Tuesday, December 8, 2009

My thoughts on IT Investment Management

Information Technology (IT) spending and IT investment is increasingly becoming a major share of Operational cost and Capital investment in many large organizations. But this money is not always spent prudently and as Gartner research finds out eight out of ten dollars that enterprises spend on IT is “dead money”, which does not create any business value1 . This paper analyses different pain points and improvement opportunities of US Information Technology (IT) spending from an industry internal’s perspective.

Business should drive Technology, Cool Technology should not dominate Business

Over the years so called ‘Cool’ technology has been sold to business by different IT vendors creating redundancies (both data redundancy and systems redundancy) and huge operational and maintenance costs. Many of these IT investments did not create any long term Business value and business people understood this truth too late. Information Technology was a completely new Business story and the orthodox business leaders had no idea about this. They had very few information to ask meaningful business questions to the IT vendors and the vendors were able to easily sell the products with complex jargons and trendy packaging of their services. Also a competition was created among competitors to stay ahead with the latest technology available in the market. People never thought whether the new technology is really needed or whether it can be integrated with the existing IT infrastructure or how costly it will be to manage the new system. The result: Huge maintenance bills to support the ‘legacy’ systems and high reengineering costs to move to new technology.

We have not improved much on this front and still today many of the IT products and services are ‘sold’ which does not create any business value. Following are the improvement areas as experienced by the author:

We need to integrate Business and Technology groups in IT Project planning and execution.
Take serious effort in improving the efficiency and effectiveness of Business Requirement gathering process. Most of the times the Business and Technology groups are not clear of the actual requirements and these grey areas can have catastrophic impact on the successful implementation of any IT projects.
Recruit Tech people in Business groups and Business people in Tech teams. This way both the groups can have better perspectives from their end.
Understand the present IT infrastructure first and decide on new Technology adoption or adding new Services or Systems based on the scope of integration with the existing system and the future business needs. Also plan for production support and maintenance costs for any new developments(typically $1 spent on any new development creates $.60 per year maintenance cost for the life of the system).2
Reuse the existing data, services, systems and infrastructure as much as possible. Focus on system integration activity to reduce redundancy.
Proper Cost benefit analysis (CBA) and Project cost tracking with correct (honest) data is another improvement area for successful IT investment.

Bottom-line: Business should drive Technology investment and not the vice-versa.

Outsource effectively

Research has shown that outsourcing increases the competitiveness and profitability of US corporations. But still the outsourcing practice has not leveraged all the benefits possible from effective outsourcing. Outsourcing, still in many companies is handled in Body shopping mode. We have a client side Business Team (consist of Business Director, Project Managers, Business users and analysts etc.), Client side technology team(Typically consist of Technology Director, Client end Project Manager, Lead Business Systems Analyst and Portfolio Architect), a vendor side onsite team(consist of Vendor end Onsite Project Manager, Business System Analysts, Technical Leads, Test Coordinators, Test Managers etc.) and a offshore team(consist of Developers, Offshore Project Managers, Technical Lead, Independent Test Team etc.). This duplication of similar roles create huge amount of overhead costs and a lot of confusion in communication between different teams. This increases the Total cost of ownership, affects the target dates and the quality of deliverables. Following are the improvement areas as experienced by the author:

Outsource the whole portfolio to a single vendor at least for a year. Make sure your vendor selection process is stringent enough to select only the matured and capable vendors having significant outsourcing experience. Also do an annual appraisal for the vendor and if needed change the vendor by opening a new bidding process. If this sounds too risky choose two vendors(but not more than that)and distribute the Development and Production Support efforts(again don’t mix the efforts, let vendor A do the development and Vendor B do the Production support and not like both A and B doing some part of development and production support). This will ensure that you don’t have complete dependency on a single vendor but at the same time provide the vendors the chance to manage the portfolio in most cost efficient manner and create the needed synergy, technical and domain competence for a sufficient time.
Make sure to minimize the overlapping of similar roles. Most of the times this introduces a lot of communication gap, duplicated and unplanned effort in documentation and most importantly huge overhead and training cost.
Offshore effectively based on the Cost Benefit Analysis and after considering proper Risk-return payoff. US business thinkers have a tendency to think that off shoring reduces costs and thus should always be preferred. The off shoring companies also sell that idea to increase their profit margin. But offshoring is not always profitable. Many a times we add three offshore resources (approximately 3*$30=$90 per hour) for a work which can be easily done by a single onshore resource ($60 per hour). Think about it.

Explore all the business possibilities of IT

Organizations are still underinvested in IT and yet to explore all the epoch-making effects of Technology usage in different business processes. Wal-Mart and Dell has shown how proper technology usage in inventory management can dramatically improve their competitive advantage. Very few organizations are considering similar IT deployment in integrating similar business processes like Human resources management, Finance, Marketing and Operations etc. Following are some of the case studies in scope for future IT deployment:

IT application in HR: Dynamically Allocate tasks and resources across boundaries and time-zones, track employee activity and effort, measure employee performance more objectively from correct data, collect employee aspiration and satisfaction statistics and help employees in matching their work with their potential and thus maximize optimize employee talent management.
IT application in Marketing and Customer relationship management: Many value added services can be added to Internet Banking applications helping customers in planning their money better and at the same time tracking customer spending to promote financial services products to the customers.
Corporate planning and Integrated Return on Investment monitoring: Strategic planning needs integrated view of all the operations, investment data and resource utilization. Integrated Business Intelligence reporting has lot of scope for improvement.

There are lots of such possibilities which are low hanging fruits and should be explored for creating sustainable competitive advantage.

End note:

The observations, as the author feels, are not specific to any client and although this paper analyses only the Banking and Financial Services companies, these may be a general trend in most of the US Fortune 500 companies. We hope that from this TRIZ case study decision makers can find generic solutions on today’s IT investment challenges and can apply those to their specific industry verticals. We also believe that if implemented properly we have significant opportunity of creating business value through IT spending and investment.



Friday, October 9, 2009

Unique Strengths of USA:Why USA will continue to lead the world for a very long time

Four key reasons I think USA will continue to lead the world for a very long time:

Unique culture of Innovation and melting point of the best brains in the world

USA is the home for the best brains in the world. It's not that the average IQ of an american is by default higher than that of people from other countries, america has successfully created an environment where the best brains of the world come and collaborate. Best of the class talents from different countries come to america and call it their home for rest of their life. That's how America can invent the best practices, products or services long before other countries can do so. US universities and private entrepreneurs are the key to this innovation journey. US has undue competitive advantage in this front which is very tough to replicate for other countries.

Strength of US Dollar

Still US Dollar is the reserve currency of the world and although its long term value may depreciate the process will take a very long time. During the Economic crisis US FED could just print money(I would say Free money) and the whole world was ready to accept dollar loans without any value depreciation of the USD. I don't think the model where US consumers continue to consume without creating similar amount of value and the rest of the world supply money and services to them is sustainable in the long term. But till the time we see an alternate global currency US dollar and as a result of that US will continue to dominate world economy.

US Military Power and strength in Global political diplomacy

US has unmatched military power and because of that it enjoys unmatched political supremacy. The might is always right and hence it can push for laws and sanctions which give them an undue advantage.

Scale of Operations

'Bigger the better' or 'Big is Beautiful' is not always true. But it is true that this american philosophy has helped america to create unique scale of operational efficiency, infrastructure development and use of Technology.

The more I see america, the stronger is my conviction that we will see more americanized world. This is not a perfect system but probably one of the most successful experiment done in this world.

How to stop the wastage Slowly but surely

We waste a lot starting from food, energy, water and other resources. Why do we do that? Are we fundamentally bad and don't care about our earth and limited natural resources? I think it this is not always a good or bad problem, it is a problem of accountability.

Most of the wastages are done when we are not accountable for those. For example consider wasting food in a office party(company pays it) or wasting water in our bathroom(we pay a fixed price for water and utilities and don't care how much we spend the water or how much garbage we generate).

Now consider the scenarios where we care. We care to drive in the right way(because if we get a ticket, our insurance premiums will increase) or when we buy food for ourselves in restaurant we buy within our capacity or at least pack it for next day.

It may sound simplistic, but I think the best way to solve the wastage problem is to make user accountable. We need to eliminate any free lunch. Let me discuss my idea with few examples.

We need to introduce pay per use pricing and remove any fixed pricing(at least some mixed model where variable component is present with a minimum fixed price). Let me start with water, utilities and garbage collection. Instead of a fixed monthly price let's meter the usage and price per the usage. Similarly let's consider healthcare cost. Our insurance covered model allows us to waste money in unnecessary tests etc. We should reduce the insurance premium and increase the co-payment or co-insurance. That way we can ensure accountability. Also we should have a guarantee program where the providers will provide guarantee of any treatment done from their facility. That way they will also make sure unnecessary costs are not involved and proper care is taken during the treatment.

We have huge business wastage. This is simply because nobody cares when the money involved is not personal money. I propose to introduce personal responsibility in corporate resource usage. The accountability should be at the most granular level and any cost save will have direct connection to that person's remuneration. This is a delicate balance but this will work.

Ownership of any transaction and personal accountability are the key here...

Saturday, September 19, 2009

Five investment themes which can make big money

The secret of sustainable money-making is to provide the products or services having greatest appreciable value to the mankind at any point of time. Hence I believe to make sustainable wealth you need to do something which really helps most of the people, which really improves the quality of life. Wall-street Financial Engineers has once again proved the fact that you cannot fool all the people all the time and continue making money. Hence my themes will not be cosmetic manipulations. They are targeted towards improving the quality of human life and creating value through sustainable business models to create long term wealth.

This discussion will be generic enough for global investors and venture capitalists; but I will provide the examples from my own country India (not for the fact that I have a bias towards India but because I can relate best to this market). I request readers to keep an open mind while reading this post because some of the ideas mentioned will be new and may come as a culture shock. Enough introduction;Let's begin.


Sounds crazy? We knew for decades that Agriculture-based economy=Poor Economy, Industrial/Service oriented Economy= Prosperity right? Yes, it was. But my feel is that we have come a full circle. Increasingly we are seeing the chance of global food crisis and increasing commodity prices. Specifically for India agriculture has huge importance in its macro economy. Still today almost half of the population is dependent on this sector. Sad part is that the Indian agriculture system is at least a decade behind the western system. We have very poor productivity (most of the people in agriculture field are under-employed), huge resource wastages (due to lack of proper distribution system and warehousing), low use of Technology (still agriculture is very much dependent on rainfall) and lack of scale (we do not have fields where large scale automation is possible). These are the problems creating a huge business opportunity. I see a growing market (Increasing Food prices because of global food shortage) and underutilized industry with a scope of huge productivity improvement. That makes it a ideal case for venture capital investment. Keep in mind although I mentioned the examples from India, this is applicable for most of the emerging economics which has not fully utilized the power of technology in agriculture space. Also this investment opportunity is for global investors (especially for those companies who have the knowhow of the use of Technology in agriculture space). The niche areas which can be exploited in this space are: Use of Biotechnology in creating better seeds, manures, pesticides (environment-friendly alternatives), Use of better storage and distribution system (Logistics management), Use of Technology in all the automation opportunities including the use of water-resource management and Food-processing, Introduction of large scale firming through cooperative model or company ownership model etc.


Here I am not talking prostitution (which is anyway the oldest and one of the most profitable businesses of the world) but providing resources and services for healthy sexual needs. Again my discussion will be around the emerging markets such as India because Developed countries have already explored this theme for years. India has probably seen much more sexual activities than its western counterparts but unfortunately most of the Indians are still not comfortable discussing their sexual needs and also lead a very low quality sexual life. India and many third world countries have more cases of prostitution, child-trafficking, rape and other sexual exploitations, HIV and other STDs (due to unprotected sex) than the advanced countries. One of the reasons for this distorted sexual lifestyle is due to lack of Sex-education and a social mindset which consider sex as something bad and unacceptable. This is a huge problem and that creates the enormous opportunity. Let me provide some ideas which can be exploited here: Internet Business for providing quality sex education (people prefer Internet for its interactive and privacy features), furniture for maximizing sexual pleasure(niche but very premium market), matured mating sites(boys looking girls, girls looking boys etc.), Quality matured content(Indian adult content industry is very unorganized producing very low quality content),Sex tourism, Sensual massage services, Theme parks and nightclubs where couples can enjoy quality sex/romantic time without any verbal abuse of police or external parties(two agreeing adults should be provided freedom to live a sexual life), sexual counseling for better sexual health, helping women with sex issues(STD control) etc. Investing in Sex is tricky especially in third world countries because politicians and police always try to make money by making rules which prohibit many sexual acts but still allowing them to continue when you pay the price (bribe). Still my conviction is that you will have a huge market helping millions of people in leading a quality sexual life and at the same time making enormous amount of wealth.


Religion is another sensitive and unconventional theme for investing. Many people hate to consider mixing religion with Business. But I think Religion should be considered a natural service. Let me clarify my point because I know this is controversial. Music and movies are considered service. People go to see opera for enjoyment, entertainment, relieving stress and enriching themselves with new ideas. Same for religion; we want to pray for relieving our stress, getting new ideas, getting mental strength etc. Hope you appreciate the similarity. My point is both should be considered Service and hence to provide good quality service money has to be spent by the consumers. Huge amount of money is actually spent in religion. But most of the time this is unorganized, poorly managed and lack proper accounting (money goes to the selective few, typical ‘executive pay’ problem). My proposal is to make religion a standard business with right pricing (ticketing) and corporate accounting practice(balance sheet, shareholder review etc.), quality products(better hygiene in temples, mosques and churches) and services (research on theology and providing new life perspectives through lifestyle coaching) and new Social Servicing opportunities(Religious institutions will also help NGOs in Fundraising).


This is a more conventional theme but still has a scope for ‘Blue Ocean Strategy’. Huge amount of Human resource is wasted for the Lack of Education in poor Developing countries. I think people have started appreciating the importance of education but many do not have access to quality education. We have scope for improving our curriculum, delivery method and the scale in which we provide education. We have a huge market for this service in the so called ‘bottom of the pyramid’ which has not yet been explored.


They say that Green is the next big thing and it really is. Environmental Protection, Renewable energy sourcing, waste management, Biodiversity control: all of these are major issues facing the mankind and epoch-making Technological breakthrough is needed to really solve these problems. Many small companies have ventured into this uncharted territory but still much more research and funding needs to be in place to keep it going. Sustainability will be the next big business (if at all we can continue doing business) and prudent investors need to put money into this theme.

Happy Investing. Eager to hear new ideas from my readers.

Wednesday, April 8, 2009

Mutual Fund Performance based Asset Management Fees and Compensation Policy

Most of the Mutual Funds in the Industry have flat Asset Management fees and Asset Manager Compensation Policy. This needs to be changed. Previously I had suggested a compensation policy in line with Hedge Fund. It should have a low flat fee and Percentage of Profit sharing above the High water Level level(meaning the Profit sharing starts only after a Benchmark return is achieved). I can think of another improvement over this plan. We can have an Industry standard set for all Mutual Funds for following this policy. Let me provide the outline of this policy. We should have a Benchmark set for each MF. Also we should have a Record Date for Uniformity in Performance Measurement(many MFs show their best return period in their advertisement which does not truly protrait their performance). For example for a Diversified Equity Fund the Benchmarking Index can be Nifty. The record date can be January 1 of each year. The Asset Management Fee structure will be as follows:
Return Below Benchmark return(Does not matter if the return is Positive or Negative, in a bear market less negative means good performance)- A small Fixed Asset Management Fee. Say .25% of the Asset under Management(AUM)
Return matching Benchmark return .5% AUM
Return more than Bechmark return not exceeding 10% - Asset Management Fee should be 1% AUM
Return more than Benchmark return exceeding 10% - Asset Management Fee should be 2% AUM
Out of this 50% of the compensation should be in cash and 50% of the compensation should be in managed fund's unit having a lock in period of at least 3 years.
These numbers can be changed but this should be the compensation philosophy.

Monday, March 9, 2009

Creative destruction:We don't need GM, we need kiva!

American Car industry is an inefficient, old, dying industry. It has huge operational and overhead costs. American cars are not technologically competitive with Japanese or German cars. I can see that we can not save them in the long run(at least in their present form) even if they make Electric cars or Fuel-efficient cars(as advised by Barack Obama) because of the fact that they are fundamentally inefficient. Still we are bailing out huge amount of money(although people don't think Billion is a large unit nowadays after we started this Bailout concept). Even the lawmakers and the company executives are pretty much sure that they can not survive in the long term. But just to save some jobs(which can not be saved in the long run) we are trying to infuse oxygen to a dying patient. This is a very wasteful use of resources.

Steve Jobs called death the "single best invention of life". We need to get out of old dying industries to create the new ones, which are efficient, meaningful and promising. Rather than prolonging the life of a dying patient we need to give birth and provide education to the new generation. That is the idea of creative destruction. We need more kiva and less GM. Let the GM Fail and let these people get resources from kiva(Goverment may bailout kiva for that matter) to start their own small companies. We need new Technology inventions, new process innovations and new entrepreneul sprits to get out of this recession. It's a tough and painful process in the short term but that is the best way the world can see a new sustainable prosperity. To quote Tom Peters, "Fail fast, succeed sooner."

Sunday, March 8, 2009

We need Futurists and not Analysts

Let me define these two terms in my own way. Analysts are those people who collect historical numbers(company quarterly performances etc.) and analyze them to suggest right decisions. Futurists are those people who analyzes future trends and try to suggest better options(which include new thinking, disruptive change ideas). At a high level both analyze the present situation and information available. But there is a small difference. Analysts think in the domain of existing human knowledge but futurists think beyond the obvious. To give an example an analyst will try to explain the Economic crisis in historical terms(like how we managed to rescue from the great depression, how the future stock price should behave based on Technical Analysis etc.). But there is a high probability that this crisis is something completely new and may not be described by any of the past trends. To face this crisis we need new ideas and new solutions. Futurists are the people who will suggest these ideas. Futurists will offer out of the box ideas to fix this great crisis.

Let me tell you why I am frustrated with the analysts. We waste a whole lot of time for analysts. Every quarter we need to show results to these analysts. Many intelligent people need to spend whole lot of time in these crappy number collection, report preparation etc. In one word these are boring stuff to do and does not add any value to the business. What is more dangerous is the short term planning needed for fairing every quarter. Many of the times executives manipulate numbers just to look good. In a complete business cycle you can not be good in every quarter. But the analysts demand that just to keep your stock value afloat. I feel for best results we need long term planning and execution. We need more prudent risk taking attitude and think beyond quaterly results. Many of our excutives waste a lot of time in planning the statement for media and analysts. They can better use this time in research and innovation.

Proper and timely information is needed for efficient price discovery by the market. This helps to reduce account manipulation to some extent. So we can not and should not stop the market reporting process completely. What I am proposing is to try something new. Let's start reporting Half-yearly results instead of Quaterly results. In this way we will keep the best of the both world. Executives will be able to concentrate on long term company performances. At the same time analysts will also allow the capital market to function properly.

Recession effect:Increase in crime rate

The USA can see huge increase in crime rate and deterioration of public safety system in near term. People are loosing jobs at aceelerated rate, media is creating a panicky and hopeless picture of the economy and investors loosing their wealth through decreasing home and equity prices:all of these creating an enormous amount of frustration. People are angry and frustrated and this frustration can turn into violence and mass disobediyence of law and order.

At the same time budget cuts have forced the Federal and state goverments to reduce security measures including number of police per capita. This creates another threat to the overall security.

The USA has another problem for people safety. People here can legally keep guns and I believe this creates another vulnarability for the angry and frustrated society.

Tough Problems need tough solutions:

I propose few solutions which may not be acceptable to typical US culture but can help to solve these problems:

  1. Ban the personal use of guns.
  2. Use food for work program to increase the number of police and security officers per capita. This way you can reduce the frstration of a few unemployed people and at the same time increase homeland security.

Wednesday, February 25, 2009

Americanized world need a culture shift

As they say:The world is not being globalized, it is becoming Americanized. The USA has tremendous influence on the world. Most of the new ideas come from US and the rest of world blindly accepts it without any second thoughts. Such is the power of America. Fortunately, most of these are wonderful ideas and the world has benefited by pursuing these. There are plenty of such examples: from Freedom of expression to Internet, and from Free Market Economics to Conveyor belt Batch process. Largely american ideas have shaped the world for a better place to live in.

But today I want to discuss few 'American' ideas which went terribly wrong. The US as well as the 'Americanized' world need to take immediate steps to correct them to see a better tomorrow. And unfortunately we have not seen any radical action or paradigm shift in the mindset of the americanized world to correct those mistakes.

Let me start with the great American Greed. Some say that greed is good and for progress we need greedy people. Greed motivate people to start new things, take risks and make large breakthroughs. But I feel there is a very fine line between ambition and greed. Ambition is working hard and trying new things for a better future. But greed is a mindset to make fast and easy money without much hardwork. In most of the times greed is associated with dishonesty and fraud which harms majority of the stakeholders. Social cost of greed is huge and today's subprime and credit crisis are example of that. The americanized world need to change its mindset. From peer pressure, rat race and greed to have enormous wealth we need to focus on more phylosophical themes of life like: Peace, Honesty, Satisfaction, Living in Present, enjoying small beauties of life, harmony with people and nature etc. 'There is enough for every man's need but not greed.' Once people can differentiate the need from the greed we can have a more sustainable and inclusive prosperity.

The second is the culture of wasting resources and living in excesses. Byproduct of greed, american lifestyle is an example of living beyond the means. Here are some statistics:In the US alone $48 Billion worth of food is wasted anually, American Credit Card Debt is valued at $950 billion, as per the 2003 data 291 million americans(out of which only 196 million are drivers) drive 231 million cars(more car per driver), In the US alone the Environmental Protection Agency estimates that 44% of junk mail is discarded without being opened or read, equaling four million tons of waste. This Economic downturn may proove to be a boom in disguise if this can change the wasteful spending oriented mindset of americans and create a culture of living within the means. If the Obama government takes the energy issue seriously we can see more Green energy sources. At the same time we need to create a culture of public transportation and car pooling simply because those are much efficient systems from energy use perspective and having less environmental impact.

Third culture which needs dramatic change is lack of effective oversight and stopping lobby powers to misuse the laws. Instead of one of the best tracking and policing system in the world we have seen many big oversight failures in the US: Financial Frauds from Bernie Madoff, irresponsible mortgage lending and derivative trading by Wall street. Also in everyday life we see so many crimes starting from prostitution to drugs and Internet crimes to detainee abuse. Narrow mindset of different lobby powers affect the proper growth of the society. We waste huge amount of money in agriculture subsidy; car lobbyists have stopped the growth of public railways and transport system; we have a nexus of insurance companies and medical practitioners creating a inflated healthcare cost; our budget is grossly misused in ineffective programs etc.

Let's think about the solution. Let's accept that we don't have any easy solutions and we can't fix all these in one day or one month. But we need to have a vision and the top leadership need to honestly pursue these dreams. We need to change acts and laws and plan big for future. We need constant communication to the people for chaging their mindset(BTW Obama did a good job in last presidential address). We need to think beyond short term political popularity and take hard decisions. From theoritical perspective these issues look simple because we know the solutions. But in practice actionizing the solutions are challenging because these involve people and changing people's mindset is a tough job. Unfortunately we don't have a plan B.

Sunday, February 22, 2009

Slumdog Millionaire and other issues

Tonight is Oscar night and most of the Indians wish to see Slumdog Millionaire(SM) winning Oscar in all ten categories. I see great excitement over this film and several true SM stories in Internet.

Frankly speaking, I think the film is not extraordinary. The storytelling is good but the film looks unreal because of its use of English and Hindi. In India English is a foreign language and a slum dweller is not supposed to speak in English. I think the director could have justified more to the reality if he tried to make the film in Hindi with English subtitles. The music is just OK considering the genious and potential of A R Rahman(although I wish he wins the Oscar; it would be like Einstein getting Nobel prize not for General Theory of Relativity but for Photovoltic Effect equation). I think one of the reason the film has received so much attention in western press is because of its link to famous production house and director. India has made many great films such as Lagaan, Taare Zameen Par which could not make to the Oscar. I think the reason is that these films were more Indian in form and type with lot of music and dance, which was not acceptable to western critics.

The reason I wanted to discuss this film is something different. We have seen a lot of protests against this film. See the details from wikipedia.

"Following its release in India, the film faced criticism from various members of the public alleging that the film fuels western stereotypes about poverty in India and that it peddles "poverty porn" and "slum voyeurism".[47] Tapeshwar Vishwakarma, a representative of a slum-dwellers' welfare group, has filed a defamation lawsuit against the film's music composer A.R. Rahman and actor Anil Kapoor, alleging that slum-dwellers were depicted in a bad light which would be a violation of their human rights.[101][102] Vishwakarma's lawsuit alleged that the name of the movie is derogatory and he was particularly displeased that Indians associated with the film did not object to the use of word "slumdog."[101] Nicholas Almeida, a social activist working in Mumbai, organized a protest against the film on the grounds that it intentionally exploited the poor for the purposes of profit, and that the title 'Slumdog millionaire" was offensive, demeaning and insulted their dignity. The protesters were slum dwellers in Mumbai, holding posters like "I am not a dog"[103] who objected to being dehumanized as "dogs" in the film title.[104]
Protests against Slumdog Millionaire have extended beyond Mumbai to other parts of the country. Slum dwellers in Patna, the capital of the Indian state of Bihar, have intensified protests against the movie. Activists have reported that slum dwellers will continue to protest till the film's director deletes the word 'dog' from the title.[105] Protests in Patna intensified on 26 January 2009, when "protesters tore down posters and ransacked a movie theatre" screening the film. The following day, the police in Bihar tightened security "outside theatres in the state to thwart any further attacks."[106]
Hindu Janjagruti Samiti has protested against the film for its allegedly inappropriate portrayal of the Hindu God Rama.[107][108] The activist group believes that the portrayal of Rama is derogatory and "hurts the sentiments of Hindus". Writing for the conservative Daily Pioneer, Kanchan Gupta reiterated the objections of the activist group that the film provides a one-sided portrayal of the complexities of religious conflict in India, and that the film depicts Hindus as "rapacious monsters".[109]"

All these criticisms may be true from their own perspectives. But I see some missing points in all these criticisms. The truth is that most of the Indians are still very poor. India still faces lot of socio-economic challenges like extreme poverty, human exploitation like child labour and prostitution and religious riots. As the truth seekers press and the movie-makers have all the rights to make stories on these themes. And I think Freedom of opinion actually helps to improve the existing system in a free pluralistic modern society. Our(most of the Indians) problem is that we are not open to critism. We don't prefer to accept the critism and improve on that and rather try to attack the critic evenif we know that the fact is true. We know we live like dogs(in all possible inhuman conditions) but we get upset if someone says that. We are much more discussion oriented and much less action oriented.

We get excited about our glorious past and that is good. India is one of the most fascinating country in the world having rich culture and traditions of music, food, science and phylosophy. We should be proud of this tradition and do our best to promote this to the world. At the same time we should be open to other cultures and learn from their experiments with truth. As a nation we should become more confident in accepting the fact that we are not perfect. We have problems and we are open to learn from our own mistakes and other's experiences. We need to stop arguining whether we are 'slumdogs'. But rather we all should aspire to be 'millionaires'. We need to stop cheap day-dreaming but start dreaming big. You know that Dream is not what you see when you sleep;dream is something that doesn't make you sleep.

Saturday, February 7, 2009

H1B VISA Program etal.

Senate approves 'strict' rules on hiring H-1B workers and there has been a growing controversy whether H1B VISA Program should be stopped completely or at least regulated. Let me first start with the disclaimer that I am a beneficiary of H1B VISA program and continuation of this program will be good for my career. Said that I will try to access the effects of this program on American Economy and also the World Economy in general.

H1B program was created to supplement American workforce with foreign workers having highly specialized knowledge in Business or Technology on a temporary basis. It was designed to help American business to source global talent to remain competitive. And I think this program helped US in many ways to achieve that goal. Best talents of the world are still attracted to study and then work in US making it a hub of continuous innovation. And I believe that is the most important competitive advantage US Economy enjoys over other economies.

It is true that many of the times H1B program(or for that reason any worker VISA Program like L1 etc.) has been exploited by different organizations. Companies have hired foreign workers with skills available in the US mainland. They were paid lower wages than the standard prevailing rates mentioned in the program. These temporary workers have been used as onsite coordinators to move jobs offshore. US corporations and Offshoring companies used this process to increase their profitability. Because of this Nobel laureate Economist like Milton Friedman think H1B is just another government subsidy .

Truth to be told all these are true but stopping H1B VISA program will not help US or world economy in any way. Protectionist view have never been successful in a Free-trade world where companies look for value. Let me explain why this will not work and what we can do to make things better:

  1. Offshoring work to low cost countries will continue to grow even if H1B programs are stopped. The latest trend in Offshoring is not the use Onsite H1B and Offshore Contractors model. Instead US companies themselves are moving their own operations to low cost companies(For US this means american job loss and Income tax loss, in H1B model at least Income tax revenue was not lost). In this model you can have some key employees(US nationals) in US and a huge back office operations in low cost countries like India or China. That means even without H1B program american jobs(which does not need local presence) will be lost. If the US government even tries to stop offshoring completely the effect will be worse. US companies will lose their competitive advantage and Foreign companies with access to cheap labor will rule US and world economy. In that way much more US jobs will be destroyed. In a hypothetical situation if US stops Free-trade contracts with its partners it will become a country like North Korea(enough said I believe).
  2. I think the only way US and the world economy can prosper is through free-trade and more wealth distribution. For decades US has been living in enormous excess. US consumers have continued to spend by taking loans from developing economics. On the other hand workers from poor countries have continued to work harder to create products, services and finance options to their American sisters and brothers. They saved that money and sent to America so that their US friends can fund their offerings. I believe this model is not sustainable in the long term. We need to acknowledge that the value created needs to be redistributed or at least balanced. That means we need to see a lower consumption and more savings by Americans and less saving and more consumptions by emerging countries. That is the one of the way US and world can maximize economic prosperity and continue business operations. For this we need have more free-trade and growth of american business for world consumption. If implemented properly US can have more high end jobs(thus low unemployment), more balanced budgets and more sustainable economics. On the other hand developing countries can see less dependence on US economy(we have seen huge job losses throughout the world because most of depended on US consumer),better lifestyle and better infrastructure and prosperity. It may sound socialist, but a capitalist economy can not sustain with massive wealth accumulation in the hand of few fortunate people and the rest of the crowd left behind. We need to see money in the hand of common people(bottom of the pyramid) so that they have ability to spend and purchase products and services. Some ideal scenarios for future? An investment banker from NYC happily accepts a job in a micro-finance company in Bangladesh(because he or she will be able to maintain almost similar lifestyle and also do more satisfying job of helping people with money rather than creating synthetic derivative products) or a Indian banker can afford a honeymoon in Mediterranean cruise.
  3. The basic difference between the US and any other coutries is that US is the country of immigrants. No other country in this world has so many hard-working, talented opportunity finders and innovators. US has always been the hub of innovation for new technologies and new ideas and the only way it can continue to survive as a prosperous country is to continue that trend. For that US should keep the border open for truly high quality foreign sudent and workers. Here quality is the keyword. I think what we need to have is a right gating process which is enough comprehensive and clear in its directions so that the exploitations can be minimized. We should ensure that only the very best gets a chance to enter the country. At the same time I think we need to increase the number of intake of foreign students and workers because we are not really doing a good job in global sourcing. I believe that there will a lot of fantastic talent available throughout the world who do not get opportunity or don't have enough information on US immigration. US can do better campaign on those counties to invite right talents by showing opportunities and also change the immigration laws to ease this gating process for the right people(today H1B Visa can only be obtained by a sponsoring company and many of the times right talents do not get those sponsors or are exploited by those sponsoring companies). At the same time US should concentrate on educating its own workforce with latest technology and skills(job skills as well as basic money management skills) needed for the next economy. US should effectively invest in higher education and research(should make affordable higher education) and work on creating a new economy( may be green technolgy, energy technology, bio-technology, space-technolgy,geo-engineering, computer science, business etc.) which will create millions of new jobs save the world from our most pressing issues.

This is the high time that we be ready for the new rules of the new economy. We can not(and should not) artificially stop companies from improving their operational efficiencies. Hence we can not save amrican jobs by stopping H1B Visa programs or offshoring. What we need to think is to create new economy, new technology and new ways we do business. That is the only way we can save american jobs(for that reason jobs all over the world) and see a prosperous world.

Wednesday, February 4, 2009

Intelligent Cell Phone

I am not a Mobile Technology guy. But I have this idea which can solve lot of problems for busy executives.
Problem Statement:
1. If we are using calling card to make international calls we need to call a 1-800 number and once connected we need to type our registration number and password to make the calls. This is problematic for the users as they have to remember those data or type it every time.
2. For Virtual online meetings also executives need to make call to one 1-800 number and then enter meeting ID and passcode.
The mobile phone should have facility to save the numbers (registered number and passcode etc.) associated with such numbers (1-800 number) and once connected should automatically type those numbers. In this case the user can enter the data once and for all and he can be free from remembering this data in future calls. This solution should have fantastic CBA numbers as the users will have a premium experience with their smart mobile device.

Saturday, January 31, 2009

Economic Crisis: Was a Soft Landing possible?

Was there a way to avoid this messy Financial crisis? Could we have avoided this in the first place or at least could have arranged for a soft landing? Lets analyze some perspectives.

Greed, fear, artificially concentrated growth and Lack of proper oversight are the four main root causes of this Economic Crisis. In last decade or so we were behind easy money. Short term results defined the success. The policymakers never thought big enough for sustainable growth which needs inclusive growth. Don't make a mistake here. Inclusive growth does not mean just communism or providing free money to poor people. But this means creating more jobs in unexplored areas and new technologies to solve the biggest problems facing mankind(like green technologies, future energy solutions etc.). To
save capitalism from the capitalists we need to create wealth and buying power at the bottom of the pyramid and the only way to do that is to redistribute wealth by creating huge amount of well-paid jobs. Instead what we saw is huge difference in salary structure between the working class and the management class(The differentials between the lowest and highest paid have risen to 1:300). Very few people made enormous amount of money by doing some Investment Baking and Management jobs. Most of these people were creating some artificially inflated wealth by derivatives and different other esoteric financial instruments. They were also fantastic in packaging and selling these produts to common people who had no idea about what they were buying. For short term profit they sold home-mortgages to people who did not have capability to repay those loans. They thought that is not a problem as the price of homes will continue to increase indefinitely and in case of foreclosure they can still sellout the house and make profits. American consumer consumed like anything by taking loans from all over the developing world the world. The developing countries found opportunities in selling their products and services to the American consumer and all those earnings were again reinvested in US as Treasury bonds. Unfortunately this loop of lending and consuming can not sustain and nobody thought about systemic risks of all these transactions. People were greedy and lacked common-sense. Stock market prices of emerging markets gained like anything and people stopped valuating stocks by Financial ratios. At the same time common people were not getting the benefit. They did not have health insurance or retirement savings or consumption capacity. Still they were lured by tempting advertisements to lead a quality lifestyle by borrowing on Credit cards and buying homes on loans which they can not repay.Government and other oversight agencies never did their jobs by properly controlling this greed. Opportunistic market makers created cheat funds and ponzi schemes. Hedge funds charged crazy amount of service fees and made huge amount of over-the-counter(OTC) risky transactions. And the most interesting thing is that all these unsustainable business continued for more than a decade. And then came the shock! Home prices went down, Foreclosure rate increased,Stock market plummeted, Default rate increased on Credit card loans, million of jobs were erased, banks failed, thousands of business went bankrupt, government bailout continued without any positive results, credit market collapsed, government debt increased and everyone is today fearful and puzzled how all these happenned so soon.

Was there a way to avoid this crisis? The answer is Yes and No. Theoritically 'Yes'. We could have done right things at the right time. We could have had more effective oversight and compliance, we could have planned for right kind of human resource allocation(best minds of the nation could have done research on green technologies and work on solving future energy problems instead of creating esoteric financial contracts), we could have planned for sustainable job creation and wealth distribution for creating a bigger market. Connecting dots backwards is easy but life needs to lived only in the forward direction. Hence I believe considering the condition present at those times it was not possible to stop this crisis. When things are going good it is very tough to take hard decisions like increasing government control and executive pay, investing in not-so-attractive green technologies, controlling credit limits and thus creating better spending habbits of the people. Hence in practical sense this crisis was due.

Let's see if there are anything good we can make out of this crisis. What are those important decisions which can help us out of this crisis soon. Following is my recommendation:

Greed and Fear are the root cause of this crisis. First it was greed: which inflated prices by creating artificial demands and then it was fear: which deflated prices to the artificial rock bottom. I call it artificial because if you think critically you will appreciate that our capacity of supply and demand should not change so drastically. We had almost same number of people living in 2007 and 2008(actually more) and the total natural resources avaiable in the world was actually less. Then why our home prices were dropped so dramatically. Why limited natural resources like gas prices can drop so significantly? Why we needed so less products or services in 2008 because of which we had to cut so many jobs? The answer is that the market sentiment changed from greed to fear. Previously people were getting much more than needed and they consumed much more than needed. After the shock it just reversed. People started a selling wave in Share market, stopped any discretionary spending and the sentiment continued to drop. One way we could have(or in that we still can) ensured a soft landing was through adjustable pricing of everything we transact. When demand drops down share, commodity and home prices fall but few things do not change in so linear fashion. For example salary or value of a mortgage loan(in general sense value of currency). Instead what we see is job cuts, or mortgage foreclosures etc. This process creates shocks in the market and creates more problem in Federal budget. People loss jobs and they bcome unproductive. At the same time they continue to cost in unemployment benefits increasing federal defecits. During the housing boom period people had baught houses in very high valuations and now those property prices have dropped creating loss for sellers and banks having foreclosure inventories. This is a vicious cycle which continue to decrease the price of the properties and the foreclosure rate. How can we solve these problems. Reprice the instruments and share the loss through mark-to-market accounting so that this process stabilise soon and we can again get back to the right track. I would suggest ban any future job cuts and foreclosures. Instead start a price discoery process to reprice the salaries and property values. Typically I am suggesting to follow simple demand-supply pricing. If the job demand is less you need to accept the paycut(it is still better than unemployment right?). If the value of a house decreases it is still better to renegotiate the loan terms and stop foreclosures. In both these cases all parties(including government) need to accept some loss but that should stop the downward spiral fast.

Economy depends a lot on the market sentiment, risk-taking mentality and consumer spending. Hence one good way to help the economy to recover is to instill consumer and investor confidence. Today both leaders and media are saying all negative things about the economy. This is actually lowering consumer and investor confidence. Instead of this if the leaders and the media(President Obama and other leaders, CNN, CNBC, FT, WSJ, NY Times)start saying some convincing but optimistic views the Economy can recover faster. If all the people again start buying stocks, houses and products the economy will be back on track very soon.

Become a Brand

Christin Dior, Prada, Gucci, Rolex, Apple, BMW, Orient Express: All of these are extraordinary brands, famous for their premium products and services. Many of us do not have financial capacity to avail these brands, but we all dream of using these products and services one day. What makes them special? What helps them to charge 100% or more premium pricing for their products and services? It is their goodwill of supreme quality. They are never value players. They are never cheap yet very useful(WalMart or COSTCO). They are enormously costly but enviously wanted. They are made for class differentiation. They are made for page-3 discussion. Only the super-rich can afford show-off their wealth with these products. And that makes them special.

There are many people who work like dogs to become that kind of wealthy. Many of the times they even don't love what they do. They just slaze in office just to live better in the future. Unfortunately some of them they never think that they have earned enough money and they can now lead a good life. At that time they become greedy money making machine. Worst, they even take loans to buy these costly designer products and to repay these huge loans they need to continue to do the same monotonus hardwork which they don't enjoy.

I have a better solution for these people. You must be extremely good in some area. You need to recognize that special profession which makes you tick. How you can do that? Easy, just experiment and listen to your heart. You will surely find a profession that you love and once found just stick to your core genious. You can be rich and famous only by doing things which you love. Because to be successful you need to work hard; work hard long time; and that effort can only be sustainable if you love the job. Once you do the job you love, you will become successful and create a brand of your own. For example you love cooking. Just stick to your love and you can become a famous chef one day. That can make you the brand ambassador of one of your loved product which you wanted to own for so long.

So dream big, work hard and smart by choosing the job which you do best and never think short term. I cannot over-emphasize the importance of the last item. Never do things which you don't love but gives you easy money or buy things beyond your capacity and waste the rest of your life in paying the debt.

Become a brand for yourself by your own inner qualities and don't try to become a brand by buying other famous brands.

Tuesday, January 27, 2009

Reduce salaries reduce taxes but don't cut jobs.

Job losses are becoming Frequency type data nowadays. Hundreds of thousands of jobs are evaporating in corporate America. Small businesses are closing down at an ever accelerating rate. It's like people care about a single death but when it is a massacre it just becomes a number. Job cut is a easy short term solution but a very tough long term problem. Unfortunately Corporate America or the Federal government is yet to appreciate the truth and it is going like a never ending downward spiral.

Let me show how this is bad and how we can manage economic downturn in a better way. 

A single job loss creates multiple problems for the government and the business economy:

Loss of Tax revenue - Income Tax, Sales Tax(spending decreases as people get pink slips)
  1. Social cost - Unemployment benefits from government.
  2. Wastage of Company Learning and Developement Expenses, Low employee morale and productivity.
  3. Less Spending - Means less business: which means more job cuts. Emperical study should show one job loss means X more job losses in future.
  4. Other Financial and social issues - More credit defaults, more criminal activity, more social tensions etc.
Hence it is evident that job losses have a downward spiral effect in the country's economy. Agreed. Then what we can do for sustaining a global economic crisis like this? Here are some of my thoughts:
  1. Government should ban(or at least control) Job cuts by companies and also should reduce any lower cap on salary. The idea is not to cut any jobs but reduce the costs by reduced salaries. This way government can still get taxes(Income and sales Taxes) and need not pay unemployment benefits.
  2. Once people have jobs(although having less salaries) they will continue to spend(although at lesser rate but still more than if they didn't had any income). This will reduce the downward pressure on the sales numbers and make the economy more sustainable.
  3. To stimulate the economy government should reduce tax rates at least on a temporary basis. This way both companies and customers will have more money at hand to spend. This loss of tax revenues can be compensated once the economy becomes strong by charging more taxes.

ESOP Plan for Mutual Fund Compensation

Asset Managers are paid huge compensation in cash and most of the times it is proportional to the asset under management. To increase their earning Mutual Fund managers do all wrong things for the investors: They invest in risky securities and momentum stocks, do short term trading with more than 100% Turnover ratio just to increase trading and short term taxes. Why do they do that? Because most of the times they don't have big stakes in their own investment decisions. They just try to make money out of investors pocket.They are like consultants: if it is a success it is the power of the idea of the consultant; if it is failure it is the failure of the client's implementation. In either of the cases their compensation is not at stake. 

How we can change it and make the asset managers more responsible for the investors? The greatest investor of the world, Mr. Buffet has the answer. His company BERKSHIRE HATHAWAY INC. never charges any fees to its investors for the Investment Service it provides. This is because the promoter himself has a major stake in that company and as the people buy Hathaway stocks the stock value increases and thus rewarding the promoter. We can have a similar reward system in Mutual Fund compensation. Instead of 100% cash compensation the major part of Mutual Fund compensation should be through Mutual Fund stock options at a fixed future price(which is generally higher than present value)redeemable at future date only. This should encourage the Fund managers to take care of the Long term health and sanity of the fund and to make prudent investment decisions.

TARP ETF: Wow What an idea

CNBC reported the introduction of TARP ETF in NASDAQ. Typically this ETF will track companies funded by TARP bailout money. That means this index is an indicator of the effectiveness of the 700 billion government bailout program. If this index goes up it shows that Taxpayers money are being utilised in a better way,otherwise not.

Stock price is the indicator of the company management performance in the long term. The board and Executives are judged on the company stock performance. One major part of the executive compensation is linked to stock options. At a higher level market indexes are the barometers of the economic health of the country. In the similar fashion we should create different indexes to judge government performance. And government executives should be judged(and compensated) based on these indexes. At the same time investors can be benefited if the government perform well as the value of the index will grow in that case.

This has another dimension. Leave aside developing countries like India, even in the most matured countries like in the US government are not judged on a regular basis in some objective, measurable ways. Theoretically we have Freedom of Information but practically we don't have it. If introduced these set of indexes should help the people to track the performance of the elected government. This should also help in more prudent government allocation of Tax payer's money and increase the efficiency of the government executives. 

We should have a Government Performance Index having different index components. Some of the components can be as follows:

1. Budget deficit reduction
2. Foreign debt control
3. Federal Expense/Investment ratio reduction.
4. Gini Index
5. National Security performance(military expenses vs. lives saved)
6. Happiness coefficient of the citizens
7. Health and Education performance 
8. Level of corruption etc.

There can be some challenges in creating this kind of index due to the secretive nature of some government agencies. Many of the times we may not be able to accurately measure the performance of the military. Because of the confidential nature these departments do not disclose many of the investment or expense data. Another problem with generally military investments is that they do not have any tangible outputs or deliverable and hence it is difficult to calculate the efficiency of the system(this is also the root cause of many corruption). The index creators need to show innovation to solve these problems. They should not compromise on national security as well as should not ignore tracking of huge military expenses.

Wednesday, January 14, 2009

Better Accounting:Need of the hour

History shows Sarbanes-Oxley Act was not successful in controlling Financial scams. It costed too much money without being able to control Accounting malpractices like Satyam scam(NYSE:SAY) and Madoff scandal. I believe there are still large number of such scams yet to be disclosed.

I think following are the reason for its failure:

  • The Act was too much inefficient in its implementation. It depended on too much documentation. When you have too much documents to create for a small and simple process change you become frustrated and the quality of data takes its toll. You just reuse a previously created document and change the name,date etc. and save it as a new version. You may ignore the fact that the facts and figures may have changed with time and those changes need to be documented properly. With the progression of hierarchy the number of documents to review increases enormously and it becomes quite impossible to review the documents for its truthfullness. It is even more difficult for the external parties(like analysts, auditors etc.)to review the correctness as they have even less time to review and less information about the company operations.This weakness has been exploited by dishonest company executives many of te times. This caused multiple cases of accounting scandals and completely wrong credit rating information.
  • US government(and consecutively other governments) allowed huge amount of Capital transaction Over-the-Counter(OTC) and through unregulated Hedge funds and Private Equity Flows. These industries have multiple weakness: Huge unaccounted money transfer, Highly inefficient Asset management Fees and Speculative Highly Levereged Transactions causing systemic risks. At the same time this creates an ethical problem of double standards: Mutual Fund companies are regulated but Hedge Fund Companies are unregulated; although both are typically in the same business.

To solve the problem the governments(it should be a coordinated effort of all the governments throughout the world) should work on two things:

  • We need to invent a better way of accounting to minimise the frauds. We need to minimise unwanted documentation but capture correct,reviewable and verifyable Data items standardized across the board. Also to minimize manual effort we can create Automated Business rule process for Data Validation etc.
  • Standardized and uniform regulation, more conservative reserve requirements, controlling (at least regulating) the Hedge Fund and OTC Market transactions.

Orkut: My Wishlist

Orkut is trying to reinvent itself everyday by creating new Apps, new colors etc. But I think it is still missing the big thing with immense opportunities. The implementation of this idea is challenging, as it may need to redesign the Orkut code architecture. Still this is worth the effort.

Today, orkut has limited options to create profiles. At the high level it has Social, Professional and Personal pages. I believe those pages have some limited fields to create the complete profile of a personality. Worst thing is even if you don't fill those fields they are displayed in the page with blank values. This looks pretty bad.

I suggest to create a site in which the users will have the ability to create customized pages of their own. For example I don't want a Personal page. In that case no Personal page will be displayed with blank values. Instead of Personal Page I want a Page called 'Creative'(just to showcase my creative world beside my Social and Professional world). In that page I want specific fields of my own(not the limited fields which we have today, but say my 'Passion'). This is just an example but for this idea even the sky is not the limit!

Thursday, January 8, 2009

Each AIIMS doctor costs 17 million Indian Rupee

Of the 2,129 students who passed out in the first 42 batches of the MBBS programme at AIIMS -- from its inception in 1956 to 1997 -- the study team tracked down 1,477 doctors. Of them, 780 or 52.81% were found to be working abroad.

India has a dismal patient-doctor ratio. For every 10,000 Indians, there is only one doctor. In contrast, Australia has 249 doctors for every 10,000 people, Canada has 209, UK has 166 and US has 548.Hence this brain-drain is a big problem for India even if we consider the NRI remittances as creators. At the same time I think we can not stop anyone from moving abroad (ethically and practically).

Better we can think of the following solution:

We should follow the US model of higher education. Increase the cost of higher education and make sure enough Need based Scholarship and no-guarantee loans are available for full tuition funding.
This should solve the educational funding issue and help government or private to create more opportunities for higher education. More doctors will help us to improve the per capita ratio.
The difference of medical profession from other high cost profession (like engineering or MBA) is that you need physical presence of the qualified professionals in the village or remote areas. That is challenging as very few people will love to live in such a place after earning a high cost degree (both in terms of money and effort) especially when living in Indian villages is anything but comfortable and at the same time the government salary is not attractive. One way we can do that is to create a mandatory one year post degree paid training (house staff program) in village areas. That way at least we can have some resources available.
Another possibility is to create military like 10 year bond for servicing in village areas (for those students cost of medical education will be much less). There are still few people who don’t come into this profession for money. These non-profit minded guys can be used in villages. Personally I don’t like this idea but can be useful in poor countries like India if it can be implemented(people can still study with subsidies and then break the bond; in the absence of proper legal structure in India implementation can be challenging).

Friday, January 2, 2009

Dumbest moments in Business

Fortune published a list of worst Business Decisions in 2008.
But I think dumbest of them is not listed in the main article.
Consumption beyond capacity by enormous amount of leveraging, greed, wrong housing market assumptions (nothing can go up indefinitely), wasting resources (4 SUV families). There are many dumb mistakes done by Americans (and so called Americanized world).
But the dumbest of all is not to work on Sustainable environment planning. We all know we can not meet our energy needs by the present technology. The best thing we can try is to create a massive research project (in the scale of Manhattan project) to invent new technologies to solve these problems. I hoped Obama will do that. But it seems Obama is more focused on creating jobs by unnecessary projects (building roads and highways, which I believe is not so urgent), bailing out(by taking new loans to make messier Federal Balance sheet)auto companies(which make crap vehicles) and stimulus packages(which may stimulate the wasteful over consumption habit of Americans and thus destroy a good habit(living frugally)recently developed within Americans).
This financial crisis can be a boon for us if we take lessons and change the way we do business. Investing in Sustainable science and engineering (geo-engineering), better accounting, better wealth distribution, minimizing wastages are few of the things we should focus now. Unfortunately we are not doing any of these and American well as world economy is becoming out of control day by day.

Few ideas for iPhone or App Store Developers

Real time Web cam:

Wouldn't it be great if I can share my New year eve experience in Times Square real-time with my family and friends?

iPhone shape is like a small mirror, why it can't be a mirror:

Just want to check if I look OK before I enter the interview room. iPhone can help!

Cut-Copy-Paste Utility

A must for saving time and improving productivity.

Zoom for iPhone camera

iPhone camera is the worst part of iPhone. Needs zooming facility and better resolution.

One Stop Shop for all Finance Management Needs: A TRIZ Analysis

Active Money management takes a lot of our time and most of the times the activities can be automated. We have different Money management tools available in the market (FREE or Subscription based service) but those are not Complete or Comprehensive. Also they don’t view the complete perspective of wealth management and lack intelligence which can be built in an Expert system.

This article aims to close those gaps by applying TRIZ principles and conceptualize an ideal system for all Finance Management needs. The proposed expert system should be a one stop shop for all money management needs.

Introduction to TRIZ

Theory of Inventive Problem Solving (TRIZ) was developed by Genrich Altshuller and his colleagues in the former U.S.S.R. starting in 1946, and is now practiced throughout the world.

Major cornerstones of TRIZ are as follows:

1. For finding the ideal solution of any problem we need to solve contradictions.
2. Innovative solutions do not compromise and can be found using TRIZ principles.
3. After analyzing huge amount of Patent data very few universal principles of invention was codified.
4. Any personalized problems can be solved by making it generic, finding the generic solution and then customizing the generic solution to the specific problem.
5. Most of the times best solution can be found by only utilizing the resources available within the system and not introducing any external resources.

Application of TRIZ in Personal Finance: Characteristic features of the ‘ideal’ solution:

Optimum resource management is extremely important for success. From personal finance perspective intelligent money decisions are absolutely necessary for Financial Freedom. Most of the times people start from similar financial positions. But over the years a huge gap is created between so-called a ‘Rich dad’ and a ‘Poor dad’. Proper Investments on a timely manner, prudent credit management, Financial Risk management, Career management etc. can make one rich. We all know this but very few of us can successfully manage it.

This becomes more challenging in the chaotic world of Information overload. People today have enormous amount of options and this makes decision making extremely difficult. One of the ways to manage this problem is to automate the search process to filter out right information from the huge amount of data and thus reduce noises and simplify information intake. The proposed solution tries to achieve this by integrating different products available in the market as well as few other scenarios which are still untapped by present market players. This solution should have all the possible features to help a user to manage his money on a daily basis.

We can apply TRIZ methodology to envision our ideal Personal Finance solution.

· Ideal Solution – This solution should be ‘ideal’ by incorporating all the features needed.
· Solving Contradictions – Automate the process to solve the contradiction of informed decision making in a world of information overload and huge time crunch in our busy society.
· Best solutions are already available – may be in different markets and product segments. We need to find those solutions to create our own solutions. We should use minimum external resources.
· Generic to Specific – Look for Generic solutions for generic Problems and map them to Customized solutions of Specific problems.

Applying these we can come up with the following features:

1. The user should have all the Finance related data in a single place. So he does not need to waste his valuable time in browsing around multiple channels of information (multiple websites, TV, Magazines etc.).
2. This solution should process huge amount of available data and only provide significant and meaningful information to the user.
3. The solution should be highly customizable. User should be able to change preferences for amount of data, set triggers etc.
4. This solution should minimize user intervention needs for any process which can be automated (Bill payments etc.).
5. This solution should behave as an expert system and advice the user with insightful suggestions, alert any obvious mistakes etc.
6. Bottom-line is the user should have complete peace of mind and should be able to use his time in more productive ventures.

Some Case Studies from existing Business Solutions

Most of the present day Personal Finance Software provides the following generic features:


1. Import Account Data
2. Reconcile Accounts
3. Online Banking
4. Bill Pay Service
5. Split Bills/Expenses
6. Categorize and Track Spending
7. Standardize Payee Names
8. Budget Expenses
9. Write/Print Checks
10. Find Loan Rates
11. Free Credit Report
12. Exchange Rates
13. Connect to Paypal Accounts
14. Connect to 529 Accounts


15. Cash Flow Reports
16. Personal Investing Reports
17. Tax Reports
18. Net Worth/Balance Reports

Financial Calculators

19. Loan Calculator
20. Mortgage Calculator
21. Savings Calculator
22. Refinance Calculator
23. Home Equity Calculator

Personal Investing

24. Import Investment Account Data
25. Portfolio Manager
26. 401K Manager
27. Download Stock Quotes
28. Displays Stock History

I will discuss few other present market offerings and improvement areas in detail and discuss how the integrated look of all these market offerings can create a wonderful tool for users.

Case 1: Bankofamerica My Portfolio

This is a FREE service offered by Bankofamerica (BOFA) to all the Account Holders.1 BOFA has partnered with many other financial houses to provide their Accountholders a complete view of their portfolio. Please refer to the screenshots below.

This gives a fantastic spending history pattern for Card members. But these details are history data which means actual spending only.

Improvement Areas:

Two views can be implemented in My Portfolio service. One Planned Expense (as done in mvelopes) and one Actual Spending. Also we can have different tools for Analytics purpose like Planned Spending vs. Actual Spending, Percentage Target achieved (Cheer up the user if more than 90% achieved), Transactions which could have been avoided (will guide users to make informed decisions). These add-ons can help the users to be on track in managing their money.
We forget things starting from paying credit card bills on time to pay the premiums for insurance. Either all these can be automated or at least alerts for different triggers can be setup. This gives users complete peace of mind!
Can have Mobile applications where the users will get multiple SMS alerts (snooze the alarm type facility where you will continue warning till you complete the Action items).
Also the Users can add different other Customized alerts like as they like it.

Case 2: Best Value for Money offerings

Benjamin Franklin said, ‘A penny saved is a penny earned’. Many of the present day Personal Finance solutions do not offer the Best value offering search option.

Helping customers to save money on high value transactions is another way to show that we Care for them.

User may like to buy high value commodities like TV or car or want to plan Flexible vacation plans when the Fare is Lowest. The Service provider can partner with different Deal sites (www.deals2buy.com)2 to sell Co branded products (on Profit sharing model).
American Express FareWatch service for Cardmembers where the Cardmembers can save their Target Travel Plan and if the Fare goes down to that trigger level they will get an alert.

Farecast will suggest whether to Buy or Hold an air ticket purchase based on Historical Air Fare patterns.

http://farecast.live.com/ 3

Also this tool should analyse the past spending data and help consumers to appreciate how they could have saved money by buying the same product or services from some other vendor.

Case 3: mvelopes.com (It was awarded PCWorld 100 Best Products for 2006)4

This is a subscription based service where they allow users to track their money before they make the actual transactions. So here the users can plan their Personal Finance and keep track of the spending and investments. The basic philosophy here is to plan and track before you actually spend it.

Improvement Areas:

The Net Worth page of Mvelopes can be extended to any Future Date based on Planed Cash flows. The main idea is that bulk money transfers are mostly Pre-planned and hence accounted beforehand. Meaning based on my planned expenditure and Investment Return assumptions I should be able to predict my Net worth 3 months down the line. This may be helpful for Future Financial Planning.
Should have provisions to manage FOREX and multiple currency transactions. This should be very helpful for corporate clients and MNCs for Capital Management. This way this product/offering can be extended to Corporate Accounts as well.
Should have capability to track different Receivable/Payable management system like billmonk.com5

Case 4:Moneycontrol.com 6

This is a fantastic portfolio management service and best thing about oneycontrol is it is absolutely FREE.

Improvement Areas:

Moneycontrol has some problems in the calculation of Return on Investment (ROI) numbers for Dividend Payments (Meaning the Software is not able to count Dividend Reinvested or Paid Out correctly in ROI calculations).
Suggest Asset Allocation suggestions based on the Risk-Return Payoff and Life-goal needs of the user. Add different other Asset Management tools (Charts/graphs etc. for Best or worst investments) or Calculators. The Bank can Cross sell its brokerage wings for this kind of services.
Can Partner with Tax Planning companies for cross selling Tax Planning services.
Can be extended to Private Equity, Venture Capital, Hedge Fund, Art, Commodities and other Alternative investment routes.
May include even intelligent Donations (from Tax treatment perspectives) and Estate Planning.
Should advice the user based on Personal Profile and Market outlook (Personalized recommendations).

Case 5: Providing Market Intelligence with Market News Feeds, Analyst Recommendations, Different Financial planning tools etc.

For a one stop solution of Personal Finance it is necessary to have all the Market Intelligence in a single place including all the Financial Headlines, Analyst recommendations, Planning tools(like buy or lease etc.).

This can be achieved through RSS like features like Google reader7 and standard tools available in market.

In ICICIDirect.com8 different research tools are available:

Case 6: Service Providers

Service providers can make money from Subscription payments from users or from Profit sharing opportunities if they plan to cross-sell offerings from vendor partners and keep the service FREE to the end-users. Data warehousing facilities can be built from the user Financial data to provide customized service offerings. For example if the spending pattern unfolds that the user has interest in eating out customized local restaurant advertisements can be displayed.


Many of the TRIZ patterns can be found if we analyze the above solutions:

Solving Contradiction: For smart Financial decision making one need to analyze huge amount of data. But in today’s world time is a premium and presently people compromise on the research time. But TRIZ supported innovative solutions try to remove contradictions. Here we have followed a similar path by automating this search phenomenon. This expert system will research all the available data feed and make informed decisions and display only the chosen suggestions to the user. This way the user can save time without compromising on the quality of research.
Customizing Generic Solutions (Best Practices) to Specific Problem areas: Multiple alert systems (‘Snooze’ facility in our normal alarm clocks) is a great example where we have taken solution from other areas and incorporated in our solution. In today’s scenario we also receive alert systems for Credit Card Bill Payment etc. In our busy lifestyle we may still sometimes miss those alerts and need to pay late fees. But if we can introduce a system where we will continue to receive alerts till the time we pay the bill our odds will be much better.

Using existing resources naturally and minimizing external intervention: Our ‘Ideal’ system will be an expert system handling day to day operations automatically without any user intervention. This system will have the intelligence to pay the bill on-time, execute scheduled transactions, alert the users in case of emergency, make intelligent Financial decisions for low value transactions etc. This will provide the user a complete peace of mind.


The Ideal solution is still not in the market. But we can surely have a close to ideal solution if we can consolidate all the existing market offerings. With the progress of time we will come up with the new features and new market offerings. Continuous research following TRIZ methodologies should be adopted to improvise the existing solutions.


Ideas from existing market offerings have been reused in this article wherever necessary.