From Meluha to Reason Magazine

For people who have read my previous blog and found it interesting please go through this article on Coase Theory

How to strike a bargain @ a Restaraunt with the help of the immortals from Meluha?

It has become a habit for me to be motivated to write a blog (only) after reading an article or a book. Most probably it would be non-fiction. But this time a work of fiction has completely hijacked my mind for sometime. 'The immortals of meluha' - a nice feel good contemporising story about Indian mythology and practices. But what has that got to do with striking a bargain @ a Restaraunt?

I will let you in on some parts from the novel. The novel is about 2 kingdoms which have different ethos and consider each other evil. One of them is strikingly similar to a socialist regime ( with due appologies to author if he had not intended to do so) with the government providing for the people. This is compared to heaven (initially). Rules are strictly followed here. Everyone is equally treated. The other kingdom is more like a capitalist economy where individuals have freedom to choose what they want to do. People believe in what works rather than the rules. Some people live in object poverty while some are affluent.

You would agree with me that most of the developed and developing nations are similar to the second kingdom. Now let us do a thought experiment.

You get into a restaraunt (in India probably if that is close to your heart) and eat your stomach's full. You are smart and you know your economics. You want to strike a bargain with the restaraunt people. You want to pay less. Let us bring some numbers in to see what would work. The food you ate costs you 200 Rs. You want a bargain of 50 Rs. You go to the restaraunt manager and tell him you will only pay 150 Rs. The restaraunt manager is not pleased. This is criminal. Assuming you are strong and he cannot physically force you. He calls the local police to come and force you into paying.

The police won't turn up for this petty a case. You have now gained a point. You are now threatening to leave without paying (take 150 or none at all). The restaraunt owner would have to pay something to the police (or convince them to come over). Assume he pays 100 Rs for the police to come (provided you still stand your ground). Now , the manager does some thinking , 'what if you pay up when the police comes and settle the issue? the restaraunt manager has to still pay the police 100 Rs'. He would end up losing 100 Rs. So between a choice of going for a 50 Rs / 100 Rs loss he would choose what works , he would most probably let you pay 150 Rs and leave than take the pains of forcing you to pay the full amount as the cost is much higher.

Yes it is a thought experiment. I wouldn't recommend anyone trying that. But what am I getting at? What has this got to do with immortals from Meluha?

First , people would do what works in a free economy than what matters.

Second , in cases where the cost of an alternative is much higher , people will settle for solutions which will reduce their cost than what is right.

Third , some people can and will hack this system for their benefit.

This I believe is the source of all corruption ! This kind of a society will allow petty crimes to be commited without much intervention. If you have hundreds of thousands of petty crimes across the economy then you have a big problem at hand.

An economy will prosper if the right way to provide justice is also the cheapest.

Would love to know your ideas on 'How to solve this Restaruant paradox effectively?'

Why pricing high could help the media companies?

I know you have a lot of questions on your mind after seeing the title. First of them would be, do Media companies need help? Well that's subjective. Being a consultant , I am 'assuming' anyone would need help . But on a serious note here's why I feel media companies need help..

First some facts,

The Watergate scandal was a 1970s United States political scandal resulting from the break-in to the Democratic National Committee headquarters at the Watergate office complex in Washington, D.C (http://en.wikipedia.org/wiki/Watergate_scandal). This led to the resignation of president Nixon , the only instance of a president resigning I presume. This was covered widely in the press. At the same time , there was also a major exposure of covert FBI operations called COINTELPRO(http://en.wikipedia.org/wiki/COINTELPRO - read program exposed section). This did not get wide press attention and to a large extent was suppressed (Source - Noam chomsky interview to Outlook anniversary issue this year) .

Early 1990s, back in India , the 'Times of India' (started in 1838) threw open its 150 year old mast head for displaying ads.

In 2004 , Bennett, Coleman and Co. Ltd (BCCL) launches a scheme called 'Private treaty'. The scheme - BCCL picks up equity stakes in companies and in return (alleged) BCCL publishes articles on them. Livemint Article

In 2010 , much closer to us , an ad starts playing even before the final ball is bowled in the over. There used to be only one ad in-between overs a decade back , now there are at least five.

In 2010 , most of the leading political parties (at least in TN ) have their own media houses.

Ok , now what do I intent to show using these facts?

Media can be used to manipulate People's beliefs and attitudes - This would undermine media's credibility

How do you control a democracy? Simple , by changing/aligning people's attitudes and beliefs to what we want them to believe. How do we do it? By using the right message and delivering it to the people. What do we use to deliver? The media. If the media is subservient to political will , then the messages we get will also reflect political will. This severely undermines the credibility of the media.

Do you read your newspaper to look at an 'Aria' ad? No, you read it to get an unbiased account on what's happening around you.

Do you really get an unbiased view? You might not.If this continues , what value would the media be to you as a customer?

Media houses are more worried about commercial gains than providing quality content these days - The perceived utility of traditional media is bound to come down

Right after India was liberalized , main stream media has concentrated mostly on advertising revenues ( same with US media companies too) . The heights of it being media companies buying stake in other companies. This will obviously raise conflicts of interests.

Will the media company publish any negative news on a company it holds equity in? This again raises some serious questions on the utility of media today.

We have other reliable sources of free information - No one might need unreliable media in the future

The final nail in the coffin comes from Internet and Social networks. A connected world will expose biases even more faster ( as we have multiple sources , some of which will bring out the truth) . People would realize the farse and move away from these media houses which tend to be biased (for monetary gains/political will). The readership of some big dailies in US are already showing decline!

With the utility of content provided by the media companies going down and with other free sources of reliable content , the future of these companies look bleak. I understand that in the current context competition has made higher pricing an impossibility while advertising has made low price a possibility. But in the future if people completely stop buying, media houses will lose on both counts.

Yes this is partly because of technology and partly because of their own making.

So what would be the solution for this? Technology related problems are easy to identify and solve. But the problems of irrelevance and dependability are at the core of what media companies do or rather fail to do. The media companies should concentrate on providing dependable and quality content which the consumers would be ready to pay for.

So a bold but a workable solution would be to start competing on reliability and the depth of analysis and stop competing on price. In other words charge a higher price , do the necessary research the price requires and deliver good quality content. People will be ready to pay.

Do we have examples of near-zero ad newspapers which people buy and read just for the content? Enter La Jordana , this gets near zero commercial ads as the government hates it, but boasts of 287000 readers in Mexico city. http://en.wikipedia.org/wiki/La_Jornada. If this paper can do it , why not others?

Disclaimer: These are my individual opinions. Please refer online resources if you need information further.

In Credit(ble) India

I was reading 'The week' anniversary edition. It had a cover story on 'Incredible India'. The cover story pointed out the obvious anomalies in India. For example the tele-density in India is greater than toilet density! and Pizza arrives within 30 minutes while ambulances seldom reach on time. Yes , it makes for fascinating reading.The article is very relevant as we would have experienced them hands-on at some point of time and can connect with it.

One of the things which got me thinking was 'Car loans are cheaper than education loans' in India. The article further goes on to explain the reasons behind this. This is possible because car manufacturers subsidize the loans and there is a collateral in the form of the car. Now , how do we subsidize education loans? The article suggests the government could subsidize education loans. Good. Agreed. But do all of those promised 'goods' ( both literal and contextual) the government promises reach us. My intention here is not to point fingers but to understand what would be practical. OK, we assume that the government is indeed capable of delivering and it subsidizes the loan to some extent. But ,without the collateral our bankers would still have to charge higher interest rates.

Ok , the bankers decide let us bring in a 'repaying capacity' based interest rate policy. The higher your repaying capacity the lower your interest rate. What an idea sir ji! The bankers would get hit as implementing such a scheme is an operational night mare. India does not have all its data digitized to make this a reality. Now, we have to find someone who can subsidize and also find a collateral in this case. Why don't the corporates who recruit subsidize the education loans? Why should the corporate subsidize? Let us understand who benefits from the loan. Yes of course the student, the parents , the educational institute (indirectly the government) and the entity which employs him. The student and the parents have to repay the loan . The educational institute provides its services for the fees paid. Some of them also have scholarships . They also play their part (of course this can be questioned). Assuming that you need that money to provide quality education we will leave the universities here. That leaves us with the corporates . How are the corporates helping. Yes , they pay the salaries. They recruit people who fit and pay them salaries.

Now , imagine if there is a change in how the corporates see this. The corporates pay the educational institutes to identify and groom talent. This would subsidize the educational expenses for the students. The corporates would also get better and fit candidates. Where would the corporates get this money? The banks would finance them with loans. How would the corporates pay the loan back? They would allocate part of the Salary they pay to the talent they recruit. The corporates would play the part of both subsidizing and being a collateral.

That seems like a feasible and viable solution. But if as a corporate I do this and the person leaves and joins another company. How would this work? As an industry we come together and form this educational pool. As long as the person remains in this industry it would work. If a person moves to an other industry which has not opted for this, then it would stop and the burden of the loan would be on the individual but now he/she has job which pays and the person can be traced

Yes, this is a bold idea. Yes, we don't know whether it would work. On paper , it seems to be good. Is anyone ready to test this out?

Why are there so little reviews?

Ok, you decide to buy the latest gizmo in town. You really want to know how good is your product. You go to the product site and ooze over the nice little high quality pictures and features 'marketed' to you. Then you realize , this might just be the tip of the iceberg. So being smart , you go to some www.xxxxypssl.com and read reviews about your product and make up your mind whether to buy the product or not. Simple isn't it? Now let us look at an interesting statistic and see how bad/good is this behavior. There were 'at least' 10 Million copies of Harry Potter and Half blood prince sold , but Amazon has just over 3500 reviews for this book( the book apparently was one of the top review generating product). The product usage to product review ratio is abysmally low!

Do you still think this sample which is not even 0.000001 % of the total population is good enough to base your decision on?

Studies have shown that reviews normally tend to be 'j' shaped , skewed more towards positive reviews. How dependable are these reviews then?

Adding to these , there are paid reviews which further raises questions on the intentions of review writers

Having stated why reviews might not be a nice starting point , what baffles me is why there are so little reviews even for a product which sells in millions. People always have something to say about a product in real life (good/bad), but most of them don't materialize online!

Now, consider this. You have a problem , say your latest PDA phone loses charge very often. You submit your problem to Google and Bingo (no pun intended) there is a solution to your problem in some www.xxxtechxxforum.com (given by geekwhoitis who already has 3B replies to his/her name). Here is a product which has some defects and people report (can we call this a review) it , while in the former case it goes unreported by majority!

Is there a difference between these two instances of consumer behavior? My guess is over and above all social reasons , there is a personal satisfaction of getting things done or in other words the IMPACT your actions create and how it directly affects you (does it solve 'your' problem or show 'you' as a significant contributor?).

Can we increase the number of reviews to a product by showing what IMPACT it would create? Is there really an IMPACT to the person who gives the review? Are firms taking note and more importantly 'act' on these reviews which are free market insights?

From core competence to care competence

Its been some time since I wrote about something. These days its really difficult to write something original (of-course I might be one of the few surviving species which are really trying to write something original).And I believe it won't be late before we see books with titles like 'How to plagiarize and stay original' and 'Thousand ways to glean good content from totally unknown websites'. When I started writing this post I didn't even think about writing on content piracy on the web and I am not still sure why I went into that , maybe to add that extra bit of humor and content ,that a blog should necessarily have irrespective of what you are writing about. Believe me, I have seen blogs on US policies which makes you laugh (I believe much of it is not by design!). So as any 'traditional' (already!) blogger will tell you , one should stay close to the title one decides to name the post. What an irony! a few words deciding what the next many words are going to say!(I see some similarity to Indian elections , do you? ).Of Course I could have named this post bababa ba! and still talked about corporate strategy. But , these internet marketing guys keep telling me about staying on top of the search results and that titling is really important. So ,now I think it makes a lot of sense to title your post Corporate Strategy and talk about bababa ba! ((Sh)it anyway happens!) rather than the other way round.I think by now most of the formalities have been done , can we get serious?

Was there a recent dent in the core competence theory? Mind you, it has undergone several dents in our case discussions , but what I am talking about is a global(can we call this a big picture?) dent. Any Idea? Bing(o)!, Microsoft launches a search engine. These were guys who were more worried about how people interacted with PCs rather than what they did with it. of course any third grade kid would tell you what you did with computers - play games,watch videos. Now , Microsoft says it is going to capture Google's market share in search space. What has Google got to say on this? Worser than the Microsoft case , they launch an open source operating system for net books. Who needs a net book ? Someone who feels that a stand alone operating system is redundant , and wants everything on the internet , and someone who lives in a place where you have amazing bandwidth. One important characteristic that is common in these aspects mentioned above is that the person requires faster access to standardized services. I am still trying to figure out what made Google do this. Most of the net book users would be indifferent to an Open source operating system. Even if you needed one , you can run Ubuntu.

Why would Google launch an operating system and Microsoft a free (This is not supposed to be humor) search service , and which would be more successful in the longer run?. I believe this is where care competence (I take the honors of introducing this new term to management literature) comes into picture. Gone are the days when firms kept to their core competence. The era of care competence is in. To put it in simple words, Google was a 'no evil' company which started out free in the 'search engine space'. It took good care of its customers and charged people who had more (than what they got) to gain from it. Google has gained much credence in this space and customers world wide trust Google for being free and also accurate. Its ad words and ad sense are user friendly and not business friendly . Now , when it launches an operating system (that too an open source system , which is not that great an innovation) , people will buy that because of two reasons , 1) the net book will cost you lesser (this is crucial as most of the world's net book users will be from Asia in the next decade due to age demographics, population demographics and Asians generally look for value for money) and 2) more importantly it is from 'Google' whose user care index is very high.Google can then introduce many other business models based on the user base which it can accumulate with this operating system.

What happens to Microsoft? It makes sense for Google to launch an Operating System. Why would Microsoft launch a search engine? Of course everyone knows Microsoft wants to play a big role in online advertising. But this cannot be built overnight. You need user base to do that. Thats exactly the reason why Microsoft has gone into increasing its user care index by providing free, dependable search engine. Google started out with care competence as its fulcrum while Microsoft is moving from its core competence (Closed operating systems) to Care Competence. Who is ready to take the first bite in this first round? Only time can decide. But , my gut feel is that Google has an edge over Microsoft.The era of care competence is in. Only firms which care for its customers , can make it big. This can even involve giving services for free and letting go of immediate profits! Sticking with Core competence no longer makes sense. To be fair to management theories , we will have to redefine core competency to include such subtle competitive skills.

Disclaimer: This is my personal opinion and analysis. Please go through materials on the web to decide for yourself whats happening!

Recession in Google Trends!!!

Using Google trends for a different purpose. I wanted to check , whether the terms people search for during recession are different from what they were before. I went to google trends and gave some sample words .. and look what I got...

Google Trend for "Market Share"

Google Trend for "Market Size"

As against a normal term Pig ( which occured to me randomly , no specific reasons)

There is a clear reduction in search volume of Market Share and Market size from 2006 mid to 2009. Is this because of the recession? or Was this the cause for recesssion , people less bothered about fundamentals ? ;-)