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.