" word .... "Ghati" that is sometimes used to describe people from the Sahyadri Ghats or Maharashtrians. Apparently, some activist has filed a case that this is a serious threat to communal harmony!!!

Fortunately, at least in this case, police sources have said that the case against the first-time author, Murzban Shroff, will likely be dropped. Thank God! We all know what happened to that poor Bangalore techie who spent 50 days in jail in a case of mistaken identity for apparently posting a derogatory image that hurt some communities.

Will we ever learn?!

For years, we have been calling our various communities by their pet names... Sardars and Mallus and Gults and Tams and Bhaiyas and Gujjus and Ghatis and Bongs and Bawas.... our popular culture, including films, are filled with humorous references to the quirks of various states / communities... whether it is the English / Hindi accents of various groups or the miserliness of the Sindhis or the Sardar with the Patiala peg and tandoori chicken or the Bong with a cigarette in one hand and a point of view on every topic on the other..... we have always taken it in good spirit and added a new joke or riposte to the collection.

These terms are not racist, never meant to be derogatory. These are our nick-names for our brothers and sisters. Just like specific individuals become Pappu or Motu or Pinky or Laddoo, groups of people that originate from a particular state or ethnic background become known by a representative name. Does it mean that they are necessarily homogenous... of course, not! Not every Sindhi is miserly nor is every Tam an intellectual/nerd... every Mallu does not use 'gogonut' oil to shine his hair and every Gujju lady does not carry a dabba of thepla in her hand-bag.... but it would be fun to think that they did.

India is what it is because of its diversity and more importantly, willingness to accept and respect this diversity. Let us not give up our unique heritage and strength.