Tuesday, May 27, 2014

Funding education

Present scenario – Student takes a study loan at say 7% from a bank to study in a top MBA college. College claims that average package after a degree is say 16 lpa. And course fee is 21 lakhs per year.
Student takes the plunge hoping of a bright future, i.e earning at least 16 lps so can repay loan in say 5 years.  Now some mathematics:
Student pays bank in 5 years - 30 lakhs (approx) [assuming that he pays in total at the end, in reality the repaid amount will be lower than this]. Problem occurs when market conditions are adverse and the student is not able to get a job that pays so much – he/she is stuck really badly. College has got its fees but student has not got a job. Indirectly that affects the college in a way that less people think of enrolling next year plus a media and public resentment against justification of such high course fees. College also feels bad (at least some people in the system) that they took so much fees but could not help the student get the foothold in society that he/she aspired, based on the claims made. Some moral guilt gets in.
One way to do away with this guilt as well as create goodwill in market about the college PLUS bring about cohesion among college administration and students in terms of job hunting PLUS enable the college to earn more and engage better with alumni is to have a deferred fees mechanism.
In this scheme – a student pays 0 fees to study but signs an agreement that he/she has to pay 50% is/her post tax salary to college for next 4 years.
How it helps college?
If we assume the average claimed package of the college, say 16 lps, then post tax say the person earns 12 lakhs he pays 6 lakhs in 1st year. If we assume this person has meager 10% hike every year then:
Contribution (approx)
16 lakhs
6 lakhs
17.6 lakhs
7 lakhs
19.36 lakhs
8 lakhs
21.2 lakhs
8.5 lakhs

Total contribution would be 29.5 lakhs. Now assuming the college had collected 21 lakhs upfront and put 20 lakhs out of that in a 9% return yielding fund, return after 5 years (1 year study + these 4 years) would have been 31 lakhs (approx). So return is not much less in terms of money but the comfort it gives to students and the image this projects of the college would justify this approach. You can imagine how much more students would aspire to study in this college and how much more respect the college would earn across the academic fraternity. It would differentiate this college from rest of all other colleges who just claims good job/salary figures to raise fees and make more money, who seems more like a business than an education institution.
Plus the alumni engagement it would create would be wow. There can be an option for a lifetime contribution of say 1000/ year from the student. No one would mind paying this to a college which has so much confidence in its curriculum, its selection process and its knowledge base that it is allowing selected bright students to study for free.
This will also remove the bias that some faculty have that students earn so much while they get less – since now they know that more the student earns more will be the return to the college.
Very broadly speaking it is like trading – where instead of investing in stocks, you are investing in talent and have the confidence on your capability that return will be more.
Why would the student opt for this?
You might think the student would pay less to bank if he/she takes a loan and so why opt for this and pay more to college. But my theory is they would do it, because this approach takes care of another risk which the bank does not AND that is the risk that the college absorbs. The risk is of adverse market conditions such that there might not be any jobs or very low paying jobs after passing out. Worst case scenario is a student earns say 5 lakhs for the next 4 years and so pays 2x4 = 8 laksh to college, so college loses 13 lakhs. But I think it is worth the risk.
 A loan is a compulsion but a repayment to alma mater is a super good feeling.
Ofcourse – there might be people who might think of misusing this option, so this offer should not be rolled out indiscriminately but rather very selectively, after some interview.
To ease the impact of contribution from student if college can open a trust or something which enables tax exemption on the paid amount then still better.

Most data presented above are approximations, intent was to pass the point rather than show exact numbers. If you think this is something that would be good to roll out then you can get the exact calculations done OR I would love to do that if asked. 

Monday, January 6, 2014

Government and financial institutions need to change

Suppose you are given 1kg gold and 100 people of different professions and left in an island which does not have anyone living there. The intent behind such a situation is to create a scenario where we can replicate what it is like to create and run a financial system of a country.

There are doctors, engineers, barbers, cooks etc etc, all professionals who would be required to live and sustain. In order to facilitate trade you print notes equivalent to the amount of gold with you. Reason for that is in case you need anything from outside world you need to pay it using gold. Now comes the tricky part. To start commerce you distribute money with all equally (to be fair and just you give equal to all) and ask them to use it for trade. Overtime service charges by people will change, some will charge more and some less. For the services that are costly that person would finally over time accumulate more money than others. So since the overall money in circulation is fixed the final outcome of such a set up is that someone will become rich and someone poor. And you charge a percentage of every transaction, i.e tax. So another eventuality is that money left for circulation will reduce over time and all will come back to you.

If we generalize it at a country level (which would be simplifying it too much but still I am putting it this way since writing so much is boring) then the way the system is designed there will be economic disparity in the country and government will get back all the money. What does the government do with that money – it just consumes it by paying a bunch of people it employs and spends some on development, which in turn would get it more. In real life we see countries getting poorer because what they need for growth, incase that is not available within its own country, it needs to buy so gold goes out. Now when gold goes out do countries pull back equivalent amount of notes from circulation? Answer is NO – hence it loses its intrinsic value – leading to inflation. That is a different story – what I want to focus on is the first part where it is clear that the way society and economy is designed it is made to create economic disparity. So why make do so many governments make so much fuss about removing poverty? And so many economists come up with research papers saying how poverty can be tackled when it is structured to be that way.

What is needed is a different model to achieve balance of wealth – may be totally different way of running economies. Is my analysis right? 

Thursday, February 21, 2013

Beating quota system in India

At present there seems to be a mad rush among people to get their caste registered under a reserved category to get the benefits doled out by government. Since politically this quota system ensures vote banks, no government in power is looking at the long term impact this stupid way of reservation will have on the overall growth of the nation.
When in the 50s, caste based reservation was introduced, the plan was to revisit the list of castes every 5 years or so and make changes,i.e add new ones and remove older ones which have benefited. The 2nd part, removing castes from lists, never happened and the list just kept getting bigger and bigger. Of course not every citizen supports or believes this caste based reservations but there seems to be no way to stop this menace.

I have thought of a way to beat this stupidity. It's an appeal to all the intelligent people (students, parents, guardians) who happen to belong to a reserved category and are not availing the reservations thinking that it is morally wrong to seek reservation and think that they are doing society good by fighting out in the general category - START USING QUOTA. Sounds silly - read on.

What you are doing is - you are allowing one seat from the reserved category to be given to a non-merit guy and fighting for the general unreserved category. Since you are intelligent you will anyways get the seat but you are increasing competition in the general category. Instead if you use quota you will take the seat reserved for your caste and allow one more general category brilliant student like you take up the general seat. This way in a bigger scheme of things you are ensuring that the overall pool (reserved as well as unreserved) of seats gets better, since all intelligent people are joining.

Think about it and let me know your thoughts. This to me seems to be a nice way to beat the system. 

Tuesday, February 5, 2013

Enough of SEO menace

I was just wondering about the whole stupidity of Google/Bing search results, SEO and stuff like that. Google displays hundreds of pages based on the search keyword given but honestly who views them? Personally I never go beyond 3rd or 4rth page and so do people I know of. I am sure most other users would also be doing the same – why then Google displays so many result pages?

I know technically they are doing the right thing – if you have a page and it’s indexed then based on PR it will be shown but what is the relevance of that. Since users focus only on first 5-6 pages max – a host of dummy approaches called SEO has come up. Everyone know that to come up in the first few pages they have to write content according to the way Google identifies them. So if you take a birds eye view of this whole thing what you see is a company which uses some logic to display hundreds of pages based on some rank and then all the page owners manipulate their pages according to that logic to appear there.

So what does a genuinely good page owner who does not know SEO do? Isn’t this whole search engine thing meant to show relevant pages only sans SEO? I know it’s tough to decide what a good page is and what is not but then if they cannot find a good reason why do they claim themselves to be the best. It’s been so many years since Google came into existence – at the early time what it did made sense, since there was no other way to search those pages. But now they should innovate – if they cannot then better make it public. Why guide the whole bunch of net users towards a stupid concept called SEO.

I know it would sound silly but I have a practical solution to this. To start with, search engines should stop keeping a log of all search keywords being typed by users. Or make the search display part very crude and simple like yellow pages – where the user knows results are stored in an alphabetical order. Imagine yellow pages having places listed based on some algorithm called “relevance to users” . Suppose I am looking for a Mr Smith – then first it will list all Smiths who are very popular in their localities. To start with it sounds good but imagine after some time when people know this they start some campaign or the other to become popular for nothing – then the listing goes for a toss. Since in the mean time people have got used to checking for only the top 10 Smiths – they end up finding a fraud guy. Then yellow pages devises another algorithm to fix that – which the fraud guys again manipulate and this goes on. In the process the actual good Smiths are just plain clueless what is going on and they remain quiet and slip further down.

So in this whole process of value addition what finally happened was value subtraction. Instead if the yellow page guys had thought of adding some value in the data that is shown alongside the name that would have been really useful. Users know that data is presented in a predefined order,i.e alphabetically and alongside the name some info is given which is optimized to make it more relevant for the person searching it.
Similarly – Google should just have a straight logic of result display else just remain out of this thought of relevant searching. 

Friday, December 9, 2011

Business in the time of Recession

Business in the time of Recession (as in the novel name "Love in the time of Cholera" :) - so much for inspiration)

IT is an enabler not a business in itself – it enables other businesses to thrive – there is a good and a bad part to it. Bad part is once the actual businesses shut down this one also dies – sad :( . Good part is since it is a tool it will always be in use as long as someone capable enough knows how to use it. Meaning recession or no recession – businesses will always be there so as long as IT blends itself to newer roles it will survive. (Tools never become useless). For a company working in IT – all we have to do is stay watchful and be open to options – work will always be there.

So lets think of industries which will do good also during recession plus companies which will rise during recession. Once we start working for these type of industries we will stay in business infact if we hit on the growing ones we will do good too. Lets list the obvious ones -

  1. Education sector – Recession or no recession colleges and schools will continue to run and in turn IT comapnies catering to their needs will be in business. Out of this the ones "selling" specialized courses might get hit like MBA colleges but basic ones – Engg ones will always be there. No parent would discontinue a child's education. We have to stretch this sector and look for all types of education 'places' – and attack aggressively.

  2. Food and Beverages industry – Lets not include entire hospitiality sector – hotels will be badly hit and so will be the high end restaurants. Normal ones will survive.

  3. Co-operative societies – like the ones who procure from weavers, jwellerers , farmers, etc and sell – they will cut down profit but since they cater to basic needs at affordable costs they will catch up – so will survive.

  4. Umemployment will hit health of people – there will be more hospitalization – insurance companies will be badly hit but hospitals will survive. Might cut cost but will stay in business for good.

  5. Government sponsored programs will do good (money is there) but this is quiet a big area – big players will be killing each other to get a pie – drop .

I can list down more but no point – optimization is the key ...that includes optimization of my grey cell usage too :) . So lets analyze more on point 1,2,3 and 4 – infact 4 is a little far fetched so 1,2 and 3 with 50 %, 30 % and 20 % focus respectively.

Education sector

  1. Play schools – with job losses parents will have enough time to take care of kids so this is not a good area.

  2. Elementary schools – these will be in business for sure. So we need to identify schools and try not only servicing their needs but also if we can come up with innovative products which might help schools to save cost and add value by using IT it will be great. Again we need not do the thinking, there are enough people in the system doing it – we just need to reach out to schools - they will be interested. Everyone likes a smart thing which costs less (it gives them double kick – one is they save money second is it makes them feel smarter ).

  1. E-Learning companies – they are quite successful and will continue to be so targeting them is a must.

  2. Universities – Too can be tried.


Another industry I missed – Social media apps and games. Considering the fact that most people would be laid off – what best thing left for people to do than engage in social media and play games . Hard core games are not for all but social media app type games are the best. Infact games or apps like "What job is best suited for you" types will be very successful.

The ageless industry ofcourse which we wont work for (on ethical grounds) will be always hot and successful – sex industry. Post last recession a survey found that sex among couples increased a lot during recession – what else costs nothing and is entertaining :).


Continuing with the earlier analysis :

Next ones are F&B and Co-operative society type companies. Again here too a little research and targeted campaigning will help. We would have to list down small and mid sized ones and then approach them.

Tuesday, November 29, 2011

Investing in an instance of a social phenomenon

Social fad or social phase or phenomenon is a thing which is never constant – it's a thing which changes over time. Take any manifestation of this – say fashion trends – they change. What remains constant though are the fundamental needs – the actual needs to which the social fad caters to. In case of fashion the actual need is wearing clothes, that never changes – being nude will never be in fashion :).

Like fashion another social phenomenon is Facebook – a tool which enables people to connect to each other, share personal moments, make friends and do a host of other social activities. These activities are what this fad caters to – these are activities which humans have been doing since long. (Be it festivals, social events, religious gatherings, parties ). Some years back it was Orkut now it is Facebook – in future something else might come up.

Why I am saying all this ?

The point I am making is that these fads are never constant so if you are thinking of investing your money in companies which just happens to be doing good 'at the moment' – be alert. Never invest with a long term perspective because fundamentally they will go out of trend and you might lose money if you do not exit on time.

Once people try the fad for some time they would get bored and would move on to the next thing that comes closest to giving the real feeling. In case of social media - people would look for some other way which can simulate social interactions in a more realistic way. For example say I develop a virtual kissing app – where anyone can kiss anyone else of his/her choice and get a close to real feeling. Initially it will be quite a hit – people would go crazy but after using for sometime they would realize that this pseudo kissing is not the actual thing – they will start loosing interest and if I have not done enough innovation on my product, might gradually be out of business. All those who would have invested in my company would lose too.

So never make long term investment on products which cater to an INSTANCE of a phenomenon.

Wednesday, April 13, 2011

Attrition - What can be done to reduce it ?

What does it take to motivate and inspire people to give in their best effort at office and also make them satisfied enough to continue working ?

The usual methods like training, reward programs, nice salary (there is no limit to salary that will make people happy), career growth opportunities etc etc are being tried across all companies. Still if you look at the attrition rate it is roughly 11% for all the big companies. So in addition to these above benefits and steps something else needs to be done as well, something more fundamental in handling human mind and it's thought process.

Lets go to our local markets, local in the sense the actual old locality where most of us would have spent our childhood days. Have a look around there are sweet shops, garment shops, toy shops and others – the thing that you will find striking about these places is the faces that are on the other side of the shop, inside the shop. They would be the same guys you would have seen when you were a kid – so many other new shops catering to the same needs have come up but these people have not moved out – Why ? Job opportunity is there still why haven't they moved out ?

Is it that these people are less ambitious ? Or they lacked the smartness to figure out that if they switch job they can earn more ? Or did the owner do something different which made these people stick around ? Or did they sign any bonds ?

I would suggest take a break now, think over it and better still have a walk around the market and talk to these guys and hear what they have to say ? (I haven't talked to them either - I just love to observe and draw inference :-) – your discussions and feedback can validate what I am proposing here. One advice - do talk to the old owners as well in addition to the employees in order to get a well rounded idea.

The definition of loyalty has evolved over time – the meaning and significance of the term for a 50 year old and a 20 year old is not the same anymore. Part of the reason for this change is due to awareness and spread of knowledge and information, information which earlier was restricted to only a few. As society grows certain characteristics are idolized at certain times and with time they fade out and newer ones take their place. I am not saying loyalty in the conventional sense is passe and no one appreciates it but what I am saying is it does not hold so much a significance as it used to.

Self confidence as a trait has evolved as well. Earlier self confidence was there too but people had a imaginary ceiling and boundary to it. If you ask any of the older employees in the shops about the business side of things like how much profit does the entity make, where from are the raw materials procured, primarily who all are the customers, potential areas where we can find new customers etc – some would not even have answer to any one of the questions (even after working for 20 years) and some who do know might never try to venture out on their own. The obvious answer they would give for not trying out on their own would be that they are loyal – could be true in most cases but not all. Some would be there who deep down would have a desire to try this out but did not because they were lacking in self confidence – were not sure if they could have done something on their own leaving a nice stable job.

So spread of knowledge has increased self confidence and changed the meaning of loyalty. Now you would find people to be equally loyal but just that the moment you try to use the older methods of motivation (with the inherent assumption to fool him/her) that person would leave or start planning to leave. These days people are too sceptical of management and have an inherent sense of distrust and tend to always think that they are being exploited, so in such a panic stricken state they tend to maximize their own earnings – so who so ever pays more they tend to leave. Of course not all leave due to this – there could be other reasons as well but I will be writing about this category only.

Finally coming to the question with which we started why people leave ? The reason I see is lack of trust of the employee on the employer. If this is taken care of then people will tend to stay more.

The face of the company for an employee is the manager she reports to, the things which she reads about the top management and the brand value that the company has created for itself. If these three groups genuinely focus on building trust and follow up their claims by action as well then it ties the employee to the company in a stronger way. If I segregate these three in terms of priority they would be manager, company brand and stuff about top management in descending order. So the most important factor is the manager of the employee. If she distrusts this guy then she will not stay longer no matter what is given and the reverse is true as well.

Of course every manager has a manager of his own and as we keep going up it finally ends with the CEO, so it is easy to say that if this person is trustworthy then everyone else will follow suit. That is correct to a large extent but then sometimes this chain is broken when a wrong person enters – he will disrupt the process. Very vital is when you hire ensure that this one quality called integrity is present in the individual.

What is integrity and how does one build trust ? Will cover in my next blog.