Category Archives: corporation

The real ‘engines’ of growth

One notices a funny dichotomy when one flits through publications catered toward different sections of society, like India Together and The Times of India (if one can actually call it a ‘news’ paper anymore). One set seems to tell us that everything is going to hell and the other seems to paint an extremely optimistic picture of the whole thing we call liberalisation. Since people usually buy that which they relate to, it follows that both pictures are true: the excruciating poverty and the sleek new capitalism.

Society can never be comprised of watertight compartments. It is more likely to contain personalities who occupy the continuum between the two extremes. Take Bangalore, my favorite example. The slums are a picture of scarcity whereas the IT SEZs are a picture of excess. It is highly unlikely that the lower strata of society will gladly give their scarce resources to a population that already has too much. Someone must be doing it, for a price, of course.

Usually, the technological artifacts of an age represent its zeitgeist. The F-1 car is to me one such symbol of this era. It has all the striking features of our society:

  • High performance
  • Very high levels of organization (in terms of car design)
  • High dependence of the whole on every single part (heard somewhere that the car won’t even start if all components are not working properly)
  • Requirement of relatively ideal conditions (very wide, flat tracks, almost fricitionless profile, specialised tyres, etc ., )

The current financial crisis can be compared to a car crash due to failure to adhere to ideal conditions. Something fails, which brings down everything else. If you read any material on supply-chain management, you’ll understand what I mean. This is why Chinese melamine finds its way to the breakfast tables of half the globe. In comparison, the society of a century ago was like a Kinetic Luna – not very complicated, low performance (in terms of economic output), easily maintained by the owner herself (assuming minimal savviness), and useful in potholed roads.

With such stringent requirements, most modern corporates are willing to pay a high price to ensure that they get the resources they need. It is only when ideal conditions are created will it perform at desired levels. The march of the corporation in India has unfortunately turned into a zero sum game which is also unsustainable, quite like running a Ferrari in Chickpet. You have to break things down to give it room, and make sure nothing comes up later. For the Ferrari owner, life is good, but not for the person whose house was pulled down.

Thus, it is not quite the IT czars who are spearheading ‘growth’ in India or anywhere else, but the people who break things to make way for them. In an era of ever rising populations and decreasing resources, the industrial society requires resource allocation which is quite disproportionate to the number of people it represents.

A few examples are in order. Take the case of land in and around Bangalore. Scare resource, no doubt. But if one saw the number of IT parks coming up before this financial screw-up, one could easily think otherwise. This article (watch the embedded video!) describes the land mafia in Bangalore and the important players, including Muthappa Rai, who was interviewed for the article. It is an open secret that if you need 10 acres for building swanky townships or glass-enclosed IT greenhouses, you go to the mafia, not the government. Pratically everyone in Bangalore, especially in extension areas, lives on illegally occupied land, which later the BBMP is forced to regularise. Those who lose out on land are farmers and who lose out jobs are unskilled locals (due to huge migration), and hence arise organisations like the Kannada Rakshana Vedike which are kept in check by the police. The mafia to disenfranchise, and the police to keep it that way. Neat idea.

Water is probably hitting Bangalore more than any other resource, and the trenches are occupied by the private water tanker operators. Like the article shows, a single operator may deliver 50 – 60 loads of water a day, each of roughly 20,000 liter capacity. This adds up to mind-boggling numbers, and this was more than a year ago. I have myself seen Leela Palace getting atleast 10 – 15 tankers of water at 5 AM in the morning. And the website says:

Ensconced in 9 acres of tranquility that includes an azure lagoon, The Leela Palace mirrors the lushness of the Garden City. Harking back to the royal heritage of the Vijaynagar Dynasty, our hotel earns it name by showcasing gold leaf domes, ornate ceiling and grand arches.

They have a freaking lagoon!! This issue is becoming global. This set of pictures shows what can be, and is not very reassuring. Also, years of industrial farming is taking a toll on land and water, with desertification of erstwhile farmlands becoming a major issue. Farmland drops, food is scarce, starvation and conflict are inevitable.

The recent flare-up in Maharastra has also to do with appropriation of jobs (which are getting scarce nowadays!) by Biharis in the Railways. The fact that railway ministers for the past 12 years have been from Bihar may have something to do with this. The actions of the MNS may not be justified, but the resentment unfortunately is.

Another gory example is that of coltan, used extensively for manufacture of computer chips. The unfortunate fact is that a lot of it is available in Congo, which has a war going on to secure these resources, destroying everything in its path. Like this article says:

More profitable than gold or diamonds, and more easy to extract, is the rare substance, colombo tantalite, known as coltan, an essential ingredient for microchips and cell phones. Found almost exclusively in eastern Congo, it can bring in a whopping $400 per kilo in the international market, giving rebel factions and neighboring governments a financial reason to keep the war going indefinitely. Only when the Congolese conflict caused a temporary suspension of coltan mining did the western world feel the reverberations of a war it had all but forgotten: Sony was forced to delay the launch of its popular Play Station 2.

My My. The poor rich kids must have found it intolerable without their PS-2s.

The unfortunate reality is that we have designed a system where comfort and excellence is almost always at the expense of the powerless and weak. There are very few daily activities that we can perform without directly or indirectly grabbing something from someone else. It of course comes packaged in hygenic tetra-paks, but the people driving our ‘development’ be it the State, the crime lords or those who exploit nature are getting their hands dirty enough for all of us. The world is going nuts, as it has been from a long time, but never before has the resource crunch affected us like now. Blame the population problem or WalMart, it is high time we learn to live within our (material, not financial) means.

Yup, word limit reached.

The Free Software Movement

Had been to Gnu/Linux Habba today, it elicited quite a good response from the student community, compared to what Im used to from my student days. Gnu/Linux is getting a fair bit of attention, since it is also being viewed as something that can get one a job. The Free Software Movement has grown phenomenally to say the least in the past few years, not least because of events like the Habba.

It is not a coincidence that the FSM exploded with the explosion of the internet. The great levelling power of the internet contributed immensely to the growth of the FSM, and this is well known. If one analyses the FSM, the key features one would find are:

  • Community: pariticipants think (or are urged to think) of themselves as part of a larger community. It is only the mutual give and take that makes Free Software what it is now.
  • Cooperation: Helping each other to solve problems, in whatever capacity possible is a by-product of the feeling of community. Big egos exist, but they are usually reined in ‘for the greater good’.
  • Equity: Notice that Communist also derives from the word community. The reason why the FSM did not end up becoming a dictatorship is the equity among its participants. Any person with a reasonable contribution is welcomed. Communism, for all its hype, never featured equity at the level of the FSM. There is a reason for that, however: most participants, atleast in the development process are of similar skill and background. They differ in terms of ideas and experiences, which makes for the vibrancy in the movement.
  • Communication: members are highly communicative, in one medium or the other. The value of this need not be stated, especially in reinforcing the above three.
  • Zealousness: Firm belief and identification with the goals of the FSM of people from varied backgrounds, skill and intellectual levels keeps the fire alive, at all costs.

The FSM defines a ‘commons’, a shared resource that anyone can use without interfering with anyone else’s rights, especially the right to private property. Noone or, equivalently, everyone owns it. IMO, it is the largest movement of our times which has altruism as a core tenet.

This was one of the reasons for the initial scepticism that it faced from the corporate world, who are taught that everything must be owned by someone (not everyone!). Fortunately for the FSM, the developed economies were rapidly transitioning into service economies at the same time as it was growing and viable business models came into being which put service ahead of the product. The corporates, adaptable beasts that they are, probably saw the value that FSM can bring in a service economy and joined forces. It is quite amazing that two social institutions, one based on altruism and another based on selfishness have managed such a fruitful interaction.

It is not as if only the corporation adapted to the FSM. The other way round happened as well. People who previously talked in terms of freedom also started talking in terms of business models and bottomlines. This is a constant feature of resilient social institutions: they learn other’s languages and develop a hybrid one at the end. With the corporation firmly behind FSM, there is no doubt that it will continue to grow and flourish. Thus, the FSM has learnt to value selfishness to some degree, and corporations have learnt a (very little) bit of altruism.

Similar interactions have happened between the Environmental movement and the corporation, leading to environmental economics for the greens and green manufacturing for Wall Street. One of the reasons that I feel the corporation will be the dominant institution for a very long time to come is this high adaptability that it possesses. Religion pretty much disintegrated in the West after the Enlightenment, but the corporation has withstood many assaults from the time of the Industrial Revolution.

Then why is adoption to Gnu/Linux still slow ? the FSM, quite like the environmentalists, had been interacting within themselves for too long. Not anymore. Gnu/Linux Habba was a focussed session on usability, especially in Kannada. Similar outreach activities will continue to push Gnu/Linux to the mainstream. However, its impact will not be as high as the environmental movement until they make a fundamental shift in approach: most interactive sessions focus on the outcome part of using Gnu/Linux. For a person, especially in places where software piracy(!) is not taken seriously, the outcome of using Gnu/Linux is not very different from using MS Windows or Word. Some things cannot be captured by the outcome of using a software product, like the experience of using it. Like the marketing tenet says, sell the experience, not the product. One has to ‘sell’ the status, moral superiority of using Free software. This is not as outlandish as it sounds. This is what the environmentalists are trying to do by asking for labelling of products, and what Apple does when it is selling the iPod, which is otherwise just a box which makes noise.

This is a slow process, but systematic brainwashing will defintely lead to favorable results. Maybe some perusing of marketing literature is in order ;)

PS: you cannot really sell an experience if the product does not work well. However, I think GNU/Linux is almost out of the blocks in this matter (at long last!)

The New Industrial State: Review

Halfway through John Kenneth Galbraith’s most famous (and controversial) book, and thought of writing up the main thesis of the whole thing. There are two kinds of social analysis: one based on a set of axiomatic rules, and another is based on empirical investigation. Galbraith is of the latter category, and always seeks to undermine the former, in extremely enjoyable prose (I would put it almost at the same level as Bertrand Russell’s prose!).

I had written some time ago about how liberalisation looks at the ground level, when the gloss of Times of India / NDTV / CNBC coverage is not present. Galbraith’s main thesis is on the same lines, with obviously more content and better form. One of the intentions is to provide a candid view of the Industrial system as it existed in the ’60s, another is to undermine the ‘theology’ of conservative economics and (even contemporary) economic pedagogy.

The reason conservative economists like Hayek get irritated with Galbraith is that he is, first of all, not given to using equations for everything, and often indulges in ‘lesser’ subjects like sociology and psychology to supplement his analysis, and not purely economic theory (with its implicit preconceptions). His broad generalizations can cause his arguments to seem unfounded, but a person with first hand experience with the corporate (like most reading this) will definitely strike a chord with his reasoning and arguments.

Profit maximization, pre-eminence of capital, informed choices by a consumer, free markets, firms being subordinate to the consumer by the working of the market mechanism are some of the fundamental notions that any standard economics textbook would try to instill in a reader. However, to say that this represents reality is a matter of faith and not fact, argues Galbraith. He takes the Corporation as a case study to drive home the point.

The structure, behavior, motivation, goals of the modern corporation, when studied without the rose-colored glasses of what Samuelson or anyone else teaches, shows how divorced economics is from reality. Economists have grudgingly admitted to some points, but they refuse to face reality in the face of decades of work going to waste. Galbraith also questions two social goals that we have only recently taken for granted (He analyzed the USA, whom we faithfully copy with increasingly decreasing phase lag) : The pursuit of growth for its own sake, and development of advanced technology. To think about it for a second, growth is a fundamental necessity for any modern corporation, both to keep its stockholders happy and for money to drive further growth. Fast changing technology also, in most cases, is a corporate goal, which contributes to the former goal in no small measure nowadays. Thus, instead of the corporation responding to accepted social goals, the corporations of considerable size actively work to shape social attitudes. This is in part a result of the members of the corporation to feel that they serve some social purpose. Another is of course to ‘create’ markets, which is what planning is all about.

In places like Bangalore, where the white collared elite are no longer in a desperate search for daily bread, alternate (some would like to call it ‘higher’) goals take their place. The corporation, with its immense reach and resources provides individuals the opportunity to influence a larger mass than it would be possible to do individually. Once an individual is persuaded that the corporation can be moulded in accordance with his/her inputs ( This is definitely true, since decision making is fundamentally a group activity and some individuals are, as always, more equal than others), aligning with corporate goals is easy. You would notice that loyalty to an organization increases with amount of time spent in it, which derives from the fact that you ‘matter’. Making sure that the corporation takes care of all the needs of the employee (financial, social, psychological) is an important part of the way a corporation behaves. Once all needs are taken care of within, there will be no need for an employee to look outside.

The past two paragraphs enumerate various facets of corporate behavior, which are driven by the need to reduce unreliability of markets. Any firm will require adequate supply, predictable labor behavior and reasonably reliable consumption of its products. Without these, planning for the future is almost impossible. There is no way a corporation can plan sales targets without all these factors of production and consumption being reliable. Most large corporations are in the habit of meeting or even exceeding previously set targets. This is not possible if the consumer is left to his/her own faculties to make a buying decision and if supply of labor or raw materials are not reliable, ie, left to the working of the market mechanism. Thus, large corporations must try to control behavior of markets if they are to invest large amounts of capital, which is a given in this time and age. A Reliance can hardly invest a few thousand crores in a refinery unless it is allowed certain concessions from market behavior. BIAL wants no other airport around for the same reason. More the competitors, lesser the power of a single competitor, and lesser their capability to plan.

To be fair, there are many markets (like those of clothing, FMCGs) where influencing consumer behavior is difficult due to a large amount of choices. But Galbraith’s focus is on the large corporation, which along with other large corporations constitute an oligopoly. In a corporation, the tenet of profit maximization fails for the simple fact that if every employee looked to maximize¬† profit, chaos would result. Thus, instead of personal profit maximization, stockholder profit maximization is the aim. This can hardly be called acceptable behavior in conventional terms. Thus, motivations of the corporation and its employees cannot be profit maximization. Similarly, consumer can no longer be called king, since there are various devices employed to bias his/her behavior. The tenets of economics, due to their lack of recognition of power as a fundamental factor in real-life economic behavior, fail quite a few reality checks.

Due to their reliance on high technology and an organised workforce to realise the same, the power now has moved from capital to organization of people and information. Thus, the class struggles of our times are no longer between those who have capital and those who do not, but those who have skills valued by the corporation and those who do not. This essentially boils down to an Engineering degree in Bangalore’s context. Anyone familiar with Bangalore will have seen how those with lesser education, organised in various groups, vent their frustration in the form of cultural and lingual pride.

A joining letter that my friend received from Oracle had the following sentence (paraphrased): “Oracle believes the the faster the employee is assimilated into the Oracle culture, the sooner the employee will be productive”. Oracle obviously does not have many bright bulbs in its HR department, but compliments to their candidness. The only other context where I have seen ‘assimilated’ being used is by the Borg in Star Trek. Obviously, the large corporation is not very different. I had once, on another blog, used ‘The Borg’ in this sense. Intuition, combined with some touch with reality, is always an eye-opener.