Want to avoid market manipulation

Track and Analyze Stock gurus/insiders advice and their action...unfortunately I could not find any good website tracking this..probably this will stop the Big Financial Services industry...hence huge pressure might be the reason!

One of the best(obvious) suggestion on US Healthcare(as well as Education system) Reform

Here is a wonderful link for US Healthcare reform. This solution sound obvious but nobody worked on this because US is full of different powerful lobbyist groups.

I have one followup suggestion. The supply of doctors can't be met by only US educated doctors. We need healthcare profesionals as well as Medical Education Services from outside. This will allow reduction of overall costs.

On the same Demand-Supply logic we should plan our University curriculum.We have many courses in our schools which do not provide jobs(simply because they are too academic and do not have practical value). At the same time we have few skills in very high demand and enjoys premium pricing. Why can't universities re-plan their course capacity as per society needs? Think about it :)

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.



Reference:

http://www.gartner.com/it/page.jsp?id=497088
http://www.gartner.com/4_decision_tools/measurement/measure_it_articles/july01/mit_spending_history1.html

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...

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.

Agriculture

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.

Sex

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

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).

Education

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.

Green

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.

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.

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."

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.