Saturday, November 19, 2016

Demonization of Demonetization

This will be my third blog on cash and demonetization (Demonetization with a twist? and Can we be a cash-less society?). While the recent demonetization has seen serious disturbances and negative impacts, a good many have started using this opportunity to demonize the attempt. While a few of them could be genuine errors of judgement, many others appear to be politically coloured.

One particular post in a leading English Daily drew my attention. While a few of insinuations had an element of truth, rest were outrageous. Let me quote specifics:

".. a blunder in every imaginable way.." - A motherhood statement that can never have a logical basis other than author's own imagination. Gullible people would be lead to believe that Mr. Modi invented demonetization!

"It doesnt' achieve its intended purpose" - Mercifully, the author has not said "..will not achieve..". Yes, in 13 days it has not achieved the entire intended purpose.

"And its unintended consequences could devastate the lives of the poor and cripple our economy" - Well, if one were to agree that the entire economy is driven by cash alone or black money alone. The developed World is under a serious misconception that going cashless is beneficial.

"Only 6% of black money is kept in the form of  cash" - Zero is better than six ! Never participate in any race that you are not sure to win!

"new 2000 and 500 rupee notes are on the way, and a black market for conversion from old to new is already thriving." - Devoid of logic. Is it thriving even when it is on its way?

"this attacks the stock and not the flow of black money" - Why make a beginning? Learn to live with it. Try telling a farmer that it is useless to remove weeds from the field since they anyway grow back.

"More government = more corruption" - How is this related to demonetization? If you can't achieve everything, achieve nothing. Coming to think of it, why not privatize currency issue itself? Instead of adorning the notice boards of Police Stations, the pictures can be on the currency notes.

"most compelling reason is this: these aren’t really high-denomination notes" - Recommending no action, merely because the notes are used by common man amounts to saying don’t attack guerillas who are using human shields!

"This is everyday currency." - This is exactly the problem. Black has become everyday currency.

"there are crores of people stuck without a way to convert their hard-earned cash" - The indigent have no surplus. In fact they spend in advance and use the inflow to repay debt from money lenders. I do agree that shortage of currency would thus also mean extreme hardship for many since each day without work would translate to a day without food.

"the barter system is back, as if we’ve gone centuries back in time." - We went back in time and in terms of civilization not now, but from the very point we allowed black money into the system. The unfair advantage that the parallel economy enjoys at the cost of law abiding citizens and the corruption it promotes have taken back our civilization to dark ages.

" this would be a historic blunder because social engineering never works," - But black money works unfailingly. Why try new things when you have tried and tested methods?

" it is an attack on property rights" - Oh, I did not know that Bank Accounts are also frozen.

Having said this, I don't mean to say that things could not have been better. Assuming an average withdrawal from ATM to be Rs. 2000 comprising 1 note of 1000, two of 500 and five of 100, replacing it with just 100s, as was done in the initial week, would increase the logistics load 2.5 times. It is unrealistic to expect any operation to scale up 2.5 times overnight. Movement of Cash from RBI to Banks to ATMs involves counting and verification at multiple points, security accompaniments etc. and is very logistic intensive. A solution that skips the number of intermediary steps (e.g, cash vans) would have been more suitable.

That a new 500 or 1000 note would have been a give-away is understandable.  New 250 and 750 could have passed off would also have avoided the change problem for small spends. Releasing them into ATMs a couple of weeks ahead would have prevented many problems.

Mandatory online declaration of stock and location of currency notes in a short window of time would have been more effective. Thereafter the notes could have been allowed to be legal tender for a slightly longer period.



 


Thursday, October 13, 2016

Artificial Stupidity(AS)

No, this is not a mistake! Right in the midst of Digitization, Automation and AI (Artificial Intelligence) we do have AS. The following narrative may sound familiar to many of you.

You have just bought a new mobile connection from the latest entrant into the market and you have emailed your "Other Provider" (OP to make it easy for our collective intelligence) to terminate the services effective next cycle. OP promptly acknowledges your mail and gives you a generated reference number and tries to be helpful by permitting you to contact them for any assistance. You are happy and start using your new-found connection and forget the old one. You receive a bill from OP for the current bill cycle and like a true gentleman that you really are, you pay the bill. A month later a rude shock awaits this gentleman when OP send you another bill for the next billing cycle.

You are obviously irritated and not much of the gentleman that you were earlier. You rattle out an angry mail pointing out the earlier correspondence. This is when AS comes into play. You will receive replies from AS level 1 (geeks excuse me. I start counting from 1) that "... on verification we find the bill to be in order. ..." followed by instructions on how to pay the bill (you are spoilt for options when it comes to parting with money).

After a couple of futile attempts to break the the wall of AS, you read through the customer complaint escalation procedure and send out a mail to a new mail ID. And that is when you run into AS level 2! Replies from AS level 2 will be on the lines of "... we are sorry for the inconvenience caused. However, we find that the bill is in order..." followed by (no prizes for guessing).

You now hunt for the next escalation level and send a mail to the latest mail ID. Yes, you are right! This is AS Level 3. The response will be somewhat like ".. we are sorry ...Although you did send us a mail asking us to terminate the services, we have no capability to handle requests that are to be actioned at a later date. As you can see from our response, we did not confirm that we have agreed to do what you requested. Hence our bill is in order ...".

Not only is AS institutionalized but, alarmingly, the process for institutionalizing AS itself is institutionalized ! If they want to standardize their operating procedure for handling a customer complaint, they hire a team of consultants (sometimes internal). The team does "proxy thinking" on behalf of all the "stakeholders" (including of-course the customer and the customer service executive) and lays down the SOP. Thus if the SOP does not ask the executive to apply his/her mind, AS gets unleashed. Now, why would any consultant be fool enough to ask someone else other than himself/herself to apply their mind?

In reality, linking AI to machine intelligence is too simplistic. After all there is no material difference between a machine and a human being who does not apply mind. In fact machines outdo such human beings due to their unfailing accuracy and by being fatigue proof. While software or any other tool created out of proxy thinking can be termed as AI, the same when used by human beings can turn into AS. Although such tools can help companies to employ "Dummies" (yes, this is intended to remind you of the "..for Dummies" series books), the number of roles available for someone who wishes to apply his/her mind will gradually reduce and may force such people to accept roles that "dummifies" them, acquiescing to the necessary level of AS.

Wednesday, March 2, 2016

The Provident Fund Imbroglio

Annual budgets in India, year after year, demand their share of controversies. 2016 Budget presented by Mr. Jaitley is no different. Salaried class is crying foul on the proposal to make 60% of interest earned on contributions made from FY 2016-2017 taxable at the time of withdrawal. 

Many questions on the details and clarifications have poured in. The fact remains that the elaborately complicated "solution" to the problem (of salaried class enjoying multiple tax exemptions - at the time of earning, investing and withdrawing) can only be contrived by bureaucratic mindset that is oblivious to cost of administering it.

The annual economic survey cried hoarse on how the subsidy in small savings is being gobbled up by the not-so-poor with statistics on PPF account holders' income. 

If we were to do such an analysis, we will find that a very large percentage of the corpus being managed by the PF Commissioners (or PF Trusts) belong to those who have very large income. The Govt. is indirectly subsidizing the high tax-free interest payouts on these deposits. The pressure to deliver such unrealistic interests has given rise to a demand to permit these funds to be invested in capital markets/equities. 

The fundamental question remains as to why Govt. should at all provide a risk-free high return fund management service to those who can well afford to do it themselves or hire professionals to do it.

A far more elegant and easier to implement alternative could have been to limit the maximum tax-exempt contribution to PF to some reasonable fixed sum instead of to a percentage of the basic salary. There are enough alternative investment and "tax-planning" avenues in the market that can address the needs of high-earners  of varying risk appetite. There is absolutely no justification for Govt. Agencies working for private profits in the name of social welfare.




Friday, April 24, 2015

Being Consistent vs Being Predictable

Is consistent/predictable behaviour a desirable leadership trait? 

The answer probably depends on who is answering. Of-course, none of us are 100% either way. 

A good many of us like to deal with people who behave in a predictable way. But, we ourselves would like to be otherwise, since unpredictable behaviour takes others by surprise and the fact that they are unprepared gives us a psychological edge.

Consistent behaviour and predictable behaviours are not really the same. For a given situation while there may be multiple actions that are consistent with the situation, being predictable leaves us with just one.

Predictable behaviour eliminates the "overheads" implied in those around us being unprepared but can lead to undesirable possibilities of a situation artificially contrived to elicit the predictable response. Effective usage of delegated powers at lower levels can not happen unless there is a certain degree of predictability in the behaviour of higher-ups. Wider participation in decision making also means enhanced scope for innovation since more minds are applied.

Unpredictable behaviour, on the other hand, increases the "overheads" enormously. Although it may eliminate the possibilities of "fabricated" situations, it deters others from making decisions and thus severely limits scalability.

Astute leaders make a conscious choice of these three different types of behaviours depending on the complexity of the situation and more importantly, the "target audience"! They try to be very unpredictable for competitors in business. 

Sharing the rationale behind the choice of your behaviour in a given situation with your team helps them to be in a better state of preparedness for a similar situation in future. This can be a very effective way of grooming up the team. In fact what may look like an unpredictable behaviour for a new person in the team may appear to be a consistent or even predictable to others, since they are "tuned-in to your wavelength"!

One of the lesser discussed and insidious aspect of consistent/predictable behaviour is the irretrievable stage (fait accompli ?) of a situation because of the decisions already made by people down the line. Whenever you encounter one such situation make sure to pro-actively ferret out others that may be partially so and eliminate the cause. This may necessitate resetting your behaviour pattern to such situations from  predictable to consistent or from consistent to unpredictable.

Saturday, March 21, 2015

Hierarchy of Compromises

Although all of us make compromises in our professional life, we rarely pause to recognize that each such compromise  leads us to a hierarchy of compromises, the starting point of which is determined by the last compromise we made.

In fact every choice we make, out of a set of mutually exclusive ones, is a compromise. That in turn places these other choices beyond our reach. Quite often we may not even have enough visibility of the choices and the hierarchy of choices that would open up down the line. Consequently, we may be able to identify the wrong compromises only in retrospect. Of-course, if you are being interviewed by your followers and asked to point out the reasons for your success, you will identify "the choices" that you made. On the other hand, if you were on introspection, trying to find out why you are not as successful as your friend, you will probably nail it on "the compromises" you made!

All of us know that ignorance about the available choices and the fear of negative outcome of a choice are the commonly known reasons for making a compromise.

Here again, many of us miss out on a more fundamental cause, that has to do with the length of time that we tend look into the future. Depending the time horizon that we factor in, the number of choices may be more or fewer. The visibility of hierarchy of choices down the line and thus the outcome of the choices would also be very different. More importantly our perception of the impact of a choice, even if it were to remain the same, could also be different.

The propensity to look into the future (length and depth) sets apart a visionary from others. But then, why don't we all become visionaries?

Unfortunately time also adds to uncertainties. This is probably why only very few are recognized as visionaries although you may find a lot more in that time frame who had the propensity to look long and deep into the future.  You can be certain that someone is a visionary only in retrospect!

Another, less obvious reason is the belief that short term outcomes can be seamlessly dovetailed into long term outcomes. This, unfortunately, is not true always. We can find numerous instances where companies were reporting healthy Qs but eventually the business model itself became obsolete.

Thus, you can essentially compromise all your way to become one (unique!) or one in hundreds or one in millions. Happy compromising!



Saturday, December 20, 2014

Serve from India

We have been hearing about "Make in India" from the PM and "Make for India" from Rajan. These exhortations essentially underline the fact that India "missed the Bus" when it came to taking advantage of economic potential that was available through demand for goods World over.

We also know that, apart from inadequate resources, paranoia about foreign capital and unfavourable business environment (license raj, bureaucracy, red tape, corruption, tax terrorism .....) were the main causes.

Although we have seen liberalization of policies, it has not greatly impacted the business environment, since corruption and red tape have become all pervasive and deep seated. Further, the opportunity itself is not what it was and is  much attenuated.

But, luckily for India, the story was slightly different with regard to services. Globalization of sourcing of services gathered momentum at a time when the liberalizations occurred. Consequently, our economy was able to take advantage of this in a sizeable way. The fact that GST may soon be a reality will perhaps help retain, if not enhance, this momentum.

But, off late, we are also seeing the License Raj hangup coming in to play in respect of services. Banning of Uber, Tax issues of etailers like Amazon, FlipKart are some examples. Every Govt. department from Police to Taxmen is trying a one-upmanship over the other in discovering laws/rules that have been violated and also in force-fitting an incompatible law/rule to new business situations.

Unambiguous and stable legal and regulatory framework is essential for a business to flourish. Not just this, the enforcement should also be equitable and should be visibly so. Vindictive, prejudiced and selective application of a framework does not inspire confidence. This will very soon lead us to start exhorting to "Serve from India".

Tuesday, October 7, 2014

Psychology of a Situation

How often do we use psychology to handle a situation? Obviously, the answer would vary from person to person and for a person from situation to situation. In fact each of us may even employ psychology to different degrees to handle similar situations at different points in time. This may happen due to change in our own mindset (psychology!) either based on learnings from our previous experience in similar situation or even without that (mood?)

In our professional life, we often come across people who are acclaimed trouble-shooters and negotiators. Trouble-shooting and negotiation are good examples of situations that demand intensive and extensive application of psychology.

In many complex business situations, I have seen two distinct parts of what can be called as "psyche of situation" (POS). The first and the most obvious is the collective psyche of all people involved that continuously affect each others' and hence dynamically evolves. Let me call this CP.

The second and the less obvious part is what can be called the vested psyche or legacy psyche(LP). Binding constraints, earlier decisions, cultural/historical expectations etc. together create VS. For example, in a transformation project like replacement of a core banking solution the approval and the budget would have come about based on a business case with various assumptions. All these assumptions together contribute to create VS. In long-term projects the team who worked on the business case may have already left the organization.

Astute "listening" in the course of our interactions with people currently involved can give us lot of insight into CP. But getting to know about LP, demands investigative work. We need to delve into the history, wherever possible, leading unto the current situation and interact with key people involved earlier but not involved currently. Personal experience from earlier such instances will be of immense help.

All this of-course, is just the beginning. Actual steps needed to manage the situation will obviously have to follow. But a clear understanding of POS gives invaluable hints on getting the team to think and act synchronously to achieve the stated objective/goal. Selective mix of team communication and one-to-one communication is an important tool. A deep understanding of the POS can also point to a workable team structure and selection of a good leader who enjoys the confidence of team. It is imperative that a Leader inspire the confidence of the team. In some situations such confidence may have its roots in the competence of the chosen leader. We often find that not all competent people are able to inspire confidence. Such finer delineations are possible only with a thorough understanding of POS.