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Sunday, August 28, 2011

The Job of a CEO

Recently I have been thinking a bit about CEOs and the challenges they face. There is loads to be said on the topic (most of it already said) but here are a couple of notes from my end:

Some might think its a nice cushy job being at the top, but in reality, its probably the toughest job possible for someone who really wants to lead his/her company. If you think of it, by default a company is always on autopilot when it comes to the CEO's involvement. Whether (s)he does any productive work or not on a given day, its work as usual for the company. So a CEO has to manage his/her time very carefully. There has to be a good mix of:

A) Engaging with company personnel, both senior management as well as employees
B) Engaging with external entities like key clients, shareholders, business partners, the media, etc.
C) Closely monitoring the current and upcoming projects / offerings
D) Planning for the future of the company

That's a quick and dirty list, there might be some key items I am missing. But truth be said, most senior managers would already be experienced and competent at managing their daily calendars. Give or take a bit, most managers can ensure that their time is well spent on all four (or more) of the above key items on their plates. Most good managers would also probably be good at items A through C. Which brings us to D, the deathly item. This one requires Vision. This is where Steve Jobs breaks away from the pack. It requires passion, creativity, balls. This is the make or break item. Unfortunately many CEOs seem to fall into the break category by attempting to do too much.

I have been reading with interest how HP's new CEO Leo Apotheker has been trying to steer the company in a certain direction (towards enterprise, away from personal computing). Most pundits have panned the choices he has made - while on the surface he seems to be following IBM's Louis Gerstner's moves, it may not necessarily work for HP. Here is a great article on what HP is doing wrong. And here is another. They bring out interesting topics such as:

a) A CEO's dilemma about letting a good thing be, versus showing the world his work, his plan, his agenda
b) The problem of planning for the 10 year horizon when a CEO's job may only be for a few years. Also, balancing growth with quarterly performance expectations
c) Working in a territory outside of your comfort zone (Leo is the ex-SAP CEO hence more comfortable with enterprise than consumer businesses. Is that why he dumped WebOS without giving it a fair chance? On similar lines, many pundits are also panning Nokia's Stephen Elop about eloping towards his old company Microsoft when devising Nokia's all important platform strategy)
d) The problem of squeezing a company too dry by going for aggressive cost cutting. HP's old CEO Mark Hurd seems to have done it, putting pressure on the incoming one to deliver results which are tough to replicate.

The articles also bring out some crucial questions about the role of a board. How careful should they be when hiring a CEO, especially from an outside industry. Or, how much should they engage when CEOs talk about large scale changes such as big M&As or spinoffs. I mean, here is the new CEO talking about selling off the main business of the company. Admittedly, HP's PC business is low margin, but hey, this is the global market leader PC brand we are talking about! The world's biggest PC company. Can a CEO shrug it off so easily? Where is the discussion, the debate?

Heavy is the head that wears the crown. That's it from my end for tonight.

Friday, August 26, 2011

What ails Infrastructure in India?

When I think of problems with infrastructure in India, the first thing that comes to my mind is: Funding (or rather, the lack of it). If you think about it, there is simply no comparison between the government infrastructure budgets of India and say, China. Our government just does not seem to have the money to build thousands of miles of high speed bullet train corridors, or 12 lane freeways, or dozens of world class ports. Where is the money in India? The flagship road infrastructure agency NHAI here has a miniscule Rs. 15,000 Crore budget annually, give or take a few. That is no comparison to the trillion dollar budgets China's agencies have. Can an MMRDA ever think of demolishing all of Mumbai and rebuilding it, a la Shanghai? So why is the Indian state struggling with infrastructure funding? Lets look around at how others built their infra.

The Middle Eastern nations built their infrastructure by pouring billions of dollars of oil money into the sector. This money was always in state hands as petroleum is routed for export sales through government owned entities. But China does not have such resource driven luxuries, so where is their money coming from? I mean, if a Chinese factory exports plastics or toys or electronics or whatever, the revenues go to private hands right? So who is bankrolling the massive infra projects? As an answer, I find it amazing that a primary source of revenue for the Chinese government could be indirect (taxes on corporates). When we then move to India, is it just that Indian exports are so much lesser, or is there inefficiency in resource management (corruption / loopholes in corporate taxation) too?

When I briefly brought the topic up with Pankaj Vaish of Citigroup*, he said that in his mind the key issue isn't actually lack of funds with the government - its execution. If infrastructure execution in India were actually smooth, the private sector would be more than willing to pump in all the money required for all our projects. He pointed out that our land acquisition is so slow and tormented, coordination between agencies so poor, and pace of approvals and execution so slow that international players simply don't feel confident about investing into Indian infra. These are entities otherwise sitting on trillions of dollars of money ready to be invested in emerging markets. Why would they not want to diversify their EM portfolio between equities and some stable, long term infra financing? Very fair point. So the fact that we are a democracy (and a badly administered one at that) is stopping our infra from taking off. Hmm.

There is one caveat though. Private funding for PPP projects (Public Private Partnerships) works well only when we talk of positive NPV projects such as toll roads or airports. You might say many other infra projects have viability gap funding to ensure PPP, but there is an implicit assumption in there. That the government has enough money to provide the viability gap funds. Which goes back to what I spoke about earlier right? Think about it, if you consider a project like the rebuilding of an entire city, there is only so much return it can generate. So private money can't bankroll all (or even most) of such a project. Not just this, there are way too many such infrastructure projects which are a social responsibility on the government's part even if they are not economically viable. The PPP model cant be a panacea - a solution for all cases in my view. Example: Urban planning (Metros and other Mass Rapid Transportation, Building Reconstruction, Intracity roads), Rural roads (difficult to impose tolls), High speed train networks, etc. Even if some of these projects can be successfully completed using Viability Gap Funding, I think we will still end up with too many projects which fall short of funds. Any ideas?


*Pankaj is the Head of Markets, Citigroup for all of South Asia. He was part of a panel discussion I attended recently in Worli. The two other members part of the discussion were Rakesh Jhunjhunwala, popularly known as India's Warren Buffett, and S P Kothari, Deputy Dean of MIT Sloan School of Management. I particularly sought out Pankaj's views on infra after the discussion because of his astute observations on other macroeconomic issues India is facing, particularly inflation.

Wednesday, August 24, 2011

The trip


From the glaciers and muck of Rohtang Pass, on to the Ganja fields of Manali. Past countless landslides and raging rivers. Then past the grand old Grand Trunk road and on to the shiny facades and rotting roads of Gurgaon. Followed by a lunch by the Taj. The real one in Agra. Past the countless cows of Bundelkhand. Then a night dash across the Chambal valley - beautiful in the moonlight. Past broken Madhya Pradesh roads and past the dense forests of Central India. Past amused monkeys and Pench's Rudyard Kipling resort. Onto the home run - the under-construction expressways of Telangana. Himachal Pradesh to Hyderabad. 2200 km in 60 hours. One hell of a roadtrip.

Tuesday, August 23, 2011

The Tu-144


Just came across the amazing story of the Tupolev Tu-144. One of the biggest engineering disasters I have read about!

Wednesday, August 10, 2011

Boredom and Creativity

Interesting piece by Dilbert's Scott Adams on creativity and how its linked to boredom. I am not sure we can (just yet) draw implications of the lack of boredom to how society is stagnating, but definitely on a personal level I do agree that you need time on your own to be able to be creative.

On the one hand, being so tuned in to the world (smartphones, tablets, kindles, etc.) actually helps stimulate things in your head. At least someone like me, I observe things, and I think. The more external stimulus I get, the more my mind starts racing. So its good in a way. And most of the things that I have ever blogged about came to life in this fashion.

But that's only one kind of stimulus. When I try to embark on something different, something bigger, then all these devices become distractions. I am having to fight out time from my schedule so that I can complete that short story I have been writing. And also certain other heavy topics that I like to think about - such as economics - I need time alone to muse. Ever noticed how all your best ideas come about when you are in the shower or the loo? No? Well at least that's the case with me. Guess its something to do with lateral thinking. Your brain gives you the best solutions when its not directly thinking about the problem. New perspective you might say. Not just showers or loos, I am glad to report that long commutes also out work for me and my brain. So next time you are stuck in traffic why don't you put on some nice music on the radio and let your mind wander?

Before I close, let me mention that I do think the information 'overload' of our times can be quite dangerous if all you do is consume mindless, purposeless content. It is one thing to read all the latest gadget news through your smartphone, or download some great books over your kindle, but if all you do is watch lame youtube videos or countless movies or reality shows on television, then in my view you are definitely abusing the marvels of technology. In this battle between boredom and creativity, I guess there needs to be a balance between entertainment and education; information absorption and thought generation; too little free time and too much of it. Cheers!
(Yes I know the last line is a motherhood, thank you very much!)

Monday, August 8, 2011

Values, a luxury not a choice

A couple of weeks back I was trying to go home from work around 8pm and it was raining like crazy. It took me a whole hour to find a cabbie who would agree to take me home. I kid you not, a full 60 minutes – during which I walked all across Nariman Point and even reached Churchgate, fully drenched despite the umbrella. People who have lived in Mumbai can appreciate how hard it gets to find a cab when its raining. When I finally did find a cab, I promptly began venting about how Mumbai cabbies act like crooks when it comes to taking on passengers, especially when its raining (FYI, the law states that a cabbie cannot refuse a passenger irrespective of where he/she wants to go). I was righteously indignant, but he said something that shut me up. He said,

“Sir, rules are rules, but a man has to look out for himself. If I try to be a sincere guy and take you home to Wadala when its pelting, I will probably not find another customer there for hours. I still have to pay a flat Rs. 400 to my seth for a 12 hour shift because I don't own the car. But you will not pay me a paisa more than the meter fare, will you?”

“Or, fording through waterlogged roads, maybe my rundown old cab will break down. Will you walk away unconcerned, or will you try and help me get it repaired? Or do you think there is a government department or an insurance company who will help me out if my car breaks down in the rains?”

“On a more elementary level, every day of my life is spent trying to scrounge out as much money as possible. There is a wife and kids and parents and siblings all waiting back home for me to earn some money so that they can live. Sure I would like to be the ideal cabbie who is honest and upright and stands up to his customers – who wouldn’t – but do I have the luxury of putting values ahead of money? “

It was compelling logic. If you put values ahead of selfish gains, your kids wont be able to afford even a half-baked education back in the village. If you die or something unfortunate befalls you, no government will give a damn for your family. It’s a wild wild world, and each man has to look out for himself.

And that is a large part of the problem we face in countries like India. Too many people are running their lives six feet from the edge, desperately trying to make a life out of the deal fate has handed them. Can you or I afford to lecture them on values? Sure there is rapid economic growth. But that is far too often distorting the wealth equation than resolving socio-economic issues for the unfortunate millions. Having started from abject poverty, this country is rapidly morphing, and wealth is being created within the span of years, even months, instead of lifetimes. While millions watch from the sidelines, unable to participate. Those with half a chance – like the cabbies who rejected me – are racing as hard as they can trying to make ends meet. Perhaps the land of Gandhi does not have the luxury to value values in today’s circumstances.

Sure you might say everybody has a choice. And I am sure there are many in this great land who continue to uphold values above many other things in life. But I don't think you or I have the right to judge the rest very harshly.

PS: I have been thinking about Values a little bit lately. There are some interesting themes to cover in business values too. Will cover them soon.

Sunday, August 7, 2011

Letter from a Blackberry insider

Interesting letter by a BlackBerry insider. Though BB disputes it, it does appear genuine. And carries some thoughtful insights into what is going wrong out there.

Saturday, August 6, 2011

A trillion or two here and there...

Every banker and consultant - analyst, associate, manager or VP - would agree with me that their lives become hell if someone spots an error in their calculations. If its a small error, then you get a telling down; if its a big error, you get hell. Imagine then what fate awaits the unfortunate soul who probably made the biggest error of them all: an error worth a whole 2 Trillion Dollars! Guess that's one more person to add to the list of the unemployed in the US!