Guess when the firm is no longer small enough: we need to find a way where people connect to each other. I don't know how powerful the One Firm philosophy of McKinsey is in actual practice - but for a firm thriving on the intellectual capital of its people, it is most critical that people are - and feel! - connected.
In my mind, one-off home office days are of limited use, esp. if what one wants to share / showcase is also the work done by the case teams. I don't think the new joinees of the family feel the "family touch" to the firm. I might be seeing too much of the family thing, but if you read my farewell mail, you will realize that the biggest sense of association that I have with the firm is that in its people I have found huge variety which I can connect at different levels. It is this association that makes me feel comfortable with them. And hence, planning to watch a cricket match with a partner even after resigning is something I can do with ease. It is very important to build in that sense of comfort for every member of the family. It is very interesting to see how the family evolves. This needs deep thought - and preparation against the same.
As any firm grows bigger, what will start becoming important are processes: processes for people to share information, processes for people to share experience, processes for people to "know" each other. Immediate pain points are becoming obvious. As it grows, processes become stricter as also the norm. I am not saying that having strong processes in place is a bad thing per se. However, what it does is it creates an over-bearing sense of structure and bureaucracy in the system - the very shackles we want to be free from and the ones that take away the sense of being in a family.
Pain points in terms of people not leveraging each other's knowledge / experience are not so obvious now. I, for example, don't know what I can leverage the 2005 cohort (SAs/Cs/PLs) for? What contacts do they bring, what experience do they have, what passions they might have, etc etc. I guess we will never ever know any person fully - but then the system should have enough knowledge that the right person for the right objective is leveraged at the right time. Is there a process that we can develop? Are there forums that we need to define?
I think the big reason firms that are regarded as having a people touch are regarded as thus, is that they have a legacy of being "small". Being small helps the informal networks in the firm grow stronger, which provides a strong support system to all in the company. Hence, when a presenter talks about his company, he can relate to his life in the company where he finds a strong friendly environment. What quickly happens if you don't know what your cohort mate is doing is that you begin to develop a sense of unease with the person and the situation: Is he doing better than me? Am I upto the mark? And since you are anyways not in a social position to talk to him about his successes and failures, you are unable to get answers to your questions. And then comes the feeling of competition which brings with it the touches of aggression and politics. Is that why the BIG firms have the reputes of being aggressive, is something that I can only conjecture.
I think it will be a bad loss for any small firm if this spirit of camaraderie is lost!
Sunday, October 30, 2005
What does an MBA get paid for?
What does an MBA get paid for?
My unequivocal answer to the above question would have been: the intelligence that 1 brings to the table. Intelligence, in my mind, was always associated with defining thought-through strategies and processes, making the processes more effecient and effective, finding loopholes in processes (and laws!), etc etc.
However, having heard about life on the trading floor, there is a very interesting dimension that got added to the answer to the question above: the amount of stress that the job forces on you. From what I heard from Madhur M, I could clearly sense that trading is not so much a call upon 1's intelligence (after one has mastered the basic skills) but is severly taxing emotionally. The 6 hours * 5 days of a market are enough to drain you out for the entire weekend!
As with consultants, I would add the third dimension where a recruit from the IIMs is helpful: one where you have to make him work hard in very trying circumstances. I can see all my sales manager friends at HLL, Asian Paints, Colgate, etc. What they bring to the table is not just much above the average intelligence to the system but also the emotional maturity to survive in trying circumstances in far-flung states away from their homes.
When I look back at life at IIMA now, I can now visualise why banks and FMCGs love to recruit traders / SMs from MBA schools: it is not necessarily for the intelligence (which no doubt facilitates the work) but for the ability to handle the huge stress and show the emotional maturity that the job demands (and is there any place better than IIMA that prepares you for the same?)!
PS: Why do software companies hire from campus? :)
My unequivocal answer to the above question would have been: the intelligence that 1 brings to the table. Intelligence, in my mind, was always associated with defining thought-through strategies and processes, making the processes more effecient and effective, finding loopholes in processes (and laws!), etc etc.
However, having heard about life on the trading floor, there is a very interesting dimension that got added to the answer to the question above: the amount of stress that the job forces on you. From what I heard from Madhur M, I could clearly sense that trading is not so much a call upon 1's intelligence (after one has mastered the basic skills) but is severly taxing emotionally. The 6 hours * 5 days of a market are enough to drain you out for the entire weekend!
As with consultants, I would add the third dimension where a recruit from the IIMs is helpful: one where you have to make him work hard in very trying circumstances. I can see all my sales manager friends at HLL, Asian Paints, Colgate, etc. What they bring to the table is not just much above the average intelligence to the system but also the emotional maturity to survive in trying circumstances in far-flung states away from their homes.
When I look back at life at IIMA now, I can now visualise why banks and FMCGs love to recruit traders / SMs from MBA schools: it is not necessarily for the intelligence (which no doubt facilitates the work) but for the ability to handle the huge stress and show the emotional maturity that the job demands (and is there any place better than IIMA that prepares you for the same?)!
PS: Why do software companies hire from campus? :)
Intellectual Discussion
Intellectual discussion:
One of the things that I have realised (thanks to a long discussion with Madhur M yesterday) is that there is a huge value in discussing 1's thoughts and ideas with people who have a completely varied background (for context, I was discussing the mail on a firm's culture) and taking inputs before freezing 1's framework.
For any intelligent deduction on any topic, I thought, all that was required was peace of mind and some spare time to think. I would try and think of a problem, gather about my thoughts on the same, and having thought through on my own, I would assume that I had come to an complete (and correct!) solution and would passionately defend the same. All the gyan that the management books made about having variety in 1's team to bring about variety in perspectives, I thought was just that: gyan.
However, the discussion with him (he coming from a trading floor in HSBC, London) made me see the difference in how our perception of ideas / concepts / events is coloured by lenses through which we see. I have been, for some inexplicible reason, been very attached to the idea of a "BCG family" and how it is evolving (in my views, becoming more transactional than personal, as was earlier the case). I guess it is because I can relate to so many people in the office at so many different levels.
He coming from the trading floor saw no reason why that should be the case! For a business that is so completely individual dependant (you will rarely hear about a star consultant, however, the world abounds with Star Traders), he sees no reason why there should be the soft mushy feeling of culture and family around the office environment. Yes, it would be helpful to have it, he says, but then if the feeling of competition is getting the firm more revenues and profits (with one ST gunning after the other), there is no reason why the firm leadership should promote a sense of "family" in the company. It might be helpful, he concedes, in the team environment in which consultants work but even there, there is no demonstratable proof that a feeling of camaraderie (or more than sharing just a transactional relationship with your colleagues) will actually help bolster productivity or creativity.
I obviously cannot prove that to him with hard numbers. However, it is interesting that my framework has now evolved: it now comes with a caveat that the family culture is of importance in a team driven situation rather than in a individual performance driven work environment. (The need for social support to the employee is still there, but it is not necessarily given by the colleagues he works with, but by his out-of-work mates and friends).
The next big challenge to my framework: what should be the size of the team sharing the camaraderie? What I hear from RamG, Shaleen, Sharad etc seems to suggest that even if the case teams share a friendly bond, that should be enough. I will however miss the fact that by growing - and growing fast! - we might be splitting the large joint family into small nuclear households. While all function effectively, the lost feeling of one-ness does make me (and Tushar?) feel sad.
One of the things that I have realised (thanks to a long discussion with Madhur M yesterday) is that there is a huge value in discussing 1's thoughts and ideas with people who have a completely varied background (for context, I was discussing the mail on a firm's culture) and taking inputs before freezing 1's framework.
For any intelligent deduction on any topic, I thought, all that was required was peace of mind and some spare time to think. I would try and think of a problem, gather about my thoughts on the same, and having thought through on my own, I would assume that I had come to an complete (and correct!) solution and would passionately defend the same. All the gyan that the management books made about having variety in 1's team to bring about variety in perspectives, I thought was just that: gyan.
However, the discussion with him (he coming from a trading floor in HSBC, London) made me see the difference in how our perception of ideas / concepts / events is coloured by lenses through which we see. I have been, for some inexplicible reason, been very attached to the idea of a "BCG family" and how it is evolving (in my views, becoming more transactional than personal, as was earlier the case). I guess it is because I can relate to so many people in the office at so many different levels.
He coming from the trading floor saw no reason why that should be the case! For a business that is so completely individual dependant (you will rarely hear about a star consultant, however, the world abounds with Star Traders), he sees no reason why there should be the soft mushy feeling of culture and family around the office environment. Yes, it would be helpful to have it, he says, but then if the feeling of competition is getting the firm more revenues and profits (with one ST gunning after the other), there is no reason why the firm leadership should promote a sense of "family" in the company. It might be helpful, he concedes, in the team environment in which consultants work but even there, there is no demonstratable proof that a feeling of camaraderie (or more than sharing just a transactional relationship with your colleagues) will actually help bolster productivity or creativity.
I obviously cannot prove that to him with hard numbers. However, it is interesting that my framework has now evolved: it now comes with a caveat that the family culture is of importance in a team driven situation rather than in a individual performance driven work environment. (The need for social support to the employee is still there, but it is not necessarily given by the colleagues he works with, but by his out-of-work mates and friends).
The next big challenge to my framework: what should be the size of the team sharing the camaraderie? What I hear from RamG, Shaleen, Sharad etc seems to suggest that even if the case teams share a friendly bond, that should be enough. I will however miss the fact that by growing - and growing fast! - we might be splitting the large joint family into small nuclear households. While all function effectively, the lost feeling of one-ness does make me (and Tushar?) feel sad.
Perspective Changing Events
Perspective Changing Events:
In light of the move to the new job, there was an interesting remark made by someone in office (was it Guninder?) that resigning from a job takes you out of the frame. I thought it also gave one a new perspective! (Puns rock!)
Refining the framework further with Gouri, I now have a three stage "prespective altering framework". Perspective about how important your job is - and how much you should worry about the same - changes with the change in your environment: how far you are out of the picture (frame!).
In ascending order of getting clarity of perspective, the events are:
1. going home for a vacation (thanks Gouri)
2. resigning from 1's job, and
3. getting married (thanks to a discussion with Bruce and Harsh, I could make a complete three point framework).
Those who belong to the consulting fraternity will realise the import of the statement in parenthesis above: "It always has to be in three points!". However, similar background people will quickly realise that there is no point in making a 2 by 2 of this framework, esp if the other axis is (what else!) "ease of implementation". As 1 can quickly figure out, the ease of implementaion of the above is in descending order and would make a very comfortable r^2=-1 (the buggest joy of any associate trying to prove a hypothesis!)
For a person like me who has intermitently done point 1 and has just executed against point 2, ask me about the "ease of implementation" of point 3! Boy, is it hard! (25 years of my life just prove the point!)
In light of the move to the new job, there was an interesting remark made by someone in office (was it Guninder?) that resigning from a job takes you out of the frame. I thought it also gave one a new perspective! (Puns rock!)
Refining the framework further with Gouri, I now have a three stage "prespective altering framework". Perspective about how important your job is - and how much you should worry about the same - changes with the change in your environment: how far you are out of the picture (frame!).
In ascending order of getting clarity of perspective, the events are:
1. going home for a vacation (thanks Gouri)
2. resigning from 1's job, and
3. getting married (thanks to a discussion with Bruce and Harsh, I could make a complete three point framework).
Those who belong to the consulting fraternity will realise the import of the statement in parenthesis above: "It always has to be in three points!". However, similar background people will quickly realise that there is no point in making a 2 by 2 of this framework, esp if the other axis is (what else!) "ease of implementation". As 1 can quickly figure out, the ease of implementaion of the above is in descending order and would make a very comfortable r^2=-1 (the buggest joy of any associate trying to prove a hypothesis!)
For a person like me who has intermitently done point 1 and has just executed against point 2, ask me about the "ease of implementation" of point 3! Boy, is it hard! (25 years of my life just prove the point!)
Monday, October 24, 2005
Branding in KPO
From: Tilotia Akhilesh
Sent: Monday, October 24, 2005 1:16 PM
To: Iyer Ramganesh; Raja Kanishka; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
cartel is the word that i was looking for....and the way i look at things (patents, brands, incumbent-protection rules in any market) are just means by which the businesses make money....
my idea in the ed sector (in context of this mail being "how relevant to India") was: can we think of making a KPO brand in India for educating the firang students (i do hope the discussion does not waver here!!). the DPS, Xavier's etc have created a name for themselves in the physical world...in context of KPO, can we create a Brand where we can make the tons of money? i can visualize the profit pool based on the huge PPP and other arbitrage opportunities...
cheers,
akhilesh
ps: the other big reason for putting a sector name was to see if we can think more on the implementation issues of these mails than just long theoretical debates!
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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 12:55 PM
To: Tilotia Akhilesh; Raja Kanishka; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
education? of course there are brands all over the place
dps in the north / west and psbb in south are examples
i agree with ur last sentence... in fact i read an article somewhere saying that almost all money in the market (in the absence of protective tariff) is being made through cartels (more abundant than monopolies)
ramg
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From: Tilotia Akhilesh
Sent: Monday, October 24, 2005 12:49 PM
To: Raja Kanishka; Iyer Ramganesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
am no marketing expert but the way I look at brands is that it is the creation of a mini monopoly profit pool - just like patents. what i find interesting is Kan's logic of branding a low cost product (which i think is superfluous): a brand will typically command a much higher price than its cost.
what 1 is trying to do when 1 brands a product is to make the customer come to my product again and again...and this is more powerful than the patents that provide a more legal (forced) and time bound monopoly. brands - since they connect at the more emotional level (which given that man has remained heart-ruled than head-ruled for the last 5,000 years - and I dont see that changing till we plunge into a black hole) will always provide a much better fortification to the monopoly than the forced patents (people like ranbaxy's will keep hitting at your - pfizer's - patents)
look at the industry that ramG has pointed out, note that none have been able to establish an emotional connect with the consumers. to establish emotional connect what one needs to provide the customer the assurance of the same (hopefully world class!) quality consistently (which can happen in case of both products and service and hence BCG is a brand name)
what interests me is that the educaton sector, esp the primary and the seconday sector does not hae powerful "brands"? think we can create on here in this era of KPO?
cheers,
akhilesh
ps: WB rocks: he has introduced me to the concept of monopoly profit pools which i believe is fundamental to any business
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From: Raja Kanishka
Sent: Monday, October 24, 2005 12:30 PM
To: Iyer Ramganesh; Pawar Swapnil; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India
very little idea about 1&2. so wont comment....3 is useless brand or no brand....but as for 4, have had an up close & personal look at what cos. have been doing to establish themselves as a brandin India & worldwide and it is extremely fascinating!
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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 12:19 PM
To: Pawar Swapnil; Raja Kanishka; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India
i agree with kanishka on this...
despite major time information flow nowadays with all technology, 1 has not seen a decline in power of brands in most industries
in fact, industries with no brands (or no major brands) have never made money and have seen significant churn of companies
e.g. 1. aluminium (no joker in the world has made money)
2. HRC steel (no money again), though CRC steel and value add steel has brands and hence Arcelor etc have made money there
3. airlines (where there are brands, but consumers dont care much)
4. cement - another graveyard for many (however cos. now desperately trying to brand their product)
ramg
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From: Pawar Swapnil
Sent: Monday, October 24, 2005 11:54 AM
To: Raja Kanishka; Iyer Ramganesh; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India
which brings me to the point of my steady state proposition..
In the long run, (with human beings still around and companies still existant), there weould be no brands..
brands are a transient distortion brought about due to information assymetry, longing for exclusivity and concerns for quality.. (each applicable in different measures to various brands)
coke is thought worth 10 bucks due to concern for quality.. whatever be details of pesticides etc, the myth or reality is that coke is centrally manufactured, is consistent in terms of taste and is drunk by millions.. kind of a quality assurance in a beverage..
eventually, people will start evolving into higher human beings with exclusivity brought about by more inherenht features than acquired ones..
quality will cease to be an issue with advances in standardization.. and information assymetry will also go down with technological and customer rights progress..
so then, everything will be a commodity.. !!!
PS: brands would not be older than 200 years.. and in a true sense have only arrived in last 100 years.. what say?
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From: Raja Kanishka
Sent: Monday, October 24, 2005 11:44 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
I do agree with the network effect bit on MSFT but what I dont agree with certainly is your hypothesis of brands being associated with snob value. Without getting into jargon ( I dont know any), there is I think something called cultbrands (or some such name) whose central value proposition is exclusivity. So they work by taking you to a higher perceived pedestal and may have low utility per se. Harley Davidson, Rolls Royce, Apple (used to be one till about 2-3 years back but everyone has an iPod these days) are classic examples.
However, Coke is one of the longest surviving and valuable brands and that does not have snob value as a value proposition. A bottle of coke, when I last heard, would cost the company about 2.40-2.50 including the bottle. It sells for 8-10 bucks because there is a taste and a unique flavor that you associate with Coke. Now some of that taste difference may be actually there, most of it might be due the brand effect but the bottomline is you will not think twice before paying 10 bucks for a coke bottle but you will certainly raise your eyebrows if the lemonade vendor on the street starts selling a glass of lemonade for more than 4-5 bucks.
conclusion: Every brand has its USP, it may be snob value for some (Rolex), same taste (Coke ) for others, prompt & assured service for some others (Fedex) but I owuld certainly not think that snob value is the sole driver.
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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 11:31 AM
To: Raja Kanishka; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
This point is true - but I believe only to a certain extent.
MSFT is hardly an example of brand - I think its success is not due to people's awe of the Windows brand, but due to the network effect, where I cant change my OS even if I want to, since I want connectivity and applications to run on my machine....its similar to, but much stronger than, the efffect of phone number change playing on stickiness to a particular provider. I stick to Orange not due to its brand, but due to pain of number change.
Brand is much more relevant in things like Nike, Rado, Longines, etc
Here I have a hypothesis - the more the snob value in a product, the more successful a brand can become...
This is bcos the brand then gets dissociated from the functionality of the product per se - why will a sensible man buy a watch for a few lakhs?
Shoes have snob value - but less than watches... so moderate success of brands here
For a country like India, where miniscule % of people can afford to have snob value, I think the volume game is more relevant than the brand game
Ramg
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From: Raja Kanishka
Sent: Monday, October 24, 2005 11:22 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
I dont think the central argument of the guy's plea is that the volume / low cost route is bad.....I totally agree with the Chinese argument of great productivity by playing the volume game. Similar is starting to be seen for India with their gameplan of lowcost IT offshoring / outsourcing and what now. So there is no doubt that the India/Chinese strategy brings in its rewards and on a sustainable basis (i guess ~20 years of Chinese whirlwind growth is long enough to be called sustainable)
The argument which hits me hard is that the efficiency and impact of a brand is so huge that all other strategies fall on their face. The MSFT example is really compelling. It speaks volumes (no pun intended) about the price points that an MSFT will be able to charge on a sustainable basis because of its extremely high brand equity. I think that as Indian talent and brainpower becomes recognised worldwide, it is time someone thought of building a global brand whose value proposition is unparalleled quality/service rather than 1/3rd the price at which it is available in the west. Imagine if you had a brand like Wal-Mart and you could combine it with a low cost gameplan : the two strategies put together can potentially lead to a blockbuster arrangement!
In A, we did some work on brand valuations where we came across this Interbrand (the global authority on brand valuations) study which stated that for the top 20 brands globally (like Intel, MSFT,Coke etc) , the value of the brand is close to 50-60% of their mkt cap! I dont know if the biggest Indian brands will be able to match even 1/10th of that !
~KR
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From: Iyer Ramganesh
Sent: Monday, October 24, 2005 11:04 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: The power of Brand - How relevant to India
fair point...
though it doesnt explain how china is making its unbelievable growth through the volume route, not the brand one....
ramg
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From: Tilotia Akhilesh
Sent: Sunday, October 23, 2005 12:31 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: FW: The power of Brand - How relevant to India
very interesting article.
cheers,
akhilesh
ps: in many cases, i keep spamming you guys with articles that interest me. in case you come across articles that interest you, please do keep spamming me!
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From: Mankad Shishir
Sent: Friday, May 27, 2005 8:15 PM
To: Mall Amitabh; Garg Ashish; Srivastava Ravi; Bansal Seema; Sinha Abhinav; Sharma Puneet; Jhunjhunwala Pranay; Verma Sharad; Tilotia Akhilesh; Gupta Gouri; Vohra Rohit
Subject: FW: The power of Brand - How relevant to India
I guess this is an old one but nevertheless very provoking and inspiring.....a little longish though.
There's a small question-and-answer game I play with business audiences
when I'm called to address them. I ask them to estimate what they'd pay
for two pieces of leather, about 12" by 6" in size. The answer's
typically about Rs 50 or so.
I then ask what they'd pay for two pieces of flat rubber, about 10" by
4". Again, the consensus is about Rs 20. Now I ask their quote for two
pieces of sturdy string, measuring about three feet long each. A rupee
or two, I'm told.
What would they pay for an hour of manual labour? Oh, about Rs 20, they
say. I then ask them to add up the cost of the goods and labour; some
attentive soul says it's Rs 92. Now I ask them, suppose you took that
leather and instructed the labourer to spend an hour shaping it over the
rubber, pass the strings through the top - and make a decent pair of
shoes that you could sell at a roadside vendor, what would you get for
it? About Rs 150 or so, I'm told. When asked for the profit margin, some
wag quipps that it's about 35%.
I then ask for the cost of four tiny pieces of leather, cut into shapes
of letters of the alphabet. Oh, another two rupees at the most, I'm
reassured. The revised total cost? Rs 94. And what if I arranged those
little pieces in the order 'N', 'I', 'K' and then 'E' on the shoes and
THEN sold them? What would I get? There's typically silence in the
house, and then pandemonium. What would the profit margin be, I ask?
Nobody bothers to calculate in the hubbub.
I do this to illustrate a simple point: that brands earn more. Not being
accustomed to jargon, I did pick up the concept that this line of
activities involved in creating a product - from the slightly reluctant
cow, to the tanner, the dyer, the rubber moulder, the lace-maker, the
cobblers and cobbling machines, to the stockists, the retailers and
finally the eager Michael Jordan fans - is called a value chain.
And the greatest value in this chain is at the end of it. That's where
the money is. I also note that virtually, without fail, all of Indian
industry has been concentrated at the wrong end of the value chain. In
every business, be it leather goods or garments or even computer
software, we have largely been the leather and cobbler suppliers to the
world. A simple calculation brought this home. An Indian IT service firm
was making loud whooping noises about crossing a billion dollars in
revenues. I read they had some 25,000 people who took them to that
number. I looked then at a former client of mine, Microsoft, who - with
twice the number of people - pulled off $32 billion in revenues. A
productivity-per-employee figure that is not twice or 4 times, but 16
times that of one of our more admired companies.
when will we begin to learn that building end-user brands - and not
low-cost processes - is what brings the moolah home? That's what will
increase our GDP, bring in the wealth, and actually make us a developed
nation.
Why is it that we teach thousands of B-school students the art of brand
creation - from understanding customer needs, competitive strengths, gap
identification and obscure market research techniques - and then deploy
them at multinationals selling soap with "new, increased carbolic acid"
rather than with someone creating global brands from right here in
India? Beats me.
I see today's entrepreneurs from Tirupur proudly claim to sell
top-quality t-shirts to Tommy Hilfiger for Rs 150 - and then use the
money they earn to go abroad and buy the same thing back at Rs 1,000 a
piece.
Somebody told me that to create a brand, you must be near consumers, and
we can't do that if consumers are in the US. Nonsense. Today, TV and the
internet are global.
My six-year-old in Bombay tells me what's cool among six-year olds in
Boston. If the Japanese can sell cars and perfumes globally, and the
Koreans handsets, we can certainly give the world our brands.
We can be more than just cobblers to the world ... Think about it
Sent: Monday, October 24, 2005 1:16 PM
To: Iyer Ramganesh; Raja Kanishka; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
cartel is the word that i was looking for....and the way i look at things (patents, brands, incumbent-protection rules in any market) are just means by which the businesses make money....
my idea in the ed sector (in context of this mail being "how relevant to India") was: can we think of making a KPO brand in India for educating the firang students (i do hope the discussion does not waver here!!). the DPS, Xavier's etc have created a name for themselves in the physical world...in context of KPO, can we create a Brand where we can make the tons of money? i can visualize the profit pool based on the huge PPP and other arbitrage opportunities...
cheers,
akhilesh
ps: the other big reason for putting a sector name was to see if we can think more on the implementation issues of these mails than just long theoretical debates!
--------------------------------------------------------------------------------
From: Iyer Ramganesh
Sent: Monday, October 24, 2005 12:55 PM
To: Tilotia Akhilesh; Raja Kanishka; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
education? of course there are brands all over the place
dps in the north / west and psbb in south are examples
i agree with ur last sentence... in fact i read an article somewhere saying that almost all money in the market (in the absence of protective tariff) is being made through cartels (more abundant than monopolies)
ramg
--------------------------------------------------------------------------------
From: Tilotia Akhilesh
Sent: Monday, October 24, 2005 12:49 PM
To: Raja Kanishka; Iyer Ramganesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
am no marketing expert but the way I look at brands is that it is the creation of a mini monopoly profit pool - just like patents. what i find interesting is Kan's logic of branding a low cost product (which i think is superfluous): a brand will typically command a much higher price than its cost.
what 1 is trying to do when 1 brands a product is to make the customer come to my product again and again...and this is more powerful than the patents that provide a more legal (forced) and time bound monopoly. brands - since they connect at the more emotional level (which given that man has remained heart-ruled than head-ruled for the last 5,000 years - and I dont see that changing till we plunge into a black hole) will always provide a much better fortification to the monopoly than the forced patents (people like ranbaxy's will keep hitting at your - pfizer's - patents)
look at the industry that ramG has pointed out, note that none have been able to establish an emotional connect with the consumers. to establish emotional connect what one needs to provide the customer the assurance of the same (hopefully world class!) quality consistently (which can happen in case of both products and service and hence BCG is a brand name)
what interests me is that the educaton sector, esp the primary and the seconday sector does not hae powerful "brands"? think we can create on here in this era of KPO?
cheers,
akhilesh
ps: WB rocks: he has introduced me to the concept of monopoly profit pools which i believe is fundamental to any business
--------------------------------------------------------------------------------
From: Raja Kanishka
Sent: Monday, October 24, 2005 12:30 PM
To: Iyer Ramganesh; Pawar Swapnil; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India
very little idea about 1&2. so wont comment....3 is useless brand or no brand....but as for 4, have had an up close & personal look at what cos. have been doing to establish themselves as a brandin India & worldwide and it is extremely fascinating!
--------------------------------------------------------------------------------
From: Iyer Ramganesh
Sent: Monday, October 24, 2005 12:19 PM
To: Pawar Swapnil; Raja Kanishka; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India
i agree with kanishka on this...
despite major time information flow nowadays with all technology, 1 has not seen a decline in power of brands in most industries
in fact, industries with no brands (or no major brands) have never made money and have seen significant churn of companies
e.g. 1. aluminium (no joker in the world has made money)
2. HRC steel (no money again), though CRC steel and value add steel has brands and hence Arcelor etc have made money there
3. airlines (where there are brands, but consumers dont care much)
4. cement - another graveyard for many (however cos. now desperately trying to brand their product)
ramg
--------------------------------------------------------------------------------
From: Pawar Swapnil
Sent: Monday, October 24, 2005 11:54 AM
To: Raja Kanishka; Iyer Ramganesh; Tilotia Akhilesh
Subject: RE: The power of Brand - How relevant to India
which brings me to the point of my steady state proposition..
In the long run, (with human beings still around and companies still existant), there weould be no brands..
brands are a transient distortion brought about due to information assymetry, longing for exclusivity and concerns for quality.. (each applicable in different measures to various brands)
coke is thought worth 10 bucks due to concern for quality.. whatever be details of pesticides etc, the myth or reality is that coke is centrally manufactured, is consistent in terms of taste and is drunk by millions.. kind of a quality assurance in a beverage..
eventually, people will start evolving into higher human beings with exclusivity brought about by more inherenht features than acquired ones..
quality will cease to be an issue with advances in standardization.. and information assymetry will also go down with technological and customer rights progress..
so then, everything will be a commodity.. !!!
PS: brands would not be older than 200 years.. and in a true sense have only arrived in last 100 years.. what say?
--------------------------------------------------------------------------------
From: Raja Kanishka
Sent: Monday, October 24, 2005 11:44 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
I do agree with the network effect bit on MSFT but what I dont agree with certainly is your hypothesis of brands being associated with snob value. Without getting into jargon ( I dont know any), there is I think something called cultbrands (or some such name) whose central value proposition is exclusivity. So they work by taking you to a higher perceived pedestal and may have low utility per se. Harley Davidson, Rolls Royce, Apple (used to be one till about 2-3 years back but everyone has an iPod these days) are classic examples.
However, Coke is one of the longest surviving and valuable brands and that does not have snob value as a value proposition. A bottle of coke, when I last heard, would cost the company about 2.40-2.50 including the bottle. It sells for 8-10 bucks because there is a taste and a unique flavor that you associate with Coke. Now some of that taste difference may be actually there, most of it might be due the brand effect but the bottomline is you will not think twice before paying 10 bucks for a coke bottle but you will certainly raise your eyebrows if the lemonade vendor on the street starts selling a glass of lemonade for more than 4-5 bucks.
conclusion: Every brand has its USP, it may be snob value for some (Rolex), same taste (Coke ) for others, prompt & assured service for some others (Fedex) but I owuld certainly not think that snob value is the sole driver.
--------------------------------------------------------------------------------
From: Iyer Ramganesh
Sent: Monday, October 24, 2005 11:31 AM
To: Raja Kanishka; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
This point is true - but I believe only to a certain extent.
MSFT is hardly an example of brand - I think its success is not due to people's awe of the Windows brand, but due to the network effect, where I cant change my OS even if I want to, since I want connectivity and applications to run on my machine....its similar to, but much stronger than, the efffect of phone number change playing on stickiness to a particular provider. I stick to Orange not due to its brand, but due to pain of number change.
Brand is much more relevant in things like Nike, Rado, Longines, etc
Here I have a hypothesis - the more the snob value in a product, the more successful a brand can become...
This is bcos the brand then gets dissociated from the functionality of the product per se - why will a sensible man buy a watch for a few lakhs?
Shoes have snob value - but less than watches... so moderate success of brands here
For a country like India, where miniscule % of people can afford to have snob value, I think the volume game is more relevant than the brand game
Ramg
--------------------------------------------------------------------------------
From: Raja Kanishka
Sent: Monday, October 24, 2005 11:22 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Pawar Swapnil
Subject: RE: The power of Brand - How relevant to India
I dont think the central argument of the guy's plea is that the volume / low cost route is bad.....I totally agree with the Chinese argument of great productivity by playing the volume game. Similar is starting to be seen for India with their gameplan of lowcost IT offshoring / outsourcing and what now. So there is no doubt that the India/Chinese strategy brings in its rewards and on a sustainable basis (i guess ~20 years of Chinese whirlwind growth is long enough to be called sustainable)
The argument which hits me hard is that the efficiency and impact of a brand is so huge that all other strategies fall on their face. The MSFT example is really compelling. It speaks volumes (no pun intended) about the price points that an MSFT will be able to charge on a sustainable basis because of its extremely high brand equity. I think that as Indian talent and brainpower becomes recognised worldwide, it is time someone thought of building a global brand whose value proposition is unparalleled quality/service rather than 1/3rd the price at which it is available in the west. Imagine if you had a brand like Wal-Mart and you could combine it with a low cost gameplan : the two strategies put together can potentially lead to a blockbuster arrangement!
In A, we did some work on brand valuations where we came across this Interbrand (the global authority on brand valuations) study which stated that for the top 20 brands globally (like Intel, MSFT,Coke etc) , the value of the brand is close to 50-60% of their mkt cap! I dont know if the biggest Indian brands will be able to match even 1/10th of that !
~KR
--------------------------------------------------------------------------------
From: Iyer Ramganesh
Sent: Monday, October 24, 2005 11:04 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: The power of Brand - How relevant to India
fair point...
though it doesnt explain how china is making its unbelievable growth through the volume route, not the brand one....
ramg
--------------------------------------------------------------------------------
From: Tilotia Akhilesh
Sent: Sunday, October 23, 2005 12:31 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: FW: The power of Brand - How relevant to India
very interesting article.
cheers,
akhilesh
ps: in many cases, i keep spamming you guys with articles that interest me. in case you come across articles that interest you, please do keep spamming me!
--------------------------------------------------------------------------------
From: Mankad Shishir
Sent: Friday, May 27, 2005 8:15 PM
To: Mall Amitabh; Garg Ashish; Srivastava Ravi; Bansal Seema; Sinha Abhinav; Sharma Puneet; Jhunjhunwala Pranay; Verma Sharad; Tilotia Akhilesh; Gupta Gouri; Vohra Rohit
Subject: FW: The power of Brand - How relevant to India
I guess this is an old one but nevertheless very provoking and inspiring.....a little longish though.
There's a small question-and-answer game I play with business audiences
when I'm called to address them. I ask them to estimate what they'd pay
for two pieces of leather, about 12" by 6" in size. The answer's
typically about Rs 50 or so.
I then ask what they'd pay for two pieces of flat rubber, about 10" by
4". Again, the consensus is about Rs 20. Now I ask their quote for two
pieces of sturdy string, measuring about three feet long each. A rupee
or two, I'm told.
What would they pay for an hour of manual labour? Oh, about Rs 20, they
say. I then ask them to add up the cost of the goods and labour; some
attentive soul says it's Rs 92. Now I ask them, suppose you took that
leather and instructed the labourer to spend an hour shaping it over the
rubber, pass the strings through the top - and make a decent pair of
shoes that you could sell at a roadside vendor, what would you get for
it? About Rs 150 or so, I'm told. When asked for the profit margin, some
wag quipps that it's about 35%.
I then ask for the cost of four tiny pieces of leather, cut into shapes
of letters of the alphabet. Oh, another two rupees at the most, I'm
reassured. The revised total cost? Rs 94. And what if I arranged those
little pieces in the order 'N', 'I', 'K' and then 'E' on the shoes and
THEN sold them? What would I get? There's typically silence in the
house, and then pandemonium. What would the profit margin be, I ask?
Nobody bothers to calculate in the hubbub.
I do this to illustrate a simple point: that brands earn more. Not being
accustomed to jargon, I did pick up the concept that this line of
activities involved in creating a product - from the slightly reluctant
cow, to the tanner, the dyer, the rubber moulder, the lace-maker, the
cobblers and cobbling machines, to the stockists, the retailers and
finally the eager Michael Jordan fans - is called a value chain.
And the greatest value in this chain is at the end of it. That's where
the money is. I also note that virtually, without fail, all of Indian
industry has been concentrated at the wrong end of the value chain. In
every business, be it leather goods or garments or even computer
software, we have largely been the leather and cobbler suppliers to the
world. A simple calculation brought this home. An Indian IT service firm
was making loud whooping noises about crossing a billion dollars in
revenues. I read they had some 25,000 people who took them to that
number. I looked then at a former client of mine, Microsoft, who - with
twice the number of people - pulled off $32 billion in revenues. A
productivity-per-employee figure that is not twice or 4 times, but 16
times that of one of our more admired companies.
when will we begin to learn that building end-user brands - and not
low-cost processes - is what brings the moolah home? That's what will
increase our GDP, bring in the wealth, and actually make us a developed
nation.
Why is it that we teach thousands of B-school students the art of brand
creation - from understanding customer needs, competitive strengths, gap
identification and obscure market research techniques - and then deploy
them at multinationals selling soap with "new, increased carbolic acid"
rather than with someone creating global brands from right here in
India? Beats me.
I see today's entrepreneurs from Tirupur proudly claim to sell
top-quality t-shirts to Tommy Hilfiger for Rs 150 - and then use the
money they earn to go abroad and buy the same thing back at Rs 1,000 a
piece.
Somebody told me that to create a brand, you must be near consumers, and
we can't do that if consumers are in the US. Nonsense. Today, TV and the
internet are global.
My six-year-old in Bombay tells me what's cool among six-year olds in
Boston. If the Japanese can sell cars and perfumes globally, and the
Koreans handsets, we can certainly give the world our brands.
We can be more than just cobblers to the world ... Think about it
Tuesday, October 18, 2005
Market Effeciency
Gan,
most of your fundae on markets and institutions like the govt. assume an artificially intelligent mechanism in place (assuming the market & institution is an inaminate entity) which must ensure its efficient working. while the theory on efficient markets would say certain things, I think there are enough aberrations, loopholes that people continually exploit and profit from, be it IPO pricing or hedge funds. I agree that the long term profitability of such aberrations might be suspect; however, they do exist in the short term and the id (Bart-speak for idea) is to make money from them while they last.
As for govt removing money from you and giving poorer people goes, I think it is wishful socialist intellectual masturbation!
_____________________________________________
From: Iyer Ramganesh
Sent: Tuesday, October 18, 2005 3:41 PM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
its the difference between what is good for the individual and what is good for the society
if i am here for speculation, market shud stop me
something like - i wud rather have more money than less
but govt. has to remove money from me and give a poorer guy
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Tuesday, October 18, 2005 3:39 PM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
and I thought we were proponents of limited liquidity :)
_____________________________________________
From: Iyer Ramganesh
Sent: Tuesday, October 18, 2005 3:38 PM
To: Pawar Swapnil; Tilotia Akhilesh; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
good
healthy market exists bcos of such divergent views
ramg
_____________________________________________
From: Pawar Swapnil
Sent: Tuesday, October 18, 2005 3:37 PM
To: Iyer Ramganesh; Tilotia Akhilesh; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
on the contraary, i was thinking of longing now!!!
_____________________________________________
From: Iyer Ramganesh
Sent: Tuesday, October 18, 2005 3:35 PM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
wow !
its phenomenal !!
but am still waiting for it to fall to 6500 before longing
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Tuesday, October 18, 2005 3:32 PM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: jis prakar se bazzar gir raha hai,
hume lagta hai hamari naukri gaye :)
cheers,
akhilesh
ossum bear hug!
most of your fundae on markets and institutions like the govt. assume an artificially intelligent mechanism in place (assuming the market & institution is an inaminate entity) which must ensure its efficient working. while the theory on efficient markets would say certain things, I think there are enough aberrations, loopholes that people continually exploit and profit from, be it IPO pricing or hedge funds. I agree that the long term profitability of such aberrations might be suspect; however, they do exist in the short term and the id (Bart-speak for idea) is to make money from them while they last.
As for govt removing money from you and giving poorer people goes, I think it is wishful socialist intellectual masturbation!
_____________________________________________
From: Iyer Ramganesh
Sent: Tuesday, October 18, 2005 3:41 PM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
its the difference between what is good for the individual and what is good for the society
if i am here for speculation, market shud stop me
something like - i wud rather have more money than less
but govt. has to remove money from me and give a poorer guy
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Tuesday, October 18, 2005 3:39 PM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
and I thought we were proponents of limited liquidity :)
_____________________________________________
From: Iyer Ramganesh
Sent: Tuesday, October 18, 2005 3:38 PM
To: Pawar Swapnil; Tilotia Akhilesh; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
good
healthy market exists bcos of such divergent views
ramg
_____________________________________________
From: Pawar Swapnil
Sent: Tuesday, October 18, 2005 3:37 PM
To: Iyer Ramganesh; Tilotia Akhilesh; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
on the contraary, i was thinking of longing now!!!
_____________________________________________
From: Iyer Ramganesh
Sent: Tuesday, October 18, 2005 3:35 PM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: jis prakar se bazzar gir raha hai,
wow !
its phenomenal !!
but am still waiting for it to fall to 6500 before longing
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Tuesday, October 18, 2005 3:32 PM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: jis prakar se bazzar gir raha hai,
hume lagta hai hamari naukri gaye :)
cheers,
akhilesh
ossum bear hug!
Hedge Funds
From: Tilotia Akhilesh
Sent: Tuesday, October 18, 2005 9:21 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
am not sure why we need less liquidity - is not the fundamental premise that more the liquidity the better the price discovery? and in the case of the hedge funds, the "limited utility" that they provide is not just in terms of the increased liquidity but their ability (and willingness) to remove even the smallest of arbitrages (through all the convoluted deals, etc)
also, speculation is very different from manipulation - which is what these crashed funds had gotten into. in case of both bayou and refco, they hid 400 mn$ each of their losses as assets - not unlike what enron did. it is a more basic case of the "accounting" regulator not being able to devise a better disclosure mechanism than for the "market" regulator to stop them from manipulating the markets...for SECs and SEBIs of the world, the problem is to identify the black sheep - who is the fellow who is most probable to indulge in manipulation (as opposed to speculation and plain arbitraging)....
the trick there would be to distill learnings from these disasters and devise some early warning mechanism...some I could think of (and 1 can devise a framework):
1. flamboyant advertising (HomeTrade in India)
2. significantly high returns earned by the fund - are they "asset"ing their losses to show a good performance
3. sudden spurt in business volumes - esp if prompted by point 2 above
I guess the point that I am going back to is the same one that we made in the small paper we wrote: hedge funds need more regulation in terms of assessing their health on a periodic basis...may not be stifling regulations that take the creativity out of them, but such that their risks are known to the market at large
thoughts / ideas?
cheers,
akhilesh
ps: should we be blogging all the mails? much easier to keep a record also.
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:37 AM
To: Pawar Swapnil; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
one simple way is to exactly reverse the current STT structure for day trading vs. delivery
ramg
_____________________________________________
From: Pawar Swapnil
Sent: Monday, October 17, 2005 11:31 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
so the next question is how do you promote liquidity without promoting speculation of the chart types?
i would go a step further and question, how much liquidity do we need? or let's say, can we do with less liquidity?
to me, the purpose of liquidity is efficient price discovery..
any ideas?
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:27 AM
To: Pawar Swapnil; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
exactly
their limited utility is in ensuring liquidity
i am opposed to it going through the roof, as it quickly tends to do
ramg
_____________________________________________
From: Pawar Swapnil
Sent: Monday, October 17, 2005 11:22 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
i am somewhat more liberal than that..
i would say, let them speculte in casinos and horse races..
some idiotic hedge funds playing with psyche of managements is not very healthy..
i doubt value of such a stock market most of whose active participants are speculators ... and that too not on how something will affect a company and its value but on how majority will think about it.. you know a second order speculation..
agreed that these guys provide the much needed liquidity to the securities.. but they become a bloody pain when they go belly down..
if they need to be promoted only for liquidity, i think we need to look at better solutions..
what say?
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:14 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
i think speculation in any form is avoidable... and when such activity goes through the roof, regulators have to step in to stop it....
in any case as saand said, in india they are insignificant. if they cause some panic in US stock markets, just all the better...
thats why i think charging lower taxes for day trading and all are retrograde steps, encouraging such speculation as against term investment.. so before india goes the same way, we shud correct our laws
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Monday, October 17, 2005 11:10 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
we might think low of hedge funds, america, mcdonalds, etc etc...
but these things do have a huge value attached to them and when they crash, they take the whole damn world down with them! :(
cheers,
akhilesh
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:07 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
i hope so
i think pretty low of hegde funds anyway
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Saturday, October 15, 2005 1:49 PM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: 3 hedge funds have crashed in the last month or so...
Wood River Capital
Bayou
Refco
Will this be the next big challenge facing the financial markets?
Cheers,
akhilesh
Sent: Tuesday, October 18, 2005 9:21 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
am not sure why we need less liquidity - is not the fundamental premise that more the liquidity the better the price discovery? and in the case of the hedge funds, the "limited utility" that they provide is not just in terms of the increased liquidity but their ability (and willingness) to remove even the smallest of arbitrages (through all the convoluted deals, etc)
also, speculation is very different from manipulation - which is what these crashed funds had gotten into. in case of both bayou and refco, they hid 400 mn$ each of their losses as assets - not unlike what enron did. it is a more basic case of the "accounting" regulator not being able to devise a better disclosure mechanism than for the "market" regulator to stop them from manipulating the markets...for SECs and SEBIs of the world, the problem is to identify the black sheep - who is the fellow who is most probable to indulge in manipulation (as opposed to speculation and plain arbitraging)....
the trick there would be to distill learnings from these disasters and devise some early warning mechanism...some I could think of (and 1 can devise a framework):
1. flamboyant advertising (HomeTrade in India)
2. significantly high returns earned by the fund - are they "asset"ing their losses to show a good performance
3. sudden spurt in business volumes - esp if prompted by point 2 above
I guess the point that I am going back to is the same one that we made in the small paper we wrote: hedge funds need more regulation in terms of assessing their health on a periodic basis...may not be stifling regulations that take the creativity out of them, but such that their risks are known to the market at large
thoughts / ideas?
cheers,
akhilesh
ps: should we be blogging all the mails? much easier to keep a record also.
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:37 AM
To: Pawar Swapnil; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
one simple way is to exactly reverse the current STT structure for day trading vs. delivery
ramg
_____________________________________________
From: Pawar Swapnil
Sent: Monday, October 17, 2005 11:31 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
so the next question is how do you promote liquidity without promoting speculation of the chart types?
i would go a step further and question, how much liquidity do we need? or let's say, can we do with less liquidity?
to me, the purpose of liquidity is efficient price discovery..
any ideas?
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:27 AM
To: Pawar Swapnil; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
exactly
their limited utility is in ensuring liquidity
i am opposed to it going through the roof, as it quickly tends to do
ramg
_____________________________________________
From: Pawar Swapnil
Sent: Monday, October 17, 2005 11:22 AM
To: Iyer Ramganesh; Tilotia Akhilesh; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
i am somewhat more liberal than that..
i would say, let them speculte in casinos and horse races..
some idiotic hedge funds playing with psyche of managements is not very healthy..
i doubt value of such a stock market most of whose active participants are speculators ... and that too not on how something will affect a company and its value but on how majority will think about it.. you know a second order speculation..
agreed that these guys provide the much needed liquidity to the securities.. but they become a bloody pain when they go belly down..
if they need to be promoted only for liquidity, i think we need to look at better solutions..
what say?
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:14 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
i think speculation in any form is avoidable... and when such activity goes through the roof, regulators have to step in to stop it....
in any case as saand said, in india they are insignificant. if they cause some panic in US stock markets, just all the better...
thats why i think charging lower taxes for day trading and all are retrograde steps, encouraging such speculation as against term investment.. so before india goes the same way, we shud correct our laws
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Monday, October 17, 2005 11:10 AM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
we might think low of hedge funds, america, mcdonalds, etc etc...
but these things do have a huge value attached to them and when they crash, they take the whole damn world down with them! :(
cheers,
akhilesh
_____________________________________________
From: Iyer Ramganesh
Sent: Monday, October 17, 2005 11:07 AM
To: Tilotia Akhilesh; Pawar Swapnil; Raja Kanishka
Subject: RE: 3 hedge funds have crashed in the last month or so...
i hope so
i think pretty low of hegde funds anyway
ramg
_____________________________________________
From: Tilotia Akhilesh
Sent: Saturday, October 15, 2005 1:49 PM
To: Iyer Ramganesh; Pawar Swapnil; Raja Kanishka
Subject: 3 hedge funds have crashed in the last month or so...
Wood River Capital
Bayou
Refco
Will this be the next big challenge facing the financial markets?
Cheers,
akhilesh
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