Chasing Windmills

The IPO of a company specializing in Wind Power Generation is leading the promoters and private equity investors to laugh all the way to the bank. The rest of us are putting up a brave front. Theatrics aside, questions surround whether the market will rationally begin assigning premia to companies seeking to create 'greener' tomorrows.

Despite stiff resistance by leading economists in a Copenhagen summit conducted several months back by a maverick mathematician, the Kyoto Protocol continues to limp forward. With a view to create a market for emissions trading, the Kyoto protocol can at best bring down the global average temperature by 0.28 deg Celsius by 2050. That may not sound much, but the current rate of increase will most certainly lead to what Led Zeppelin would call "When the levee breaks".

Stray moves such as curtailing the use of plastic bags, the early (and I believe, innovative) adoption of Carbon Credits by select Indian companies is leading to an institutionalized approach to environment preservation. This will be a more powerful catalyst for change than environmentalist movements.

From a purely financial investment viewpoint, I would back companies who can substantially reduce current emission levels and actually benefit the environment through their activities. For example, a US based company that went from boom to bust and now is treading cautiously through such initiatives is Idealab (if I were a US investor, I would be highly interested in Idealab). The moves of some of the large oil majors are well documented.

The financial returns would be driven by a possible combination of several well known factors:
...... society and legistature who will seek to banish the repeat offenders when a large scale disaster finally strikes (not the 'mere' daily extinction of several species - marine and terrestrial)
...... cheaper alternatives in recycling
...... heavy lobbying by large corporates who adopt such technologies
...... Outright closure of offensive industries by leading them to bankruptcy e.g. tanning

What is true is that alternatives have not really lived upto expectations. Vehicles currently driven by alternative fuels are not sustainable "mass transport" carriers and therefore will not be able to reduce consumption significantly. Hence, consumption is being controlled through administered prices rather than being driven by competitive alternatives. This continues to be the grim reality.

However, as a blind optimist, one can only reply, "Noone anticipated Google when Yahoo! and Alta Vista ruled the world of search engines. Who knows?" I'm sure Don Quixote would approve!

Books, old friends that are always new

Has the format of novels hit a saturation point in terms of maturity and usage?

It strikes me as remarkable that while styles of writing have morphed over time (in sync with languages), formats have not kept pace. Cartoons continue to fit snugly into a three / four- panel format (or as series), while novels continue to entertain us through prologues, chapters and epilogues.

It seems that structure is more important than content. What if the structures were to change? What would be the impact?

For one, I think that the medium drives the structure. And, to some extent, structures demand of the medium. That means, content is driven by the underlying technology. Thus, if the delivery channel is a book, then we will continue to read bound sheets of printed paper in our hands. What if the delivery channel is 3G over CDMA devices? Then what would be the format? What if the delivery channel is electronic and delivered at your PC (e.g. we have Harry Potter and Stephen King books distributed in PDF formats)? What if in a bid to maintain our cultural and linguistic diaspora, we will have to mandatorily word every piece of communication in twenty languages? Are the current methods the most effective way to communicate / entertain?

Personally, I think the structure of the novel was a very important innovation in our literate history. But as one raises more questions than answers, doubts are cast on the novel's longevity.

I think we are going to be driven by 'staccato' entertainment delivered over amorphous devices. The novel will simply have to learn to adjust.

My $1 dream

It is unacceptable that problems wiping out over ten thousand people a day in Africa are a result of mis-management of disease and debt. It is criminal that the natural water resources in Ethipia feed the Nile and can sustain the civilization many times over, and yet tens of thousands have perished from water scarcity. It is unacceptable that the Bengal famine took place in midst of abundant food-grain. I am tired of sick, disease and famine-ridden children touching my feet every day, in the hope of getting a few rupees.

I am disillusioned with the notion of becoming personally rich and yet participate in an ecosystem which has 15 components (out of 24) that are being degraded at an alarming rate. What will my currency be worth if it can't buy anything and hasn't been backed by creation of national wealth?

I have but one dream - that the income of over one billion poorest people in the world be raised by $1 per day within the next five years.

That is over $365 billion per annum of fresh wealth created in the hands of you and me. That is over $365 billion worth of purchasing power in the hands of the poorest section of today's world. The odds are small that tomorrow's wealth, and booming markets, are going to be the creation of today's rich. The odds are large that a sustainable income in the hands of the poor will drive the creation of phenomenal wealth in society. One that has been created free of debt and disease.

This then, is my dream career - a social investor. One who invests private equity into social enterprises with very tangible economic returns. But not one at a small scale - one at a phenomenally large scale. And it shall be driven by my second (or third) love - technology. Low-cost, large-scale technology. Data transmission over optic beams that obviates the need for cabling, or high-powered mirrors that amplify the power of solar panels.

Hell ..... I never said I'm a big thinker, nor did I say I'm very bright.

But that is it - my $1 dream. You with me or you stepping aside?

Stumbling to Greatness

Observing recent surges in capital appreciation of real estate, spurts of natural disasters, slow down of judiciary systems, volatile markets and rising tax bills, one can't help but wonder if we aren't unwittingly committing ourselves to suffer from the following:
a) Natural restriction in labour mobility - who would want to move to places where rates are shooting through the roof?
b) Large losses in personal financial holdings - with claim processes in Insurance companies set to be choked for ages and litigations bound to increase, the individual / corporate owners are likely to bear large burdens (economic and emotional) for a long time.
c) Tax evasions that will continue to be on the rise as larger proportions of people will continue to figure out ways to avoid / evade taxes.
d) Poverty, lack of access to basic human rights etc. will dominate the landscape.

As we grunt towards mediocracy, attendant problems will make themselves more evident:
a) Higher crime rates.
b) Disproportionate levels of development (and therefore population densities) across the nation etc. etc.

Instead of untangling the Gordian Knot, one way to cut it could be as follows:
Dismiss this bogus concept called "Public - Private" Enterprise. The Govt needs to focus solely on social areas that are unviable for any private enterprise e.g. railways, education etc. As these become viable, they then need to be mandatorily parcelled off to private enterprises. Subsequently, the Govt would need to play the role of a regulator ensuring that the private sector makes essential services easily available at affordable levels. This way, borrowings and taxes would go down to hopefully, near-zero levels. Naturally, the consequence of that would be shifting of expenses from the Government to the private sector, but competition should hopefully reduce those prices. Look at the communications sector.

We need to return to the village to run a city or a nation. Small scale entrepreneurship is the way forward. This however, will lead to the necessity of creating strong Intellectual Property regimes.

Scale has a natural limit where the products being created stop serving any use. Hence, organizations will need to seek ways of acting as loosely bound units, where each unit is a stones throw away from customers. How these units share infrastructure and services to reduce transaction costs would become an area of competitive advantage. If we keep producing stuff beyond a useful level, we enter a dangerous terrain of mathematical functions where more junk is produced at lower costs. Lower costs do not justify creation of junk.

One curious contradiction to the above point is this: Human beings are essentially social animals. Hence, the need to stay in contact will remain an essential way to preserve the psyhce. The ability for organizations and people to stay in touch in an effective way will pretty much drive society to the next era. Thus, organizations will need to deliver communication services at a mass scale and at reasonable prices, with the express mandate that prices for the same services must drop. Scale does have its advantages.

Banks as custodians of society's savings (and therefore wealth) will need to become less important. Disintermediation in all markets will become a sign of the times. All economic crashes have been preceded by flawed bank policies. Thus, the role of a bank as an intermediary between lenders and borrowers will diminish. People will start asking the same question, "If I earn less than 2% (effective) on my bank savings, why not lend directly at 9% to a credit-worthy borrower, and pay 2% to a person who monitors credit-worthiness and ensures repayment?" This would force financial institutions out of comfortable, profitable metros and into rural markets - which would aid Micro-finance. Isn't that a good thing?

As development becomes more uniform, real estate rates, octroi, duties etc. will become more rational, leading to an environment where labour can be more mobile. This will improve the market for rentals, where fewer and fewer people actually own any assets and more and more people start utilizing assets on rent. However, the number of people with access to all these services will go up, which is a sign of good times. After all, who wants to be rich in a poor country?

I'm not sure if India will become a great country in my life-time. Maybe it will be achieved in my kids (or foster kids) times. After all, education is the only real cure to our ills.