Monday, May 14, 2018

Interesting Readings May 14 2018 - Development Finance Institutions.

Deepak Nayyer talks about capabilities created in Development Financial institutions (DFIs) for longterm lending. 

These DFIs are very important in creating a capability for lending to special investments. India, till 2000, had developed the capabilities to lend to infrastructure, sector-wise capacity creation etc. We need the concentration of skills in one place. This way, special knowledge reduced the risk for lending.

The commercial banks decided to reduce the lending risks by consortium lending. That is a statistical approach to risk mitigation.

Now Deepak Nayyar wants to create a National Development Bank. That I think is a bad idea. Though there may be some merit in creating a network of professionals who can lend to industry and towards infrastructure. These professionals can be monitored using DIN-like number (Director identification number) and their investments performance tracked. These people may be employed with commercial banks but without sign-off from these persons, such loans will not be approved.

What we are creating is attribution chain. I have discussed the importance of attribution in both of my books - Subverting Capitalism and Democracy and Understanding Firms. Please use the links below to check out the books. 

Wednesday, May 02, 2018

My two favourite HR people!

I was listening to Masters in Business and discovered Patty McCord. Patty is former HR head of Netflix. She doesn't speak HR she speaks innovation. Listen to the MiB episode with Patty Mccord here. It is worth it. THIS is what HR should be.

My suggestion:
  1. Ask your HR manager if he/she knows what is your job like day-to-day. ( analyse financial statement, work on new toothpaste launch, etc.) it has to be specific.
  2. Does he/she know who are your clients? 
  3. How do you make money for the firm? How much?

And the next one is of course EvilHRLady.

Friday, April 20, 2018

Interesting Readings 20 April 2018

India needs to fundamentally alter its export strategy
Ajit Ranade spells out the answer briefly. The article however highlights important gaps in Indian exports.

What 1985 tells us about a US China trade war
Mint searches for lesson in Regan's Japan strategy for Trump's China strategy. Interesting.

Worth reading.

Sort of explains my feeling. Long ago we shorted a group of Australian media stocks. We took positions when they were trading in $38-42 range (yeah all of them) and then they went up over next 3 months. I being a junior was a bit scared though we had doubled down of these bets. Ultimately Lehman struck and these stocks went down right to $4 approx. Yet, I still remember feeling a bit jittery during those times.

One of the most important podcast you will listen. Annie is a poker player and her views on decisions in uncertainty will definitely be helpful. I want to read her book "Thinking in bets". Poker is much like financial markets - decision making under uncertainty. You can also read For Richer, For Poorer: Confessions of a Player by Victoria Coren Mitchell for general view of Poker.

Many people seem to throw blockchain and Distributed Ledger technologies as useful in many domains. For example, in the above one, shipping is considering. While blockchain can solve their problem, that is not the most apt solution. What they need seems to be a centralised processing system with view access to all channel partners.

This is an old one but it gives sort of the evolution of Chinese leaders. 

World War Watch

F-35 the myths. This four part series answers some of the questions related to F-35. Part 1; Part 2; Part 3; Part 4. I am beginning to believe it will be better for India to rely on 5 aircraft configuration for Indian Airforce. Gripen, F-35, Tejas, Su-30, Rafale. If US can offer a manufacturing line for F-35 we should take it. But a manufacturing line for F-16 block 70 does not seem to make sense. Particularly I find F-16 short on avionics and a fuel guzzler of sorts. The main part will be to ensure all aircrafts talk to each other. That will be the biggest problem. Further, the deployment should be multi-aircraft types rather than single types. It means more collaborative training between all pilots.

Tuesday, April 17, 2018

Jobs/Employment and Growth

Why are incomes not picking up even when the unemployment rate is at its lowest and profits are rising?

The first phase of automation focussed on improving productivity. So skill requirement of workers goes up and hence their pay goes up.

In present phase of automation, the skill requirement of worker operating the equipment is going down and hence their pay is going down.

Thus, if you replace the spade with earth moving equipment, you need to pay the worker more for the higher skill requirement. But when you replace an expert barista with a coffee-maker machine then you need to pay less to the operator of that machine. 

Wednesday, April 11, 2018

Interesting Readings 11-Apr-2018

Ila Patnaik believes bank fraud at PNB and ICICI Bank (possibly) are result of lack of proper supervision. I agree that supervision is inadequate. However putting the blame on RBI alone is not proper. Rightly, Ila points at all supervisors. In addition, I think one perspective is missing - that PNB and ICICI Bank (alleged) fraud are two different animals. PNB is systemic loopholes being exposed something regulator, management should have caught and has far reaching implication wrt Business process design within banks. ICICI Bank (alleged) is pure corruption. Even if it is conclusively proved that there was no fraud, the optics on this are bad. It is more responsibility of shareholders than the other. 

Shikha Sharma followed K V Kamath's model of growth without regard to Asset quality. Even Rana Kapoor belongs to this group. On the liability side their strategy is to get corporate deposits. Aggressive lending - generally large corporate (longer tenure) and consumer lending (higher risks) on asset side and corporate deposits (more fickle, higher costs) on liability side accentuates Asset Liability mismatch for these banks. Chanda Kochhar managed to set ICICI house in order after Kamath's high-paced up-scaling. But the problem persists in many new private banks. As corporate lending portfolio looks more risky the banks become more shaky.

Grantham is one astute market observer. Earlier this year he mentioned the likelihood of a melt-up (markets going up). The Trump histrionics have dented the probabilities but it still is at 40%. Cool!

Interesting ideas from Fred Wilson. Short video, short podcast, IPO intro-letter. 

Frauds are eating up the moral character these days.


Ken Rogoff thinks it is not easy.

On a different note
The story of the spy. Looks like a must watch movie from Meghana Gulzar. Talvar was well made movie. I liked it.

I like Dwayne Johnson.