Interesting times in the Middle East. From Tunisia to Yemen there seems some ferment or the other. One wonders where all this will end or whether it will.

The relative stability of post-war years meant that many people grew up assuming a certain basic quality of life as a given- without wondering about either the economic requirements to support this or the social impact of this.

Post 2008, there has been a realisation that stability is only on the surface. South Asia always had its problems but at least it seems to be "growing" and has "potential for growth". Greece is bankrupt and so is Ireland. The famed "cradle to grave" is being threatened - truth be told it was never sustainable.

On the other hand where there are relatively larger hand outs to the 'nationals' in the MENA region there is still ferment at perceived imbalances between the rulers and the ruled.

So from an Indian perspective , despite the corruption and the quality of political leadership it still makes sense to build a work life in India- considering other parts of the world dont seem so well organised any more, and considering that the 'growth' story is in India as much as any other part of the world, it makes huge sense to stay in India rather than look out.

The grass has never looked so brown on the other side.

Quis custodiet ipsos custodes

Or thus said Socrates. The philosopher and not the football player though the latter may well be talking about his goalie. Pls click on this link.

http://www.business-standard.com/india/news/a-i-misled-by-relianceinsurance-deal-say-psus/369320/&com=y


The story begins some years back when a certain MNC broker forms a stranglehold on fleet aviation business due to the massive premiums paid by a leading private airline. This is leveraged to get best terms for other large aviation accounts. For many years competing brokers try to break in but are unsuccessful.

In comes an upstart with 'strong political connections'; all the incumbent brokers hate him (often forgetting they went or would go the same path if they had a chance). He uses this political connection in the current regime (reputedly with a moneybag) and has 'fatwas' issued for change of insurance bids. The upstart ties up with the MNC broker's bitter competitor and they go out in the market.

Their bid is a few thousand dollars less! Whether this is good broking or good politics will for ever remain speculation. But hey, the incumbent has not given up. He puts a spoke in the wheel. He says one of the tender conditions remain unfulfilled.

here we come to the understanding or lack thereof of how London works. The concept of underwriting agencies is lost on most Indians especially insurance industry people. Simply put, the man with expertise rents the balance sheet of a strong player and both benefit - the brains gets financial strength and the latter gets better return on investment.

insurers 'subscribe' to the total capital deployment of the u/w agency. So if an u.w agency needs USd 10 mln capital , 10 insurers can subscribe 10% each, sharing the profits after paying a fee to the agency manager. Not unlike AMCs.

The problem in Air India is that the tender document says that the "lead underwriter" must have led similar size accounts with a 10% line.Leads can be with 5% subscription as well but obviously the incumbent has put 10% to ward off competition.

Now Mitsui is a 'subscriber' to Global Aerospace and not the 'underwriter'. The underwriting agency is Global Aerospace. Mitusi has quoted independent of GA- technically its not a 'leader'.

Second a 9.8% stake in GA is exactly that - and not 10%. You cannot round it off simply because if there were a USD 1 billion loss Mitsui would shell out USD 98 million not USD 100 million.

technically New India is correct. But more than that just the process of putting a spoke in the decision making means quotes which usually have a 30 day validity expire. You have to re tender then. And who knows what that will bring?

Watch out for the next episode of this drama!

Plastics!

here is the article I was looking for....

http://ezinearticles.com/?Are-Plastic-Food-and-Beverage-Containers-Safe?&id=57347

I suspect plastics need to be eliminated every where, we just dont know what changes they are bringing about..

Ideas during an Economic Downturn

I was in Singapore some time back and got into a passionate debate about, well what else, why India is not making the best of the global opportunities. Reams have been written and doubtless many more will suffer this angst but my approach, was almost fossilized , compared to what most "modern" Indians would like. Here's my two-bit worth of thoughts...

What is hitting most average middle class Indians today? Rising inflation, exorbitant interest rates and shrinking or stagnant incomes to name some common woes. You cannot afford the maid, but who will take care of the kids when both parents work? Mortgage payments have shot up so much properties may be sold. Real estate developers are offering "incentives" hand over fist. Eating out is a luxury.

Many of us remember the old times - not the good old times but the times of scarcity. When you had to be nice to the "Ration Shop" owner to get the extra sugar the state released during festivals, the clout required to get a telephone or a gas connection. You walked short distances, you ate out occasionally more as a celebration than to avoid cooking and were happy with public transport.

And thats the solution , really. Its not a revelation, just common sense. Thrift was always a virtue, its just became unfashionable to be so. Socialising meant display rather than bonding. But is this really our way of life? It has , conversely, become fashionable to blame "too much money" for the difficulties we are facing. Too much money, the argument goes, spoils people, makes them greedy and causes them to over stretch with disastrous consequences.....


So whats the "Indian" solution. In ancient times there were four "purushaartha" a "grihastha" or a householder was enjoined to perform. Dharma - the right path, Artha - wealth creation, Kama - enjoyment of sex and Moksha - liberation of the soul. If this sounds like the good times, it is. In the balance of these lies the mitigation of risk!

Artha - or wealth creation is actually a duty. Thats right, make money! As much as you can. But - make it within the scope of Dharma. When wealth creation becomes Adharmic, money controls people instead of the opposite. Money is not used, judiciously - it is abused.

It was said that a sixth of your income went to the state - so the state could provide the services it should (which is a topic by itself). A tenth of your income went to charitable purposes - so the poor and destitute did not become a burden on the state , rather it was society which directly provided a safety net. And the most reliable safety net ? The Family.

Thus it was that looking after your parents in their old age was not a chore but a privilege. For they not only looked after your children (thus saving on the maid) happily, they also were the repositories of wisdom and experience. Stable minds in an era of instability. And how much was the economic burden of putting another plate on the table? Surely less than the numerous times one would have eaten out to avoid cooking?

And when this is extended to the work place , the age of the employee will not advertise his competence or the lack thereof. Instant gratification will be traded for steady growth. Conservatism can be chafed at, but since when did it become a virtue for Corporates to live beyond their means? As it was for a family.

Thus the average performing employee was protected by the above average achiever for each had his role to play. And a good year did not mean unimaginable bonuses and a bad year did not meant retrenching people, with great social cost to both corporates and society. For in the downsizing frenzy usually some very experienced hands would be dumped. Not unlike sending your parents to old age homes!

So what reduces the risk for both families and corporates is the balancing of impetuousness with sage advise. Sure, it sounds stifling to the out performers in good times, but when growth slows and belts have to be tightened its the conservative, whether fiscal or social who survive.

Good times create a sense of euphoria and invincibility. Tough times create resilience and compassion. In our roots lie our salvation. Instead of taking a begging bowl and expecting the state to drop a few pennies it would be much better to rebuild the base of a close knit family. And reduce the risk of intemperate fortune. That is the ultimate social security.

Why a Repeat Global Crisis is Inevitable

For the last few weeks the only sound I cannot hear is the sound of suspended, not bated, breath. Its as though people cannot bear to think of the next moment, and perhaps holding breath will hold time. Surely, the following moments can only be worse than the previous ones? Market Crash, bankruptcies, bail-outs, job losses have become buzzwords where M&A, surging stock indices and fat bonuses were not even causes of plain old jealousy

So whats with the fast and feast? Human Nature is the simple answer.As Taleb famously said " Risk Avoidance is not governed by reason,cognition or intellect. Rather, it comes chiefly from our emotional system "

And collective emotions lead to a mob mentality. "Market makes reason". Perfectly sane people who would never have picked a knife except to cook their daily meal indulge in frightful behaviour as a mob. William Bonner and Lila Rajiva trace the reasons for witch hunts in medieval Europe.Plague, the split of Christianity into Catholics and Protestants and religious wars.... And the probable reason, closest facts? Border disputes!

Just as there was a mob (I mean respected analysts) claiming the Sensex would touch 50,000 points are the naysayers saying the global economy will collapse. Its apocalypse now.

Nothing will happen. Even in the USofA the impact of the current event affects 7% of the economy belonging to the financial markets. Of course there will be an impact, but nowhere near as Catastrophic as predicted.

As usual when the streets are burning the crooks make away with the most. Leftists are gloating about the "nationalisation" of AIG, the massive funds the Fed is pumping into the bastions of Capitalism. Yet when all the breast beating dies down the world will go into a recession. Some people will lose their savings, many their homes, but people will pull through.

In 3-4 years people will pick up the threads and get back. In probably 7 years you will see the next bull run.... The next bubble...... It was dot com then its CDOs now , it will be something else next time.....

It was always thus, and so it will be.

Whither State owned Insurers?

A friend of mine forwarded me this article. I would suggest you take a quick look at this before going on with my views.

http://in.biz.yahoo.com/071021/203/6m81x.html

The gist of the article is - you dont need to spend INR 640 million to understand something fundamental.

First a couple of points missed in the article -

- Whilst private general insurers have gained 40% market share, Public Sector insurers have not exactly "lost" business. They merely have a lesser share of a growing pie. This is the purpose of all opening up - more competition increases the pie itself which benefits both buyer and seller.

-LIC's success in retaining or even increasing market share is also a function of the policy period. Life Insurance means longer policy period provoking the question - Will the Insurer be around to pay the claim 5/10/15/20 years down the line? I would trust a state owned entity to a private player for such a crucial need. Hence LIC = perceived safety.

-this does not happen in non-life insurance. most policy periods are 12 months. Also there is rarely the same sense of personal involvement whilst protecting assets; after all its not one's own life.

-but most importantly the market has to see a couple of collapses ; only then the buyer will understand the value of a strong balance sheet.


Now on to my real question

Consultants are usually hired to do the management's dirty work - like that great invention of modern managements - "Rightsizing"!.

But the best solutions for any business in crisis is to listen to its own employees. Unfortunately most management love to listen to Outsiders. A classic case of "ghar ki murgi daal barabar"

I am convinced there are enough right minded people in the state owned insurers with sufficient pride of stakeholdership to take their organisations forward.

Ownership is never the problem. Lack of competition is. A private sector monopoly is probably worse than public sector monopoly.Look at power distribution in Delhi. Or ask the residents of Mumbai how an excellent BSES has degenerated into a pathetic Reliance Energy.

So before the insurance consumers get the shock of their life lets pray some inspired thinking will allow the PSU Insurers to get back to their glory days - not inspite but because of open market competition.It will be good for everybody in the industry.

Inspiration

One of the most inspiring poems I have ever read and one which I can unhesitatingly say will make every one misty eyed.

[IF]

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don't deal in lies,
Or being hated, don't give way to hating,
And yet don't look too good, nor talk too wise:

If you can dream--and not make dreams your master,
If you can think--and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build 'em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"

If you can talk with crowds and keep your virtue,
Or walk with kings--nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds' worth of distance run,
Yours is the Earth and everything that's in it,
And--which is more--you'll be a Man, my son!

--Rudyard Kipling

I've received a lot of nice feedback from folks about this particular poem. I'm glad that I could contribute something useful to the Internet, even if the words are Kipling's and not mine. Enjoy.