The Insights of a Columbia Professor

I am a regular Listener of Econtalk, where an Economics scholar (Russell Roberts) talks with luminaries of the field about various aspects of political economy. This week I listened with interest to Prof Amar Bhide of Columbia business school talk about outsourcing and venturesome economy. I was hooked early on when he talked about the fears of Americans regarding innovation in other countries, and the supposed lack of basic science research at home (link to the episode page).

He said that there are multiple levels of innovation, but they may be divided into three basic ones. Taking the example of shipping, the Archimedes' Principle regarding buoyancy is critical, but not sufficient to build a ship. You need technical expertise of various kinds for that. And then you need to run the shipyard, and that requires a different set of skills altogether. His point was that basic research is all well and good, but the knowledge, once created, is there for all to use. What is much more critical for prosperity is the application of that knowledge, and that requires skills that are much more local. Leading a team of workers to either build, or manage requires much more local knowledge, and contributes much more to the profits than basic research. We may agree or not with him, (I do, with the caveat of health care) but the idea leads to interesting paths.

I think its obvious from his exposition that the three basic tiers of wealth creation are basic sciences, technical sciences (like medicine and engineering), and management sciences. And it is interesting to see that almost all of my classmates are moving from technical sciences to management, implicitly agreeing with his theory that this will lead to them contributing more than they do now (and presumably receiving more too :-) )

And now, look at this EPGP course. One of the major explicit differentiators for the course is the focus on India and emerging economies. This ties in well with Prof Bhide's thoughts that the management needs to be much more focused on the local factors that any other branch. There is going to be a local focus throughout the course while teaching us general principles. Sure, there are differences between different emerging economies, and that's why we will have full-time immersion into these counties for several weeks, giving us a first hand experience of how business is done there. This fantastic aproach is one of the reasons I'm excited to pursue this course.

Economics is a Rap Song

Demand, Supply - Rhythm, Rhyme, Results

The top ten Principles of economics, courtesy Greg Minkew's blog

Here are lyrics:

Verse I
Tradin’ this for that, call it tit for tat
We all face tradeoffs and that’s a fact because
Everything is in finite supply
That’s the reason why we all sell and buy

Next up is rule deuce, the next best use
Of money or time defines its true value
It’s more convoluted than just the simple cost
What else could you do? What opportunities are lost?

Decisions at the margin, yeah that’s the key
To understanding principle #3
Take your present situation and assume that it’s the best
If a change is worth more than it costs, then that’s your test

Lesson #4: it’s like the carrot and the stick
We break it down so you can see what makes the world tick
So why do we do the things that we do?
It’s a system of incentives that we all respond to

Chorus
Demand, supply
Listen up, learn this, and you’ll know why
We work, we buy
The price is right when the competition’s alive
(x2)

Verse II
Everyone in society can benefit from trade
#5 is a reminder that we shouldn’t let hope fade
Just use what you’ve got to produce your best
The money that you make will buy the rest

Lesson 6 is a trick, the invisible hand
Buyers and sellers clear markets without the man
The market system almost always prevails
But recognize, too, that markets can fail

Because of monopolies and the troubles they create
Uncle Sam comes along and he’s gotta regulate
That’s lesson #7: when government’s there
They oversee to guarantee that competition is fair

#8 says the future of a national State
Relies on services and products people create
If we sell and excel and we keep doing well
Then the money keeps going ’round just like a carousel

Chorus

Verse III
#9: keep an eye on that money supply
Printing too much paper sends prices sky high
A dollar means nothing, it’s just a nice name
If what it represents doesn’t stay the same

Number 10: there’s a tradeoff in the short run
Between unemployment and inflation
I really can’t explain the whole situation
You want the full story? Step up your education!

Shared by joyce santos at imeem

Digital War on Poverty

For a free marketeer like me, the ghastly poverty of the world is a nightmarish challenge. If the world were a free market, the only poor people would be the lazy or the incompetent. Sadly, that's not the case. Poverty is a rut, hard to get out of, and a challenge to the best of abilities. The poor are often enterprising and resourceful, but are defeated by a system that protects entrenched interests, mostly in the garb of pro-poor policies. Indian experience has shown that IT is one way of bypassing crippling regulation and enabling enterprise. Kenya shows another way technology can be liberating. As I heard in this story by BBC's Digital Planet.

Kenya is not an ideal nation. Most people don't have a bank account, roads are not particularly safe, and the distances are substantial. And a large proportion of population depends on buying and selling goods for relatively small amounts, or remittances from people in larger cities. Without bank accounts and safe roads, it meant a greater risk, bigger cost, and therefore less business. Not any more. The largest "bank" in Kenya today is Safaricom, a telecom operator. They started a mobile money transfer service in 2007, and today its so widely used that a survey shows 83% say they will be worse off without it. (Link here)
Its called m-pesa, and it works with a combination of kiosks and text messaging. Reducing the cost, time and risk of transaction removes the inefficiency introduced by the government. That's a small step towards lower poverty. It has the generated interest from CGAP and Gates foundation, amongst others, and there is a huge likelihood of replicating its success else where. (Like Afganistan, and Pakistan).

ITC's e-chaupal provides a very different services to indian villages It tells them the price of their produce, amongst other things. Just these simple measures are changing lives. Just by providing information and reducing transaction costs, these applications of now-mundane technologies have a potential to pull millions out of poverty.

Whither Jobs?

Fan though I am, this is not about the eerie absence of Steve Jobs from the helm of Apple. With or without him, I don't foresee an 80's style collapse of Apple. There is, however, another threat to Apple, and to me. The Economy.

First, the disclaimer. I am not an economist, you know. Although i read this essay by Daron Acemoglu, an MIT economist, and he details where economists too went wrong. This article by Arnold Kling is very accessible.

To quote Acemoglu, economists started believing that

the era of aggregate volatility had come to an end. We believed that through astute policy or new technologies, including better methods of communication and inventory control, the business cycles were conquered. Our belief in a more benign economy made us more optimistic about the stock market and the housing market. If any contraction must be soft and short lived, then it becomes easier to believe that financial intermediaries, firms and consumers should not worry about large drops in asset values.

I'm no one to judge an economist, much less an economist's assessment of economists, but I must say that till early 2008, I heard many economic writers I admire say that this problem was all "much ado about nothing".

Anywho, here we are, no one seems willing to give any good news. Wall Street Journal had this article, saying recruitment in Business Schools were at a lower level than even one expected in October. One quote by a student caught my eye. She said about the placement system in the college,

The system they have in place now seems to be one that works very well when the economy is good, but now that there are no employers coming -- no one knows what to do

This may be true, and therefore we will need a plan. This is the moment for aggressively reaching out, and I'm happy to say our batch is already thinking on those lines. I never would have thought that there will be dozens of mails everyday in our mailing list. Some are about mundane issues like what laptops to buy, but several talk about projecting ourselves to the world. This being the first batch, and the institute is flexible, so a lot of ideas are being discussed, and nothing is off limits.

This may sound like an ad for the batch, but it didn't start that way. I wanted to discuss the problems, ended us talking about the solutions we are working on. So.... does anyone have any idea? Where do we look for jobs next?

Corporatese

As I enter the corporate world, I wonder whether I'll learn something, or will there be value addition going forward. In other words, will I resort to Corporate Speak?

I am a fan of Lucy Kellaway for some time now, and her recent Twaddle Awards were particularly hilarious. She is a columnist for FT and reads her columns out loud for the podcast audience as well (that's where I caught her). She is a crusader for sanity in corporate culture and using English instead of Jargonese.

In blogs and in forums, in conversations and mails, we are all aware of people saying things like 'going forward we should drill down, go back to the drawing board and aggressively leverage our deliverables to maximize value addition'. So it was with some relief that I read this post by Maybe MBA, who is from Chicago Booth. In a hilarious comment, Deadhedge said 'I was in a class where the professor said, "We are going to get beyond the cliches here. We are really going to drill down, peel back the onion, and kick the tires here."'

Can we start a new trend, making it uncool to use excessive and unnecessary jargon? I hate to think of myself using such language as a corporate man even though I probably will.

Wild Cats in Bangalore Campus

I came across this story in Times of India (via Indiatime). All headings from "Only in India" to "Education in Wilderness" just write themselves.

There is a leopard in Bangalore University campus. And yes, there IS. Not caught yet, and presumably s/he doesn't want to be caught. The best remark was, 'campus is very vast and it is not unlikely to sight a leopard. I think the leopard lives in the campus, but hasn’t harmed anyone so far.' This luminary was the conservator of forest.

Now I know life is not a Wilbur Smith novel, and tracking is easier said than done, but there are so many possible angles to this news. Whether you take wilderness encroaching civilisation as the economy takes a dip, callous officers waiting for a casualty to label a clearly dangerous situation dangerous, or just the visual of a real life leopard on university campus while so-called wildcat Kareena shoots in another campus in the same city, the situation is delicious.

But THE ANGLE for me has to be the invasion of us wild cats, coming to Bangalore and disrupting a staid world. People tracking our footsteps, trying to catch us, but unable to do so. Will we blaze a path? Will we try and create new space? Take our "wild" ideas and transform the staid campus of business?

Who knows?

But we will try hard. Very hard.

Falling asleep, waiting for the dream

I'm going to IIM.

Never thought I'd ever utter these words. Except to meet someone, of course. Come to think of it, I don't even have a friend who has gone to an IIM. All m friends are busy administering harmful substances and making carving marks on sick people.

I am a surgeon, still. For another 50 days. Then I'll be a student doing 1 yr EPGP course at Indian Institute of Management, Bangalore. I'm still coming to terms with it, trying not to get carried away by the feeling.

Thankfully there is already a community of admits, and their brilliance keeps me grounded. I was selected in R2, and when I joined the Yahoo group, there was already so much buzz, so many activities, and so much going on that it took me a few days to just get my bearings around the group. The guys and gals have been doing a fantastic job. There are already committees and dedicated committee members doing a lot of legwork (and brain-work) for all our sake. Kudos to them, too many to name here, but they and everyone else know who they are.

Right now the majority of us is going through the process of securing a loan in a risk-averse climate. Through efforts of IIM and the group we have been able to secure a collateral free loan, but it was not easy.

There were a lot of study groups when I joined but I wonder how much people ae studying now. I hope not much, because I'm not. After obsessing over the MBA application process I'm now freaking out with movies. Will watch Slumdog soon, but saw Danny Boyle's Trainspotting recently..... mind blowing. A few scenes are bound to stick with you foreever

I think that's enough rambling for a day, and hope to catch up later.