Private Treaties

Going through recent media reports I came across NEWS about how media houses were ganging up to offer advertising space to buy equity stakes in small companies. Commonly called SME, small business houses are being approached by media conglomerates to offer media space as a currency to buy latent wealth in a quid pro quo arrangement. Call it a new age commercial bartering or a meeting point of vested business interests, the trend is visible in the management space too, consulting firms bartering management services for equity stake commonly called sweat stakes in small companies. 

The commercial terms of these so called ‘Private Treaties’ makes for a compelling business deal, a win-win situation for all it seems. SME’s who were looking for publicity but could not afford to pay in cash can now find a messiah in the media houses. The latter will provide strategic media space that can reap commercial benefits for these companies in the form of brand equity building, subtle product and service message delivery to intended target segments and not but the least, enhancing the PR quotient of the promoters. 

Even the stock markets of late have taken a liking for News & views of small quoted companies, a ground for good speculative trading with media in tow. Similarly in the Management space, small companies can avail Management bandwidth & Networking skills that normally eludes them.

Whether its media houses or fancy Consulting firms, it’s all about recognizing the ‘hidden value’ of these companies and unlocking them by extending what appears a generous helping hand. Of course strings are attached; the promoters have to cough out 2-20% stake for these angels which eventually would mean a windfall gain for promoters when these companies grow to the next stage in an emerging economy.

What drives this kind of deal making? Jack & Suzy Welch have an interesting insight to this,”Blame the fierce competition of the global marketplace. Too often, deal heat is inexorable especially if there are other contenders in the ring”.

Whether such arrangements has a bearing on the impartiality of media and their primary business of fair reporting without bringing any conflict of Interest is a moot point . On the other hand can Management consultants be impartial and objective without being affected by ownership frailties in such scenarios?

SME has suddenly become a focal point of interest and attention to a whole new generation of evangelists masquerading as value partners, mentors, turnaround specialists, growth agents, catalysts, and what not. A truth to whether they measure up to their lip services can be found in the details of their so called working terms & conditions for engagement. These guys in my opinion are essentially Corporate miners who see SME’s as the next treasure trove for making quick money. 

A lot of parallel can be found in History books which is replete with tomb raiders masquerading as archaeologists, treasure hunters seeking distant sea shores in the garb of merchants & spice traders and so on. So it’s all about history repeating itself with new jargon's & mumbo jumbos suited for the current digital age.

5 rings of despair for Indian sports

On the eve of the greatest sporting spectacle on Earth, the Olympics, I am reminded of an incident that happened a while ago. It was the year 1986 and I clearly remember an incident that was reported and which transpired between the then Prime minister Rajiv Gandhi and Margaret Alva who was the sports minister . 

It was the Asian games and days had passed without India opening its gold medal tally in the event. A worried Rajiv called up to check on India’s progress in the event and  Margaret asked him to wait for events featuring PT Usha , the then reigning queen of track and the best medal prospect for the country. To this Rajiv reportedly snapped “If only Usha can get us gold medals, then why do we have to send so many?" India had sent over 400 and all it got was four gold medals. Usha had a hand in each of them. 

Much has been written and debated about the factors leading to India’s dismal performance in the International sporting arena, no point in repeating the cliched excuses like we are a cricket crazy nation, our sports infrastructure in not adequate, our sport bodies are politicized etc etc. 

Agreed, these are problems to be addressed but our cup of woes, by no stretch of imagination exceed that of Nigeria, Iran and Somalia which face much harsher political & economic conditions but perform better than India at this arena. Are their athlete’s hungrier for glory is one moot point?

A general rule of thumb has been that a country’s performance in such arena is proportional to its population & economic wealth while a more serious analysis will factor other important variables like past Olympic performance, whether the country was previously part of the former Soviet/communist bloc (including Cuba and China), and whether the country being a host nation or so.

A study done by PwC on these lines do not figure India among the top 30 countries that are expected to grab 82% of the medals in Beijing. In another interesting study SS Vasan has found parleys between sports performance at regional & international levels and going by India’s performance at Commonwealth games, they should perform far better in the Olympics than they actually are.

I was just curious to check out on how close we were to the elusive medals in the 57 best attempts (read athletes competing from India in Beijing) that we have cobbled up for this event . What has been their recent mean/modal performance values & how do they stack up against the best in Business? 

Sadly, SAI & the IOA websites were conspicuous by absence of such data and analysis. What you get to see is the usual stuff of their recognized federations and associations blah blah.. What I wanted to know was all about our best athletes/sportsmen? what they have achieved? How they have trained for this seminal event? What does their performance indicate to? I hope Mr.Kalmadi is listening to all this.

All said and done, what need to change at a fundamental level is a complete rethinking and a 360 degree change of mindset in the way we approach sports business. 

To conclude I am reminded of what Ed Smith had to say about sports in his book What Sports tells us about life,"Sports is a condensed version of life - only it matters less and comes up with better statistics".

Quant’ nomics

My world of small scale investing has gone topsy turvy, thanks to the turbulent markets and the daily Yo-Yo swings in the Sensex. 

Sometime back i relegated my basic instincts in picking and choosing stocks based on my style of analysis to a new breed of Mutual fund called the Quant fund. This fund promised ‘agility’ and promised an investment rationale based on computer simulated models purely based on numbers with a promise to better the Nifty performance. I said why not give it a try when it was backed by George Soros, a big name in the Investment world. 

Here was some kind of a financial robot I thought, that would crunch numbers in the most cold blooded way possible and invest without any bias or misplaced emotions. After all mathematics and its underlying number based logic is what drives our daily lives, be it the car we drive or the planes we fly or simply the computers we work on. 

That were the thoughts then, now as i sit back and look at the performance that this dear Quant friend has delivered sadly belies all my hopes and expectations. Sitting next to other ordinary mutual funds in my online investment portfolio, it has delivered me a 27.9% loss as against 10-15% loss of other run of the mill funds. No wonder, i pity myself like the countless suckers who fell into a similar mess called Derivatives, another quant product.

Relative performance of such quant products points to failure, but why? After all stock market is all about numbers and quantitative techniques like the one on which this mutual fund rested should have performed atleast better is my premise. As a wise guy after the event i have realized that financial markets are primarily driven by basic human emotion of Greed and fear that makes the Bulls run and bears dance on the bourses. 

Do Investment logic based on numbers hold fort when they are on the rampage? Most Investment pundits, like the ones you see on TV and read in Newpapers, argue that the macro fundamentals of our economy is strong and the market will find its feet soon. But this kinda argument is based on numbers like Corporate earnings, Infrastructure spending, credit flows & like but will it sway the investment logic of fear driven ordinary investor? 

As far as I am concerned, I have taken to reading Emanuel Derman’s book “Life as a Quant” to find some solace and search for inner meanings to a Life in numbers.

Reality Bites

Reality shows on TV have a way of unwinding what has been hard wired into human brains for ages. The propensity to seek the unpredictable, not to mention the excitement, fear & anxiety and sometimes irrational behavior that goes along with it .

Man is a social pleasure seeking animal, and irrational too, better exemplified in today’s reality television shows. Where every person, whether the judge or the audience go with their preconceived notions & expectations of the participants or a situation and come out with a unique experience when the plot goes on unexpected lines.

Reality-shows in my opinion are of 2 types, the adventure and non adventure. The former is usually associated with travel, trek or Sports while the latter is mostly talent hunting, singing dancing & like. And shows like 30 Seconds to fame gives me the impression that its not only cricket that gets T20’ed but reality shows too. A participant is supposed to rattle off his talent in the craziest possible time span & then go through the shredder of evaluation from the audience & judges. And if he makes it to the next round, the participant is supposed to piece himself back for the second tango. And the cycle repeats. Though blood & gut normally dosent spill out in these shows, unlike the old roman gladiator games , its more than made up with racial slurs, regional/nationalistic sycophantic appeals for votes not to mention the psychological abuse heaped in the form of objective performance assessment.

My two favorites shows have actually been variations of reality shows but real nonetheless. One is that of the late naturalist Steve (Steve Irwin, the star of the Crocodile Hunter nature television documentaries) who combined his love of animals with the excitement of reality show by performing his daredevil acts of deadly animal rendezvous in the most unplanned & unscripted ways. The other by magician David Blaine who created the unpredictable acts of appearance & disappearance of objects, levitation,death defying stunts etc out of ordinary daily events through cool magic skills on the streets of New York & elsewhere. Incidentally the dude made a cool $ 6 million from such televised street shows last year .

Whats amazing about this kind of reality show is that in a perfectly normal and mundane backdrop, the protagonist operates on a thin line between the real & surreal. And carries it off with aplomb. These guys defy logic, fear, and tread into the unpredictable where rules do not apply and the plot can sometime go horribly awry as in the case of Irwin. They welcome us to the world of free will and entirely implausible plots.

Coming back to human nature and its great quixoties, Dan Ariely captures various essence of Human psyche in his book Predictably irrational , a good read.