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The world economy has not even recovered fully from the excesses of Wall Street in the sub-prime mortgage crisis, and these fellows are all set to seek out the next opportunity in financial speculation. A report today in mint describes one such exotic instrument already being explored on Wall Street. A paragraph from the article explains it simply, and clearly this time the stakes seem higher and the risks wilder.

The bankers plan to buy “life settlements”, life insurance policies that ill and elderly people sell for cash—$400,000 (around Rs1.95 crore) for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

The earlier the policyholder dies, the bigger the return—though if people live longer than expected, investors could get poor returns or even lose money. (http://www.livemint.com/2009/09/06215505/New-exotic-investments-emergin.html)

A sick way (no pun intended!) to make money. If anything, this has all the elements of a blockbuster bubble and the crash thereafter. Now it remains to be seen whether the governments around the world have learnt anything from the last crisis. What made the story more humorous was that this story was printed along side another hopeful story – one about the global economy starting to expand.

Oh well, boys will be boys, Wall Street will be Wall Street and MBAs will be rascals.

Month 1
Proj Mngr: We have completed unit testing of most of the reports. The data loading for some of the months is left because of delays in providing the same by the user.
Client: How do you define ‘most’? ‘Some’ has no meaning for me. Please be more specific in your status reports.
Proj Mngr: Ok, I’ll take care of that next time.

Month 2
Proj Mngr: We have completed UAT of 90% of reports. Loading of data for months of Jul and Aug 09 (2 months out of 24) is pending.
Client: Let’s not get fooled by numbers.
Proj Mngr: …..

Now what’s a rookie project manager gotta do in this situation? How do should the project manager explain the status to the client without “getting fooled by numbers” and at the same time “being more specific”? Any smart ideas?

Disclaimer: This post is hypothetical, and has no relation to any event, object or person alive, dead or in a zombie state.

“The only way to maintain a long term competitive advantage is to change faster than your competitor.”

“Operations are activities which are repeatable and do not have a specific start date and end date. Projects are, on the other hand, one time initiatives which are unique, and have a specific start date and end date.”

The link between these two statements?

Projects drive change. Projects bring something new to the organization.

An organization which is strong in selecting the right projects and executing them tightly will have a sustainable competitive advantage over those which do not have this capability.

This makes project managers in the organization very important as a stakeholder in the overall strategy of the organization.

Ergo, all project managers should be worshipped as Gods, or at least given raises.

Caller: Hi Sir, can I take five minutes of your valuable time?
Me: Yes

Caller: Sir, I’m calling to inform you of a very attractive credit card scheme which xxxx Bank is offering just for you.
Me: I’m not interested.

Caller: Sir, at least please listen to the details. It is a very attractive scheme.
Me: For the bank?

Caller: No sir, of course for you.
Me: Then why is your bank willing to give me this scheme?

Caller: Sir, because you are a valued customer.
Me: Ok, tell me the details.

Caller: Sir, we have this new scheme where we offer you a Gold Credit Card with no annual fees.
Me: Hmm hmm

Caller: The interest rate is very low also sir
Me: But I already have a credit card which fulfills all my requirements.

Caller: Sir, which bank’s card are you currently using?
Me: The Reserve Bank of India

Caller: [Pause]…. Umm, ok sir but this Gold card has many attractive features
Me: Like what?

Caller: Sir, no annual fees, low interest rates, large payment period…
Me: Reserve Bank provides me all of this

Caller: We will also give you a free gift sir.
Me: What is that?

Caller: A chance to participate in a lucky draw for a Honda City car
Me: Hmmm…

Caller: Sir, are you interested? We have hundreds of satisfied customers who have taken this credit card
Me: Reserve Bank has a billion satisfied customers.

Caller: Yes sir, but this Gold card has many advantages
Me: STFU

<Beeeeeeeep>

A tale of two cars

Two ads for two different cars have caught my attention in recent times. One is for the classic Maruti Suzuki and the other is for a new entrant Honda Jazz. These two completely different ads shows how important it is to keep the message to the audience simple.

Here’s the Maruti ad first. The brilliance of this ad lies in its simplicity. Notice that this ad doesn’t show any car at all. Instead the images and emotions used in these ad are more reminiscent of previous ads for chocolates or diapers. It shows a mom putting mehndi on her hands while she asks her relatives to take care of her baby. No matter what the relatives do, the baby keeps on crying. Until the mother takes the child in her own hands. The tagline shown after this is simply amazing. You cannot help but smile at the simplicity yet the power in that message. The message is simple, if you love your car, you’ll take good care of it.

On the other hand, take this ad of Jazz. It shows a man putting a cactus in the backseat of the car and driving around town to pick up his girlfriend. All other cars seem to burst in bubbles around this new car. When the man does pick up her girlfriend, she sees the cactus and gets shocked. Then it shows a hand plucking a flower from somewhere on the cactus. Both of them get into the car and drive off happy. On top of that, the tagline used by the ad, “Why so serious?” a totally unoriginal line. Moreover it doesn’t even fit with the whole ad. Didn’t expect this from the same (car) company that produced this masterpiece of an ad.

P.S. Read this article later on AFaqs. The creative head tries to clarify the ad, but makes it all the more muddled.

Three conflicting messages versus one simple one. That’s the power of a simple ad.

The PE ratio, as any MBA worth his salt would know, is considered a measure of the growth prospects of a particular stock. The ratio compares the market price of the company’s share to the earnings per share of that company. The higher the PE ratio the higher the prospects of growth. But a high PE ratio could also be possible if the market has over valued the stock. So a high PE ratio may also be considered risky for someone who has invested in that company’s stock. When there is a shakeout in the market, like the one which happened due to the mortgage market, the stocks could all come tumbling down.

In India, the MBA factories are also very competitive and on a fast growth track. Every year, business magazines publish ranking of B-schools. Various parameters are used to find out the top 10 B-schools of that year. Most of the students generally consider these rankings their bible and often prefer a high-ranking B-school (let’s say by placements) even without considering other parameters which turn out to be more important in the long term.

I’ve always taken these rankings with a pinch of salt, but now that I’ve “been there, done that,” I’ve come up with a parameter myself of one possible way to rank B-schools. Let me introduce the StuFac ratio. This multiple can be used at both the institute level and at an individual student level. At the institute level, it is simply a ratio of the average salary of the students to the average salary of the faculty of that institute. For an individual level, the ratio is the salary of the student to the average salary of the faculty. Just like the PE ratio, the StuFac ratio can be a proxy for an institute/student’s growth potential (as well as the risk associated with overpricing of the student).

Now as innovative as this measure may be, I want to make it clear that it is by no means comprehensive. More than an accurate measure, it is just a (egoistic) way to compare different B-schools and students therein. However, as any MBA grad who has spent a few years in the industry would know, after the first job, it is the student’s initiative and hard work which dictates his growth path and not which B-school he graduated from.

P.S. If any B-magazines are contemplating to use this measure for their rankings next year, do not forget to consider a royalty for me.

Since I joined work, there’s hardly been any time to devote time to the blog. Things have been quite hectic on the personal front as well. Even though Mumbai provides a lot of inspiration, I hardly have the energy to convert that inspiration into writing. For now, I’m posting a very interesting section from a book I’m currently reading. It matches my outlook of the telephone which is nothing but an instrument meant to disturb you and take over your life. I’ve realized this is true all the more after I restarted my work life, this time as a manager.

…Now just relax and imagine a less complicated world in which the phone has not yet been invented. In such a world, you write a note to propose lunch or a meeting and you get a note in response. Everyone plans ahead a little bit more. It’s common to take half an hour in the morning to read and answer your mail. There are no loud bells in your life.

Wednesday mornings in this alternate reality are dedicated to meetings of your company’s pension trust investment committee. Imagine for the moment you are one of the employee representatives charged with watching where the money is placed. On this particular Wednesday, an inventor is scheduled to make a presentation to the committee. The inventor has plans to change the world, if only you’ll invest in his new contraption. His name is A.G. Bell.

“Ladies and Gentlemen, this is the BellOPhone!” (The man unwraps a large black box with a crank on the side and an enormous bell attached to the top.) ‘This is the future. We’re going to put one of these on every desk in America. Homes, too! It will get to the point where people can hardly imagine a world without them.” As he warms up to his subject, he begins gesticulating enthusiastically and hopping around the room to make his points. “BellOPhones everywhere you look, all of them hooked up together with wires under the street or overhead. And now this is the really
exciting part: You can get your BellOPhone specifically connected to somebody else’s BellOPhone, even though it may be all the way across the city or maybe in some other city. And when you’ve connected it just by entering the code, you can make the bell ring on the other fellow’s machine. Not just some rinky-dink bell, either, but a real heart-stopper.”

He sets up a second device and connects it to the first, on the other side of the room. By manipulating a dial on the face of the first, he causes the other machine to come alive. It gives off a loud BRRRRINNNNNNNGGGGGGG! After half a second, it rings again and then again and again, deafeningly.

“Now, what’s a fellow got to do to stop this ringing? He’s got to race over to his BellOPhone and pick up the receiver.” He picks up the receiver on the ringing device and hands it to one of the committee members. Then he bounds back to the other side of the room and starts shouting into the mouthpiece of the originating device. “Hello! Hello! Can you hear me? See that, I’ve got his complete attention. Now I can sell him something, or get him to lend me money or try to change his religion or whatever I want!” The committee is stunned. You raise your hand and venture a question, “Since nobody could possibly have missed the first ring, why bother to repeat it?” “Ah, that’s the beauty of the BellOPhone,” says A.G. “It never gives you the chance to wonder whether you want to answer it or not. No matter what you’re involved in at the time it rings, no matter how engrossed you are, you drop everything to answer it. Otherwise, you know it will just keep on ringing. We’re going to sell billions of these things and never ever allow any to be sold that
ring only once.”

The committee goes into a huddle, but it doesn’t take very long to come up with a judgment. You all decide without a dissenting voice to throw this turkey out the door. The device is so disruptive that if you were ever dumb enough to allow it to be installed, nobody would ever get any work done around the office. A few years’ effect of the BellOPhone and we’d all be reduced to buying goods from Taiwan and Korea. And our country might even have a negative balance of trade.

Of course, there’s no turning the calendar back.

This short story summarizes what the phone will ever be. Consider this situation – you are talking with someone, and suddenly the phone rings. How many of you would interrupt the conversation and pick up the phone? To answer someone who might be at the other end of the city, and to ignore (even for a few minutes) the person standing before you? 99 out of 100 people do that. Why do we give more importance to people on the phone than to people standing before us? How would you feel you’re standing in a line waiting to order pizza, and the person at the counter answers the phone to take a home delivery order? Things to think about.

Next post coming up in a few days, another of my pet peeves – meetings. What they were meant for, and what they are used for.

This infograph shows the revenue earned by the weighing machines installed on Mumbai suburban railway stations. Figures are in Rs lakhs (100,000). Further more each machine takes one rupee coin to issue your weight. So this is where all the one rupee coins have disappeared. What’s more, Mumbai’s weighing machines earn more than me.