Google: where is the diversification?

Google still earns 97% of its revenue from internet ad business. Here is a nice blog on business insider which lists all what Google promised but has failed. http://www.businessinsider.com/all-the-things-people-thought-google-would-do-but-it-hasnt. The list include

• Take over billlboards, TV,Print
• Replace advertising agencies
• Replace microsoft office
• Develop an operating system
• Build a google phone
• Become a nationwide ISP

among others.. Also google has failed to monetize its social networking website orkut while facebook and myspace has taken the lead both in United States and rest of the world. Youtube is still making losses and efforts to get a positive return on its large investment in buying Youtube has largely been a failure.

The internet advertisement business though remains strong and Google has been able to maintain and increase its market share of this business. But despite the oft repeated culture of innovation, Google has not been able to deliver a new revenue stream.

If we compare this with Apple, they have been more succeessful in going fromMac to ipod to iphone. Diversification is one of the biggest cry in the current business environment as we have seen banks betting huge on mortgage backes securities and forgetting about diversification has paid a large price. so what is in store for Google ?

The power of information

A recent example of the power of information is the expensese scandal in the British House of Commons. The British MPs were provided a second house allowance so as to carry out their works in London. As a method to line their pockets, many MPs rigged the system where they stayed within the rules but probably violated the spirit of the rules by claiming reimbursements for items like dog food, swimming pool maintaineance etc. I am not clear about the back story but the MPs agreed upon public pressure to publish these expense items in July. The Telegraph got hold of all these expenses and over the last week have published them in their newspaper shaming the concerned Member of Parliaments. The result is that many MPs have agreed to return the super-fulous expenses that have been claimed and call for a new system for reimbursement where there are more checks and balances. The hue and cry generated in the public and the corressponding public pressure seems to suggest that in future there will not be a single MP who will try to claim for expenses against the spirit of the rules for the fear of being exposed and shamed across the countries.

This is truly an example where the information has played a critical role in getting public servants to behave in a manner that upholds the dignity of their offices. In India after passing of the Right to Information bills, we do have instances where the information has helped to get justice for commonn people but I hope that the events that unfolded in England would be repeated in India where certainly the belief is that Members of Honorable Parliament are certainly not honorable. Who is going to take the lead?

Fundamentalism

"Fundamentalist movements use the fear and prejudice of each other to sustain themselves" - Anonymous.....

The extreme right of the Hinudu fundamentalism needs the hardcore fundamentalists on the muslim side to create an environment of hatred and fear among the moderate Hindus and get their allegiance to their cause.. Cow slaughter is one of the examples...In the moderate sufi version of Islam which persisted during the Mughal times, with exceptions cow slaughter was banned so as not to hurt Hindu sentiments and this not being core to Islam practices.. But the hardline ulemas in cases had advocated cow slaughter as probably the issue on which they want to test the identity problem. The Hindu rightist party took up this issue to get the moderate Hindu in their fold by creating the environment where the whole of Islam has to be resisted to protect Hindu beliefs.... Similar examples can be found on the other side.

Another way the fundamentalists thrive is re-writing history. History is a funny business since by nature, it has lots of ambugities which with the help of some imaginations and lying can be interpreted to suit their agenda. Here history includes what is written in holy books and the books of foresight as they are called. The interpretation of scriptures written hundreds of years ago is a very subjective process. The fundamentalists usually take this route to create a place in the larger scheme of history and hence able to demand legitimacy among both the hardliners and the moderates who are their targets..

Is management more difficult in boom times?

The popular thinking is that true managers are discovered when the going gets tough. Coal metamorphs into diamonds when it is put under high pressure deep beneath the earth. The best leader is one who radiates enthusiasm among his followers during dire times and finds a way out of the darkness. The mettle of a person is tested when the whole world stands against you. Though there is no denying the fact that leadership during times of adversity is very challenging and needs the best out of person to wade out of big waves, I believe that there are many things present which are of assistance to leaders in such times. But in times of boom, leadership can be trickier.

As the saying goes that "The only way now is up because you are at bottom". If you are down and out and we have a charismatic leader, he/she can marshall his followers easily to follow him. The trick is to have the people believe in him/her which is easy since the people are all down in the dark and it is human nature to follow that white lone light. The challenge is to make sure that you are convincing "the light is bright " and its the only one which in this analogy requires that the voice of leadership is clear and adresses the problems infested in darkness. Certainly charisma and clear ideas are critical requirements in a leader in such times.

Now lets think about the times of boom. The things are all going fine and the feeling in the team could be that why the hell the leader is required. They can chart their own courses and be successful. In such times, the greed to be agressive fuelled by external surroundings and take more on the plate is big and then the common sense takes a backseat. As with the example of banks, "when the music is playing, you need to dance". When everyone is earning money, risk assessment policies were relegated to the background and everyone betted big out of the greed. Each of the crisis infested banks had leaders who were blinded by this greed and didnt take any steps to stop the dance. The reasons of agency problem does exist but there was also the pressure from the shareholders and employees. If you are not earning and taking risk similar to other banks, you as CEO can be removed by the board. There are evidences where the CFOs of these banks made the role of the risk assessment department smaller and smaller so as to concur with CEO and board's assessment for taking larger risks. What we learn here is that it is very difficult for people to stand, raise their hands and say that this policy is wrong since that is going against what the market and external surroundings are saying. The herd behavior was followed by all the banks with no leadership shown by any of the parties.

The reason is that Leadership in getting people to stop what they are doing and chart a new course is very difficult since getting support for this is near impossible. It is easy in the times of the recession since the people have no other way out. But to get people to follow a difficult path when they have a choice to follow a smoother one on the other side is the most difficult things to do and that is what is required in a true leader.

Essence of capitalism

"The essence of capitalism is creative destruction" -- Joseph Schumpeter .

By saving the banks, are we breaking the basic tenet of capitalism?

Hue and cry about nothing?

There has been widespread condemnation of the recent announcement of anti-tax haven policy by the United States government in the Indian media and people have expressed concerns that this will lead to job migration back to United States from India. Mr. Obama in his speech also emphasized this point that the new policy aims to reward companies that create jobs in Buffalo rather than Bangalore. But the tragedy behind this that both the public and media have not separated the populist speeches and the real effect on the current labor market.

In India also during elections and policy announcements, we see politicians making hyperbole claims as part of playing to the gallery and this policy announcement is also a similar example. The first question we need to look here is how much tax rates play a part in the final investment decisions. Though the differences in instutionalised tax rate can be large as 30% in India to 40% in United to zero in Cayman Islands, the actual tax rate paid by companies cab vary a lot from this rate since the government subsidies and the very complicated tax laws present in every country plays a role. Even if the difference in tax rates can create a positive difference in NPV for two investments, other factors like availability of resources both human and machines, strategic policy, local laws, competitive advantage etc are more important in making investment decisions.

Even if the argument is made that tax rates does make a difference, the question is how much of an influence will it have for jobs in India. According to Wall Street Journal Editorial " The current tax law in United States require US multi-national to pay taxes according to local tax rates and when the company brings the profit back to US for paying dividends or investment, the US company is liable to pay tax at US rate at this profit while claiming a credit for the tax paid in local country. So if say in Ireland where tax rate is 12.5%, the US company brings back the profit to US, then the company will pay a tax at the rate of (40%-12.5%) where tax rate in US is 40%. What the Us government's new initiative aims to do is that the period for which profit that can be kept in foreign locations is reduced so that the company can bring those profits quickly and invest in United States." But by this logic, this new policy doesnt have much influence for India since India has already high tax rates and the investment in India is not due to tax arbitrage but due to labor/knowledge arbitrage.

I read that Mr. Yashwant Singh made this also a poll issue which shows how much the politicians all over the world are well connected in criticising each other and in the end getting their own way with their respective electorates.

I dont have any knowledge about tax laws and may be these policies would have effect on Indian jobs in future but the underlying thing remains that taxes are not the only input towards investment decision and till we maintain a liberal investment climate with availability of quality human resource, we will continue to attract investments and creation of Indian jobs. Globalisation hopefully in its second avtar is an irreversible phenomena and any attempts for protectionism will backfire.

"Rush Limbaugh" post....

So i was hearing the name "Rush Limbaugh" many times in the last month out of my timepass of watching CNN nowadays. One out of five speakers/expert I guess used to refer this guy and so I decided that lets find out more about him. So here is what I find out about him. He hosts a radio show where he views his conservative views. He is prinicipally opposed to liberal politics and wants the republican to go back to its conservative roots. This conservative roots refer to espousal of policies like small government, minimum taxation, individual liberty (no gun control), anti abortion, belief in faith(religion) and possibly opposition to affirmative action as no identification of race as any criteria for affirmative or discriminative action(not sure of this). Can you believe it that there are clubs/committees in USA which supports zero taxation policy? It was difficult for me to believe that. But lets not digress from the topic.

So I visited his website(www.rushlimbaugh.com) and read some(emphasis on some...) of the transcripts of his radio shows. I did expect conservative views but this guy is just a petty showman in my view. In one of the shows, he supports/propounds the theory that Obama is supported by liberal conspiracy to destroy America and he is an agent of George Soros, Saudi Arabia and any other(u name it)... I cant follow his logic and reasoning and this is what I understand is my fear behind this insistence on logic. By logic one can I believe prove a monkey a man and vice versa. And hence by bizaare reasonings, this gentleman is running his radio shows and he is pretty popular and earning millions of dollars. I have heard similar bizaare logic when I hear of leaders from VHP, Bajrang Dal in India how the muslims is out to kill all the Hindus in India and or how CIA is bank rolling all Indian politicians .

A recent incident was after Mumbai terrorist attacks when a mullah on Pakistani television was supporting that this incident was the handiwork of RAW intelligence and RSS to do something I forgot....I was of the opinion that this type of ultra-stupid logic was the output of immature democracies like ours and Pakistan and as we mature, we will be able to put them to grave.. But Mr. Limbaugh broke this dream..

My conclusion is that the right wing conservatives or for that matter left wing dreamers will always have listeners and in times of trouble, their supporters are going to increase... we just have to make sure that we find the best ways to keep them in check and not to wreak havoc on the society by coming to power directly or indirectly...

"Politics and power are same everywhere..Politics breeds power...power breed meglomania ..and meglomania brings corruption which in turn completes the circle by encouraging politics..."