What would a mobile phone look like if we did not have pockets on our clothing? Would we still have a trillion plus dollar mobile industry?
Saturday, February 1, 2014
Wednesday, January 22, 2014
Sunday, January 19, 2014
Tuesday, January 14, 2014
Wednesday, January 1, 2014
Charlie Munger, my hero, turns 90 today. I have learned more from Munger than my ~20 years of formal education. He is an absolute genius. For the last decade, I have been regularly taking the iron pill Munger prescribed and I am sharing it with you on this special day.
The iron pill is:
"Whenever you think that some situation or some person is ruining your life, it is actually you who are ruining your life...Feeling like a victim is perfectly disastrous way to go through life. If you you just take the attitude that however bad it is in any way, it's always your fault and you just fix it as best you can - the so called iron prescription-I think that really works." - Charlie Munger
It really does work! Happy Birthday to Charlie and Happy New Year to you!
Monday, December 30, 2013
Sunday, December 29, 2013
Friday, December 27, 2013
Thursday, December 26, 2013
The world continues to evolve in ways that are hard to imagine. One hundred years ago, we could not have predicted the state of the world today, and we can not predict how the world will be one hundred years from now. However, what we can do is understand how the world is today and discuss why. This may give us some ability to change the trajectory of the world's direction. In the last century seven aspects of life have changed significantly. Let's look at them:
1. Movement: Everything is moving today. We are moving and everything around us is moving. Until the 20th century, the visual arts were mainly paintings that did not move. Today, the popular visual arts are movies, TV shows, documentaries, etc. where the characters move and talk. People did not travel much and now we can drive or fly at will. Speaking on the telephone required us to sit at one place and now we have mobile phones which allow us to move and talk. Same thing for the Internet. The interaction with the Smartphone is interactive (kinetic). Because the Smartphone screens are small, moving fingers is required every few seconds to consume the content. An average person looks at the phone 150 times a day. That requires a lot of movement. Our eyes are moving more as well just because there is more to see. Our standard of living is enabled by global trade. Trade is all about movement. What will life be like without the movement of labor and goods around the world? Unless you go to a movie theatre or watch the performing arts, when are you not moving? Of course, all of this kinetics has brought us many economic gains. But, at what cost? Why do more people have ADHD today? Why are people in the rich countries so stressed? Why are the monks or people living in villages so happy? Can we be mentally calm if everything is always moving?
2. Choices: The choices we have today are mind-boggling. 100+ different types of cereal in a grocery store! The number of things you can eat and drink has increased exponentially over the last century. Starbucks claims to offer 87,000 drink combinations. The number of things you can do with your free time is close to infinite. The number of channels on cable always amazes me. We have the choice to travel anywhere in the world. I can visit any of the billions webpages on the Internet. You are no longer limited to marrying someone from your village. You can choose to marry any of the millions of single people around the world. Even the new iPhone comes in three colors. Of course, the choices are much greater for people in the rich world. There are people in poor countries who do not even have the choice to live. There is no doubt that choices have contributed to economic growth. Choices also enable you to get things you want. How do you know what you want? Most of it is the result of social conditioning and insecurities. How are the choices affecting our mind? Is there any correlation between choices and happiness?
3. Isolation: With all of the interconnectivity and communication technologies, we are more isolated today than ever before. Communities work when there are interdependencies among their members. You don't need to depend on anyone today. Everything is available for a price. People don't live with their extended families any more. More and more people are moving to cities. Don't listen to anyone, do whatever you like. Are we losing our ability to compromise? Life has become a competition to satisfy senses (eating, drinking, vacations, sex, entertainment, etc.). I don't think the human senses have been in more control of the human mind. Corporations work relentlessly to dehumanize you. Employees are explicitly told not to compliment co-workers, not to trust anyone, always have a paper-trail, punch the timecard, eat lunch in one-hour, etc. etc. Our friendships are based on convenience and not on love and commitment. Social media products like Facebook are supposed to bring us together. In some cases they may, but in many cases they allow us to hide behind the screen to avoid rejection. Many people I know see a therapist just so that they have someone to listen to them empathetically, that role used to be filled by friends and family. Humans have stronger relationships with machines (iPhone, PS4, TV, etc) and fictional characters than with other human beings. Some buy dogs and cats to feel connected with a sentient being. Why are we still unhappy if we can do anything we want? What is the meaning of a human relationship?
4. Democracy: We are seeing the aging of democracy. No one will disagree that the governance system in the US is not working. In 1913 the US tax code was 400 pages long and today it is ~74,000 pages. Most of these pages are loopholes for organizations that benefit politicians. If every vote is equal then what happens to the minority whose concerns are not shared by others? If a society is to be judged by how it take cares of its weak then the US democracy has been a failure. How can a rich country not afford to provide healthcare and education to its citizens? And, how do you justify spying on all citizen communication in a democracy? How do you justify selling guns to citizens after hundreds of school children die due to gun violence? Is it just the current government representatives or is it a systemic problem related to the aging of the system and are we just finding out the cracks which were not visible before? China has moved 600M out of poverty without having a democracy. The Chinese system is not better than a democratic system but what it has achieved in some areas is remarkable. Instead of rejecting the entire system why can't we learn from it? How much of democracy is getting into power through oration and staying there compared to acting in the best interest of the citizens? Can we create a better system?
5. Large Organizations: What have the UN, WHO, EC, WEF, IMF, World Bank, etc. achieved in the last century? The fall of the USSR had a lot to do with central planning. The world we live in today makes large centralized organizations useless. The people in charge of these organizations fly first-class around the world and dine in fancy restaurants in Geneva while planning how to make life better for people in Afghanistan and Somalia. Try living there! What did the UN do when the US attacked Iraq? How many countries have come out of poverty because of efforts of the World Bank? How many diseases has the WHO eradicated? I would argue that the Gates Foundation has done more for health than any other organization. Somehow these organizations have an inverse relationship between size and effectiveness. Isn't there a better way to allocate resources to solve big world problems?
6. Morals: Religion has played a critical role in spreading morals. When morals were developed the world was not connected and societies were homogenous. We lived in tribes with people who were like us and we moved with our feet or on animals. There was no access to information about how the tribes 3000 miles away were living. Today, the world is connected i.e. we can travel anywhere and we are aware of what is happening in the world and the societies are heterogeneous i.e. people of various color, religion, sexual preferences, race, etc. all live in the same society. Can we go beyond tolerating differences to forming loving relationships with people who are different than us in our society? Can we still justify giving money to the local symphony knowing that the same amount of money can save thousands of lives in Africa? Do we need new morals?
7. Education: Is education an instrument? Or, is education an end in itself? This is an age-old argument in philosophy. The current education system is designed to produce workers. Most people who get degrees end up working for big and small corporations. Most people study to get jobs. What would the world be like if we studied just to study so that we are better citizens of the world? What is taught is lost by students the second they finish taking their exams. Is the current education system teaching us how to think? It may be teaching us how to shut our brains and believe what we are told. Why are morals not taught in the education system? Can't we change the education system to create a better society?
There are many positive things in the world today compared to one hundred years ago. However, I have only written about areas which need attention for us to leave a better world behind for our children. Humans have the potential to do the impossible. Can we put our minds together to change these seven critical areas to make the world better?
Monday, December 23, 2013
The banks are considered too big to fail: i.e if they go bankrupt the world may plunge into a depression. Ironically, the solution to this "too big to fail" problem from the 2008 financial crises has made the banks even bigger. Since then I have been paying more attention to the banking world. What do you think the banks do? In simple terms, banks are intermediaries between borrowers and savers. All they do is take money from savers who are looking for a return on their savings and give it to borrowers who are willing to pay interest on that money. Banks are at the center of how capitalism works today. And, that is what makes them too big to fail especially after the repeal of the Glass-Steagall act. A simple equation can explain how we got into the 2008 financial crises:
A bank's equity holders (shareholders) gain when the return on its assets rises. Maximizing RoE means holding fewer safe assets (cash, government bonds, etc.) since these provide low returns. When the return on all asset classes is low, another way to boost RoE is by increasing leverage. Banks can increase their leverage by borrowing more from depositors or debt markets and lending or investing the proceeds. That gives them more income-generating holdings relative to the same pool of equity. In the short-term, shareholders gain. Most bank CEOs are compensated based on RoE.
When the financial crises hit, the banks had leverage ratios of ~50 i.e. they could absorb only $2 in losses on each $100 of their assets. That helps explain why the American subprime market, although only a small fraction of global finance, could cause such trouble.
The main regulatory response was to revise international banking regulations with Basel III. The maximum leverage allowed by Basel III is 33. In America, the Volcker Rule will soon prevent deposit-taking banks from engaging in "proprietary trading" (in essence, investing in stocks, bonds, and derivatives using its customers' money). In theory, the Volcker Rule will shield deposits from traders' losses. In practice, it is difficult to distinguish between trading conducted with a view to serving customers and that done solely for the banks' benefit. Regulators in Europe are taking a different tack. They have proposed "ring-fences" that will separate customer deposits from banks' liabilities. Against them, banks would only be allowed to hold assets like cash, government bonds and loans to individual and firms. Activities deemed riskier, such as trading in shares and derivatives and underwriting companies' bond issuance, would sit outside the ring-fence, backed by a separate stash of capital.
The equation is still the same. The regulatory response is not trying to prevent failures but to prepare for them. Bank Managers have to manage the inherent tension in the equation i.e. between stability and profitability. Can we change the incentives for the Bank Managers? Can we make the economy less dependent on borrowing? Can we change the equation?
Adapted from The Economist Fall 2013 Schools brief
Sunday, October 27, 2013
"I like the elements which are hybrid rather than "pure," compromising rather than "clean," distorted rather then "straightforward," ambiguous rather than articulated," perverse as well as impersonal, boring as well as "interesting," conventional rather than "designed," accommodating rather than excluding, redundant rather than simple, vestigial as well as innovating, inconsistent and equivocal rather than direct and clear. I am for messy vitality over obvious unity. I include the non sequitur and proclaim the duality. I am for richness of meaning rather than clarity of meaning; for the implicit function as well as explicit function."
"And so the three centuries since Newton became a long period of fascination with technique, with machines, and with dreams of the pure order of things. The twentieth century saw the high expression of this as this mechanistic view began to dominate. In many academic areas - psychology and economics, for example - the mechanistic interpretation subjugated insightful thought to the fascination of technique. In philosophy, it brought hopes that rational philosophy could be founded on - constructed from - the elements of logic and later of language. In politics, it brought ideals of controlled, engineered societies; and with these the managed, controlled structures of socialism, communism, and various forms of fascism. In architecture, it brought the austere geometry and clean surfaces of Le Corbusier and the Bauhaus. But in time all these domains sprawled beyond any system built to contain them, and all thought the twentieth century movements based on the mechanistic dreams of pure order broke down."
Sunday, October 13, 2013
Monday, October 7, 2013
My dear friend, Jim Faulstich, passed away on September 22, 2013. Jim had a profound impact on my life. He taught me about the importance of civic duty, the depth of opera, and the joy of life. I even learned more about India from Jim. Everyone who spent any time with Jim, loved him. His enthusiasm for life was contagious. Jim's contributions to the business community and government organizations are still positively impacting the lives of millions of people.
Jim was not only a great friend. He was my hero. May he rest in peace. My condolences to Jim's family.
Saturday, September 28, 2013
Since I joined the advisory board of Crimson Mim, a fashion-forward retailer of women's apparel, I am paying more attention to what people choose to wear and why. During my recent visit to Copenhagen, Denmark I observed that most women walking in the city do not wear heels. They dress very well and usually wear colorful sneakers. This behavior is different compared to what women wear in other cities I have visited (Paris is another place where many women do not wear heels or colorful sneakers but that is a different story). I was curious to find out why. I learned that the reason is neither philosophical nor cultural. Women in Copenhagen do not wear heels because of a very practical reason i.e. the walking streets look like this:
Most Copenhagen women keep a pair of heels at work and wear them when they are at the office. By the way, the colorful sneakers they wear look really good on them.