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Learning by Proxy

Learning by Proxy | China

This edition became insanely long. I going to have to take some of the stuff that happened this week and move it to the next edition. Something significant is afoot in China and its relationship with the rest of the world.

As a kid, I used to love cricket. Now and then there would be these matches where India would play a team that represented the Rest of the World. All without exception were exhibition matches, but there was a thrill associated with it. If we won, we got to beat the whole world in a single match. The best from every country.

China is increasingly taking a position where it looks like China (and some crook states) Vs the rest of the world (not that there are no crooks here). How it will end is anybody’s guess, but the tension is building.

The biggest participants of the first world war were France, Britain and Germany, but it started in Sarajevo with the assassination of Franz Ferdinand. The world is a tinderbox right now. A random spark can set it ablaze.

Shifting Sands

Japan was considered a manufacturer of cheap transistors in the 1960s. Their products were considered low quality. Fast forward to 1980s, getting a Sony was a mark of buying a high-quality product. China went through a similar cycle. Even a decade back Chinese products were considered cheap and low quality. The last decade has caused a huge pivot in perception. Along with that pivot, a lot of product manufacturing moved to China. 

Being at the epicentre of the manufacturing revolutions made Japan the economy it became. From the ruins of Hiroshima and Nagasaki emerged a nation that was revitalised and more powerful economically. The same happened with China, from being a hopelessly poor agrarian economy, they became the second-largest economy in the world. With the newfound power and money, there are new problems that are emerging.

Where does China end? (Physically)

China has always had a different interpretation of where its borders end. China seems to think all of the South China Sea belongs to it. The reason the South China sea is important is because of its strategic value to trade. The countries involved in this dispute include – Japan, Vietnam, Philippines, Malaysia, and Borneo. By extension of the fact that the US is responsible for the safety of Japan as per the treaty to end World War II, they are also involved.

Hong Kong has been burning for the past 2 years. China is not used to defiance by its citizens. Further, they cannot afford for this spark to spread to the mainland. A lot of money and power will be at stake if that does happen. Hence the clampdown on Hong Kong.

China has had border disputes with India for the past 60 years. They continue to claim that land on the Indian side. This has led to a war-like situation at the northern border. For China, Aksai Chin which they occupied over 60 years ago is important to keep their control over Xinjiang. The road from Tibet to Xinjiang passes through Aksai Chin.

The northern army commander, Lt Gen. Y.K. Joshi, on Saturday said the army would “continue all efforts to restore status quo ante along the LAC”, the statement assuming significance against the backdrop of the no-intrusion claim by Prime Minister Narendra Modi.

This is the first time an army commander has officially spoken about “restoring status quo ante” along the Line of Actual Control, which entails that the Chinese have occupied Indian territory.

Source: The Telegraph

They have also been having disputes with Bhutan

China is stepping up pressure on Bhutan to settle their bilateral border dispute. In addition to laying claim to more territory in Bhutan, Beijing has revived an old land swap deal that will require Thimphu to cede control over the territory to settle its border dispute with China.

Source: The Diplomat

Pandemic

There are a lot of tall buildings in China, but there is no Trump Tower in China. Also unlike Moscow, Beijing never wanted one. So Trump has been quite pissed with China right from the outset. Despite berating them for years, he did not have anything that he could really hold against China given the American dependence on China for manufacturing.

COVID-19 provided the perfect segue to turn against China and also get all of the “allies” to turn against China as well.

China made things worse

China had been giving away loans across Africa because Africa was seen as the next big thing. The idea was not to help them develop, the idea was to trap them in debt. This became obvious when they squeezed Sri Lanka for the port China had financed. Sri Lanka could not repay the debt and ended up handing over the port. There is a Wikipedia article on this – Debt trap diplomacy. 

The total loans outstanding from China come up to USD 600 Billion.

There is a global (especially western) push to forgive African Debt. This is deeply motivated by other considerations and China has said – No.

Also, when the pandemic began, and a lot of countries rushed supplies to China.

A total of 21 countries and the United Nations Children’s Fund have donated epidemic prevention and control supplies to China, a foreign ministry spokesperson said Wednesday.

Those countries are the Republic of Korea (ROK), Japan, Thailand, Malaysia, Indonesia, Kazakhstan, Pakistan, Germany, Britain, France, Italy, Hungary, Belarus, Turkey, Iran, the United Arab Emirates, Algeria, Egypt, Australia, New Zealand, as well as Trinidad and Tobago, spokesperson Hua Chunying said at an online press briefing.

Source: Xinhuanet

A couple of months later when those same countries needed supplies…

Countries’ procurement agents are fighting each other in China for access to the protective equipment that must play a key role in stemming the spread of the novel coronavirus, German Health Minister Jens Spahn said.

He was responding to a spate of reports of consignments of protective masks destined for European countries being bought up by United States officials, sometimes even as aeroplanes stood ready for departure on the tarmac.

Source: Reuters

Hanlon’s Razor – Do not ascribe to malice what can often be ascribed to incompetency. Even so, the mind looks for a more complex explanation.

In this context

Hong Kong is an important port through which a lot of capital moves. The Chinese take over of Hong Kong has hurt the financial interests of rich people in several countries. There is no better way to attract the ire of nations than hurt the rich. The policy, for now, seems to be to hurt China economically.

Huawei is a Chinese company which has played a crucial role in the development of telecom infrastructure across several countries. The next couple of years were supposed to be windfall years with the introduction of 5G. Hurting Huawei means hurting China. The UK which is going to embrace Brexit screaming and yelling at the end of this year fired the first shot!

Culture secretary Oliver Dowden told the House of Commons that UK mobile providers will be prevented from buying Huawei 5G equipment after December 31 under a revised telecommunications bill that the government will table for a vote in the fall. Dowden also announced that providers with Huawei kit in their networks must remove it by 2027.

Source: Quartz

Australia in the meantime is heavily dependant on the Chinese import of ore. Mining is a huge contributor to the Australian economy and China is the biggest trading partner. Even so, in a world that is rapidly changing, it is important to pick sides.

Australia has declared “there is no legal basis” to China’s territorial and maritime claims in the South China Sea, marking an escalation of recent tensions with Beijing and bringing Canberra further in line with Washington.

Source: The Guardian

India which is even more hopelessly dependent on China banned TikTok and 58 other apps. This is by far the most inconsequential push back. But you know how they say – an enemy of an enemy is a friend. Not only that, but there are also three Trump Towers in India.

The two countries have been working quietly to step up information sharing amid the tense military standoff between Indian and Chinese troops — it has been on for 11 weeks now — along the Line of Actual Control in Ladakh.

After US Secretary of State Michael R Pompeo spoke to External Affairs Minister S Jaishankar in the third week of June, at least two high-level phone conversations, the key to this cooperation, have taken place.

Source: Indian Express

and

India and the US are close to inking a “quick” trade deal, Commerce Minister Piyush Goyal said Tuesday, adding that the pact aims to get issues that have been pending over the past couple of years “out of the way”.

Source: Indian Express

The USA also has banned Huawei. In addition to that, there has been heavy rhetoric. That rhetoric translated into action finally. The US government forced the Chinese Consulate at Huston to shut down. Why? The claim was that espionage operations were being run from the consulate. The Chinese diplomats were burning files outside the consulate causing local emergency service to respond to the smoke. And then…

US officials prised open a small back door having previously tried to gain access via three other entrances. The consulate was ordered to close on Wednesday by the Trump administration which said it was seeking to protect American intellectual property.

Source: Express

And then

Beijing ordered the US embassy to close on Friday in a tit-for-tat move, after Washington instructed China’s consulate in Houston, Texas, to cease operations, claiming it had been involved in a US-wide Chinese espionage effort.

Source: CNN

From the perspective of manufacturing –

Entire nations and their governments are questioning their excessive dependence on Chinese manufacturing. Scores of companies have been instructed and have already started moving production to other countries. Production of strategic importance like pharmaceutical and electronics are being moved to home countries. TSMC, the largest contract chip manufacturer, was given Billions by the US government to set up production in Arizona.

A Gartner, Inc. survey of 260 global supply chain leaders in February and March 2020 found that 33% had moved sourcing and manufacturing activities out of China or plan to do so in the next two to three years. Survey results show that the COVID-19 pandemic is only one of several disruptions that have put global supply chains under pressure.

Source: Gartner

Reliance boss Mukesh Ambani, announcing the partnership at his company’s annual meeting last week, said Google would build an Android operating system (OS) to power a low-cost “4G or even 5G” smartphone that Reliance would design.

Source: Mint

Most importantly pharmaceuticals

But this grant was different. It went to a Richmond, Virginia-based public benefit company that was just seven months old. Before the pandemic, it hadn’t manufactured any drugs, although its founders were pharmaceutical veterans.

The company, named Phlow, isn’t tasked with making new drugs against Covid-19. Instead, its goal is to shore up the US supply of generic drugs.

Source: Quartz

Adding salt to injury

China’s economy had its first contraction in decades thanks to COVID. After a decline of 6.8% in the first quarter, the economy seems to be back to growth posting a 3.2% growth in the second quarter of the year.

China’s economy grew 3.2% in the second quarter following a record slump.

The world’s second-biggest economy saw a sharp decline in the first three months of the year during coronavirus lockdowns.

But figures released on Wednesday show China’s Gross Domestic Product (GDP) returned to growth between April to June.

Source: BBC

But here is the thing, Retail consumption is lower than it was pre-COVID. So internal consumption is low. Externally, every large economy, esp. the USA has been struggling with the effects of COVID. So the consumption is not coming from outside either; then how? It is a result of government spending. This was the original recipe that worked for China. But given that they are a much larger economy, with a highly developed infrastructure and a global economy which is stagnant at best; how long can they keep bankrolling it? Also, if the spending is on infrastructure what do they plan to build?

And the final nail in the coffin. China seems to be poised to have its own Lehman Brothers moment.

Losses at global banks are projected to soar by $926 billion to $2.1 trillion through 2021, according to Standard & Poors. Almost $400 billion of that increase is forecast to come from Chinese institutions, compared with a $360 billion increase for those in North America and Western Europe combined. While an impending wave of soured loans isn’t expected to cause a credit crisis, the forecast demonstrates the economic pain that’s anticipated from heightened unemployment and bankruptcies.

Source: Quartz

Fallout

The excessive nationalistic push at a time of great global economic instability is not helping China. If at all anything, it has helped galvanise opposition to the country. Even countries like Australia who are tied up in a lot of trade are pushing back.

The sands are shifting and we do not know where and how this will end. The one thing that is for certain is that many of the squabbling global powers – US, India, EU, Britain and Australia (mostly thanks to Trump) are seemingly uniting due to their hatred of China. In 6 months there might be a new president in America.

The sands are definitely shifting!

Indian Monsoon

Monsoon is very important for India because agriculture depends on it. This year the north-western branch of the monsoon has arrived with great fury. The winds carry moisture from the Bay of Bengal and move towards the north-east till they meet the Himalayas. From there they follow the Himalayas as the wind turns to move the clouds westwards delivering rains along the way. What started as heavy rains in Assam, turned into flooding and now has turned into a catastrophe.

“Since the first week of June, we are having no respite with wave after wave of flood that has wreaked havoc inside the Kaziranga National Park and Tiger Reserve,” said Kaziranga’s park director, P. Sivakumar. He said an animal that had drowned in a swollen river near the park on Saturday brought the death toll of the endangered rhinoceroses up to 10.

Source: New York Times

Now as the monsoon clouds move westwards, it’s claiming more victims. 

Floodwater entered one more district of Samastipur in Bihar and spread to more inundated areas, hitting half a million more population on Tuesday, even though no fresh casualty was reported and the count remained at 10, an official bulletin said.

According to the bulletin by the state Disaster Management Department, more than 5 lakh people were affected by floods on Tuesday alone, taking the tally of marooned people to 29.62 lakh in 12 districts of the state.

Source: NDTV

It remains to be seen how far this monsoon rage continues. UP, Haryana and Punjab are very important to the food production in the country and if flooded especially at this time, it could turn into an unmitigated disaster especially since the economy is already reeling.

When you see it

Donald Trump had expected to head into the elections with a great economy, unemployment at historic lows and a great platform. Instead, his Attorney General is being questioned on the hill, unemployment are at historic highs (only the great depression saw worse unemployment) and a GDP decline of 10%. The US economy has contracted by 1.8 Trillion dollars! Yes – perspective – add a Trillion to that – India’s GDP.

Gross domestic product — the broadest measure of goods and services produced — fell 9.5 per cent in the second quarter of the year, the Commerce Department said Thursday. On an annualized basis, the standard way of reporting quarterly economic data, G.D.P. fell at a rate of 32.9 per cent.

Source: New York Times

Another way to looking at it. The US economy lost a shade more than the Market Capitalisation of Apple (which posted blockbuster results last quarter). (~1.75 Trillion)

One of the stories last week was titled – Spending is back to normal for poor Americans—but not for rich ones

Research shows that when low-earning families lose income, they do substantially decrease how much they buy. So it’s not that poor Americans are going into credit card debt to keep up their spending. Rather, economists have found that the US government’s stimulus payments and enhanced unemployment insurance have kept many low-income families afloat.

Source: Quartz

To me, this fact only indicates how little the poor have for discretionary spending. They are surely not going to be buying anything that is not absolutely necessary when they are living on doles. Turns out their lives were the same as living on a 600 dollar cheque even before COVID!

Simply put, rich people spent 1.8 Trillion less.

No sooner was this data released, Trump tweeted that the elections needed to be postponed! To which Mitch McConnell said, “Never in the history of the country, through wars, depressions and the Civil War, have we ever not had a federally scheduled election on time, and we’ll find a way to do that again this Nov. 3,”

The illusion of democracy is the only thing America has going for itself. If that illusion falls apart, there would not be much that is different between America and Russia.

Raising Capital

Now that Mukesh Ambani and Reliance have tasted blood, they can’t stop coming up with fundraising ideas. A while ago, Amazon had bought up stakes in Kishore Biyani’s Future Retail, which had been saddled with debt. In the aftermath of Facebook, Microsoft, Google investments in Jio, Amazon felt left out. 

Jeff Bezos called Mukesh Ambani and said ‘aisa kyun bewafa?’ (why this unfaithfulness?). 

Mr Ambani promptly asked – you got money? 

Jeff said lots – I have so much money that the only way I can blow it up is building spacecraft and destroying Flipkart.

Mr Ambani – I might have something else you can blow it upon…

Rumours are that Amazon is going to buy 9.99% of Reliance Retail. Now some corporate juggling is taking place to bring Future group under the same umbrella.

Mukesh Ambani’s Reliance Industries Ltd will pay between Rs 24,000 crore and Rs 27,000 crore ($3.2-$3.6 Billion) to buy the Indian retail chains owned by Future Group 

Source: ToI

The Antitrust people are looking on the wrong side of the Atlantic. This is just wrong. The Confederation of All India Traders has been going to court and making a ruckus about Flipkart and Amazon, where are they when they have to fight?

Rise and fall of the OTT

Since we are talking about the Atlantic. Recently Apple acquired the Tom Hanks movie ‘Greyhound’; a World War II story from the middle of the Atlantic. The movie is said to have cost USD 50 Million. Given that the year is a bust and going to the theatre does not make any sense, Mr Hanks sold it to Apple. But what about movies that are made with budgets of hundreds of millions of dollars? No OTT player would buy it! What then?

Paramount Pictures announced yesterday it is delaying the releases of two highly anticipated blockbuster films again—this time until 2021. A Quiet Place: Part II will move from Sept. 4, 2020, to April 23, 2021, while Top Gun: Maverick will eject out of its Dec. 23 date and now land on July 2, 2021. Both films had already been postponed from their original release dates this summer.

Source: Quartz

Signing off…

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Learning by Proxy

Learning by Proxy | Business of Politics and Politics of Business

Every Saturday, I publish this series called “Learning by Proxy”. It is a capsule of some of the stuff that I found interesting over the week along with some context to it. I hope you enjoy it.

Follow Up

It turns out the Indian and Chinese forces have been brawling at the border since September 2019 when the government decided to convert the Ladakh into a Union Territory. The current situation was just an escalation of the troubles that had been boiling over for a while. So – The government has kept this issue concealed from the people because they would not have wanted to be blamed for fomenting it.

In the past two months, there have been at least three clashes between Indian and Chinese soldiers in the Pangong Tso area. As seen in satellite images, the Chinese side has constructed pillboxes, shelters, breast-walls and bunkers at Finger 4, both on the bank and the ridge, where they have deployed troops in large numbers.

Source: Indian Express

Politics

Politics of Business

You know how companies owned by the Indian government, which have created an entire category, end up in a heap of losses. You need to look no further than aviation to see the shining example. Air India (né Tata Airlines) created the airline business in India. After the economy was opened up in 1990, many private airlines started to appear. The government, in its quest to ensure that cities other than metropolitans develop, created a rule forcing airlines to take up unprofitable routes to smaller cities and state capitals. Air India is a loss-making mess because it gets a disproportionate share of these routes.

Source: ET

Something similar is afoot with the telecom sector. When a company takes 50% of the market share in a country like India, it often comes with a fair amount of support. It is unprecedented in world history for a 50-year-old industry to be shattered by a new entrant in 5 years. Now, when the government employees themselves start pointing it out.

Employees of state-owned telco Bharat Sanchar Nigam Limited (BSNL) feel that the central government is favouring Mukesh Ambani-owned Reliance Jio in awarding state-funded projects to it, and denying opportunities to other players by creating an uneven playing field.

Jio was recently allocated INR 50K Cr worth government contract under the Universal Service Obligation Fund (USOF) to deploy 54 mobile towers in Ladakh’s rural areas. Moreover, impending restrictions on BSNL to extend telecom connectivity in the so-called left-wing extremism (LWE) affected villages are also denting the state-run telco’s already frail revenue numbers.

Source: Inc42

Let me put that in context – Jio Platforms has raised ONLY twice that amount through all of the fundraisings that it has undertaken in the last 3 months.

Good Old Fashioned Regime Change

When you think regime change, you think CIA. Americans have been great players of this game. Having said that, others have also learnt a thing or two along the way. Chinese aggression against India is well known. In one of my previous editions, I had mentioned the dire circumstances that Pakistan is in. This leaves other neighbours that can be encouraged to stew trouble. Of all countries, Nepal decided to change its map and declare Indian territory as a part of Nepal. Now, India seems to be creating trouble for the leadership of Nepal. The PM is Nepal has been asked to put up or shut up.

Prachanda said at the outset that Oli’s allegation against India was wrong. “Not India, it is me who is demanding your resignation. You must furnish proof of such irresponsible remarks,” Dahal is believed to have said.

Two days after Nepal Prime Minister K P Sharma Oli claimed that India was trying to topple his government with support from some politicians at home, party leaders, including three former prime ministers, Tuesday asked him to prove his allegations or quit.

Source: Indian Express

Economics

Economic War

There has been a call to boycott Chinese businesses and Chinese products for the past couple of weeks since the border clashes took place. At the same time, a lot of ink has been spilt trying to argue how impossible it would be to disengage economically from China. Further, it would be Indian manufacturers and Indian consumers who would be hurt by such moves. In the meantime, the Indian government has been putting its greatest weapon to work – Its bureaucracy. Chinese shipments have been delayed at the port of entry for “checking”. The Chinese have been returning the favour. This has caused a lot of trouble to both exporters as well as manufacturers in India. The next step seems to be apps that generate little to no revenue from India.

TikTok has been banned in India. The IT ministry has banned 59 Chinese-owned applications, including TikTok, ShareIt, UC Browser, Likee, WeChat, and Bigo Live. The Ministry stated they were “prejudicial to sovereignty and integrity of India, defence of India, the security of the state and public order.”

Source: Indian Express

Supply Chain

Over the last 30 years slowly and steadily more and more of the manufacturing base shifted to China. First, it was due to the lower cost. Off late it has been only about convenience. China has been behaving badly using the Pandemic as a distraction to push its nationalistic agenda. From the South China Sea, Hong Kong and even up to India the country has been pushing to expand.

There is no other way to hurt them but economically. The military engagement will not end well for anyone involved. But shifting supply chains is a decades-long process. The biggest risk is chip manufacturing which is necessary not only for the phone in your hand but also for defence applications. TSMC one of the largest contract manufacturers of silicon set up a plant recently in Arizona with federal funding. It can produce as many chips in a month as their plants in China can in a day!

China’s rising costs had companies looking to broaden their sourcing well before the trade war or coronavirus, but those events are increasing the urgency. In a recent survey of 260 global supply chain leaders across different industries and regions, research and advisory firm Gartner found 33% had already moved their sourcing or manufacturing out of China or planned to do so within the next three years.

Source: Quartz

Business

Under Pressure

Facebook has been under pressure ever since Twitter flagged the Trump tweet on mail-in ballots. The Chairman of the Board, Peter Thiel; whose data company Palantir played a role in the Trump victory, was one of the prominent supported of Candidate Trump. It came as little surprise that Facebook was willing to look the other way. But when your revenues streams get threatened, you cannot continue to look the other way.

Facebook has said that it will flag all “newsworthy” posts from politicians that break its rules, including those from President Donald Trump.

Separately, Facebook’s stock dropped more than 8 per cent, erasing roughly USD 50 billion from its market valuation, after the European company behind brands such as Ben & Jerry’s and Dove announced it would boycott Facebook ads through the end of the year over the amount of hate speech and divisive rhetoric on its platform. Later in the day, Coca-Cola also announced it joined the boycott for at least 30 days.

Source: News18

Some have argued that the USD 10 Million per month or so that most of these companies spent on Facebook was a drop in the bucket. But come to think of it – USD 10 Million across a year is USD 120 Million, and 10 such clients backing out would mean a loss of a billion dollars in revenue. Anybody else wants to lose a Billion dollars in revenue during this economy?

How does the medicine taste?

Dear Chinese Tech Company, for years your government protected you. They pretended to be extending a level playing field to all but they really were not. They made life so difficult that behemoths like Google and Amazon had to call it quits and leave the country. Agreed, it was mutually beneficial. China needed you guys to win so that a local company could be beaten into submission when it came time to censor. How does it feel to be fed the same medicine by another? Hurts?

DTH Dying with Cinema

OTT is going to be the undoubted winner of Lockdown 2020. Cinemas have been shuttered and by the looks of it, are going to have to wait for a long long time before things return to business as usual. On the other hand, DTH companies are also having a hard time. In India during 2019, DTH lost 2 Million subscribers. With the glut of streaming services who wants DTH anymore?

India lost 2 Mn direct-to-home (DTH) television subscribers in 2019, findings from the Indian Telecom Services Performance Indicator Report October-December 2019 published by the Telecom Regulatory Authority of India (TRAI) revealed. The segment ended the year with 69.98 Mn subscribers, down from 72.44 Mn in March the same year. 

Source: Inc42

Technology / Science

Zoox

A few years ago, being pressured about Uber drivers not being given the same benefits as an employee, founder and CEO Travis Kalanick pushed back. He said anyway, they will all be replaced by self-driving cars and caused a slight panic amongst the drivers. The firing of Travis, a bad IPO and several dozen lawsuits later, Uber is nowhere close to bringing self-driving cars to the roads.

So it came as quite a surprise that Amazon went ahead and acquired a self-driving car company. Amazon’s logistics needs to deliver in hours or days not minutes and hence self-drive would not be valuable to Amazon as much as it would to a cab company or food delivery company. Google, Tesla and a few dozen other companies have been pursuing self-drive. Apple is rumoured to be testing something of the sort as well! Remains to be seen what road Amazon takes.

The e-commerce giant said it had agreed to acquire Bay Area-based autonomous vehicle company Zoox, a deal reportedly worth more than $1 billion. (Amazon did not respond to questions.) Since its founding in 2014, Zoox has been known for its technical chops, its secretiveness, and its sky-high ambition.[…]

In 2018, it showed off its first prototype vehicles, which look like sensor-laden golf carts on steroids. The company has also been testing its software on more conventional-looking Toyota Highlanders in San Francisco, where it is learning to handle chaotic city streets.

Source: Wired

Brain

When you see you are not really seeing. Your brain in interpreting the electrical signals being generated by your eyes upon being subjected to light. The same is true of almost every organ. Therefore there is almost no objective reality in the world. It is all subject to how your brain chooses to interpret it. This was highlighted by the ‘Yanni’ / ‘Laurel’ sound recording a few years ago, where, part of the people heard one thing while the other another. Also, perhaps why some people like classical music while other rock.

Instead of presenting his lab animals with real chemicals, he went straight into their brains. Last week, Chong and his colleagues published a study in the journal Science showing that they’d worked out some of the details of just how the olfactory bulb represents odours—by making mice smell scents that don’t actually exist in the real world.

Source: Wired

Misc

This should probably not come under Miscellaneous but the other sections are covered.

China is increasingly being isolated. Almost no country can eradicate its dependence on China for the moment but all attempts are being made. Further, there is also a push to align against China.

China is livid after the US stepped in on Wednesday evening to delay a draft press statement condemning the terrorist attack at the Karachi Stock Exchange at the UN Security Council. 

The US was the second country after Germany to delay the statement, both silent expressions of solidarity with New Delhi, after the Pakistan foreign minister Shah Mehmood Qureshi and later PM Imran Khan blamed India for the attack. 

Source: Quartz

How many enemies can you make before your luck runs out?

Cash Free India

I am very proud of the fact that when it comes to transaction protocols, India has some of the best and most secure protocols. 4 years ago, NPCI launched the UPI which made it really easy for anybody to make microtransactions right from their bank accounts. This further resulted in greater penetration of banking and online transactions.

India has been a cash-heavy country but the demonetisation coupled with the introduction of several of these technologies has changed the way things work in the country. UPI hit almost 2 Billion transactions last month. This is significant because the economy is busy taking a dump in the toilet and this number reflects the greater dependence on online transactions.

The National Payments Corporation Of India (NPCI) said that the Unified Payments Interface (UPI) recorded 1.98 Bn transactions worth INR 2,06,950 Cr in June 2020.

Source: Inc42

Signing off…

Categories
Learning by Proxy

Tax – Real Estate – Water | Learning by Proxy

Every Saturday, I publish this series called ‘Learning by Proxy’. It is a capsule of some of the stuff that I found interesting over the week along with some context to it. I hope you enjoy it.

Follow Up

Indian and China have been having a lot of heated exchanges in Ladakh. This week it escalated and resulted in India losing 20 soldiers including a Commanding Officer.

Defence Minister Rajnath Singh Tuesday reviewed the current operational situation in Eastern Ladakh, following Monday’s violent faceoff on the LAC, along with the Chief of Defence Staff and the three Service Chiefs. External Affairs Minister S Jaishankar was also present during the meeting.

Source: Indian Express

One name is conspicuously missing, don’t you think? Modi has been AWOL.

Also

The Indian army said that both sides suffered casualties, but there has been no word on numbers from China yet.

Tuesday’s battle was reportedly fought with rocks and clubs. However, no shots were fired.

The Indian army said a number of its troops “were critically injured in the line of duty”.

Source: BBC

Rocks and Wooden Clubs? No Shots fired? What the hell is going on?

China has taken the Galwan Valley and now their Foreign minister is like – Go on. Nothing to see here. Everything is resolved.


Politics

LGBTQ

Law is always very political and the appointment of supreme court justices is the greatest power wielded by politics over law. Trump got to appoint two Supreme Court justices and that was expected to swing the Supreme Court towards the far right. Imagine the surprise then, when the court declared that employment could not be taken away if a person was LGBTQ. The final vote came down the interpretation of the term ‘sex’ in a 1964 act. Whether it meant only man and woman or all sexual orientations. Neil Gorsuch who was the first appointments by Trump wrote out the order.

The Supreme Court’s decision on Monday outlawing anti-LGBTQ employment discrimination is a triumph for both the country and the court. It is a victory for the country because, in one fell swoop, the court granted vital protections to LGBTQ people in every state, making the United States a fairer, freer place.

Source: Quartz

Shooting yourself in the foot

The so-called stimulus package is an attempt by the Modi government to roll out the red carpet to investors to choose India. At the same time, the abysmal state of the government is forcing the tax officials to look at any vestige from which revenue can materialise. The Central GST collection during the lockdown fell from Rs. 47,000 Crores same period last year to a shade below Rs. 6000 Crores this year. An 87% per cent drop. The IT Department slapped Tiger Global with a tax bill of Rs. 14,500 Crores. Flipkart would not be Flipkart without Tiger Global. Antagonising them despite a Double Tax treaty with Mauritius is not a great move.

Earlier this week, news reports said Tiger Global may take India’s quasi-judicial body, Authority of Advance Ruling (AAR), to court over its claim that the investor has outstanding tax dues on its sale of shares in e-commerce major Flipkart in 2018.

Prima facie, experts, believe Tiger Global is protected against the payment under the India-Mauritius Double Tax Avoidance Agreement (DTAA), which prevents investors from being taxed twice on the same income in both countries.

Source: Quartz

Economics

Tipping Energy

Coal has been on its way down for a few years. In the US, gas-powered power plants have proved to be a much more viable source of energy than coal. This combined with the falling costs of renewable energy has made it harder for coal mines to continue to operate. Trump had said he will bring these coal jobs back. No one can stop the steady march of better economics, especially in a capitalistic system. This is not about the environment, it’s about profits.

The Texas-based utility that owns the Maryland plant just announced it will shut down Dickerson’s three power units after 60 years of operation, citing the high cost of operation. Like dozens of other coal plants across the country, Dickerson is a casualty of coal’s fast-moving demise. The industry has been squeezed between cheaper natural gas and expanding use of renewable energy for several years, but now the Covid-19-driven recession has jammed a stake through its economic heart.

Source: Wired

Stimulus – Togo Style

All of the big nations have been busy announcing large stimulus programs to get their economies back on their feet. To date, Germany has been one of the few that has put its money right in the hands of the workers who have lost their jobs or stand to lose their jobs. Togo is going a step further and putting money in the Novissi (digital wallet) accounts of informal workers!

For its part, Togo has looked to solve that problem with Novissi, a digital cash transfer program that sends funds to citizens through mobile money. Togo’s President Faure Gnassingbé has said the scheme targets informal workers whose incomes were “disrupted” by lockdowns. As of mid-April, over 1.1 million Togolese citizens—13% of the population—had registered for Novissi with around 450,000 people (65% of which were women) proving eligible beneficiaries and receiving up to 35% of the minimum wage.

Source: Quartz

Business

Flying Low

The airline industry has always been out with a begging bowl. In good times and in bad. As Richard Branson famously put it – If you want to be a Millionaire make a Billion dollars and start an airline. Almost every major western airline has been bailed out by the government and in some of them, the governments hold massive stakes. Interestingly, low-cost budget airlines in Europe seem to be in better stead despite not having needed a bail-out.

Ryanair and Wizz stocks are better bets right now than Air France-KLM and Lufthansa, according to Morgan Stanley. That’s because the flag carriers rely more heavily on business travel and long-haul routes that will likely to be slower to bounce back. They will also have a lot of work to do to repay the money they’ve borrowed from taxpayers. (Norwegian Air, a discount carrier for long-haul flights that got a $271 million loan from the Norwegian government, has fallen more than 90% in the stock market this year.)

Source: Quartz

Real Estate

I had written about the reckoning that real estate will soon be faced with. The increasing move towards ‘work from home’ and the closure of malls causing an upsurge in OTT was bound to hit commercial real estate. Malls thrive because of the footfalls multiplexes drive to the malls. Multiplexes have been closed and have no clear opening date. Retailers refused to open their stores unless malls waived rent. An open mall with stores closed does not make for good business. DLF blinked.

Under the new proposal, DLF Shopping Malls is offering rental partners a 100% waiver on MG rent for the entire lockdown period till June 15. Post this, a 75% off on MG rent is offered till June 30, sources said. DLF has also proposed a 50%, 24% and 10% waiver on MG rent for July-September 2020, October-December 2020 and January-March 2021, respectively, they added.

Source: Financial Express

To add insult to injury, CavinKare one of the large FMCG companies based in the south known for brands such as Chic and Nyle decided to pull the shutters on its HQ. Everyone except factory employees can work from home!

“We have shut down our corporate office and closed all four branches. We see no need for it. We have called for bids from tenants for the 40,000sqft office,” Ranganathan said. Additionally, the four branches have also been shut. “Only factories and R&D centres will have employees come in and work,” he said. Nearly 300 people worked out of the corporate office, while the company has a staff strength of 1,900. 

While most companies have announced aggressive WFH models in a bid to save on costs and stop the spread of the Covid pandemic, Cavinkare’s Ranganathan said he has chosen it for productivity reasons. “It is more from a productivity standpoint. We have seen a 30% increase in productivity in the nearly 100 days of lockdown,” he said.

Source: Times Of India

Technology / Science

The Price of Water

In space water is an especially valuable resource, but not for the reasons that you think. Yes, water is important for humans to survive. Also, in space, the only way to create thrust is by losing mass. Water = Mass. When you use fuel in space to propel, you are essentially ejecting mass to create force (thrust) towards the opposite direction. It costs about USD 18,500 to put one Kg in space. Not the most economical way to put fuel in space. Alternatively, you can mine the water on the Moon and use it as fuel. Now, NASA is going to determine the price for it.

That’s why Bridenstine’s statement is so important: If NASA follows through by saying we’ll pay $X for propellant delivered to location Y, that could give hypothetical lunar mining entrepreneurs the market they need to get off the ground and encourage private propellant buyers to make their own plans to use these resources. (One technological wrinkle will be designing spacecraft for regular refuelling.)

Source: Quartz

Retweet no more

Recently Twitter has grown a spine. This has meant that the company is beginning to cut back on all kinds of misinformation. How many times have you retweeted an article just after looking at its headline without even bothering to read it? They have started tracking that!

Twitter seemingly expanded the amount of data it collects from users to include the links in tweets that were opened, the tweet that included the links, and when it was opened. Zucker-Scharff noted that the link-tracking appears to have begun last month; he said the file containing the history of links on which he had clicked did not appear the last time he examined Twitter’s code in 2018.

Put together, this does much more than flag if a user is sharing something they haven’t read. It could also identify them. For example, if law enforcement has anonymized browser data on several users, officials could use timestamps to identify the person, matching the anonymous data with the Twitter timestamps.

Source: Wired

Spying with Lightbulbs

Researchers have found a way to listen to conversations taking place by watching the vibrations on a lightbulb! So stop using bulbs. LED all the way.

Researchers from Israeli’s Ben-Gurion University of the Negev and the Weizmann Institute of Science today revealed a new technique for long-distance eavesdropping they call “lamphone.” They say it allows anyone with a laptop and less than a thousand dollars of equipment—just a telescope and a $400 electro-optical sensor—to listen in on any sounds in a room that’s hundreds of feet away in real-time, simply by observing the minuscule vibrations those sounds create on the glass surface of a light bulb inside. By measuring the tiny changes in light output from the bulb that those vibrations cause, the researchers show that a spy can pick up sound clearly enough to discern the contents of conversations or even recognize a piece of music.

Source: Wired

Misc

Have you ever watched a Chess match? I am guessing not.

Hence it would come as a great surprise that Twitch, a service that streams video games is getting hooked to Chess. All thanks to Grandmaster Hikaru Nakamura. I was watching a short video included in the news piece and its amazing.

Signing off…

Categories
Learning by Proxy

America – Testing – Space | Learning by Proxy

Every Saturday, I publish this series called ‘Learning by Proxy’. It is a capsule of some of the stuff that I found interesting over the week along with some context to it. I hope you enjoy it.

When I started on the suggestion of a friend, I did not know how it would play out. This is the 10th edition already! I know some of you like it. Do share if you do.

Follow Up

China has already crossed into Indian territory and by the looks of it, the de-escalation suggested is because their goals have been met. They took a bit of the salami slice they wanted to. Read this piece on the Chinese strategy from Hindustan Times


Politics

Mr. President

Americans have a way of doing things that few others can.

The death of George Floyd, juxtaposed on the Pandemic where a disproportionately larger number of black people have died was like putting salt on an open wound. To make matters worse, this was not a stray incident, Ahmed Aubrey a young boy was shot in a residential area by while men just a few weeks back. The anger coalesced and spilt onto the street. 72 cities in America protested and many of them burned. The president instead of soothing the pain was searching for cayenne pepper.

If anti-fascists are terrorists, then does America represent the opposite?

The protests even reached the gates of the white house. And the brave president hid in the bunker!

US President Donald Trump was rushed to a White House bunker after hundreds of protesters gathered outside the White House, with some of them resorting to stone-pelting. The incident, according to the Associated Press, happened on Friday night as protests against George Floyd’s death spread to several cities. The AP report said Trump spent nearly an hour in the bunker, which was designed for use in emergencies like terrorist attacks.

Source: Indian Express

And then he threatened to unleash the military on his people.

Declaring himself “your president of law and order,” President Donald Trump vowed Monday to return order to American streets using the military if widespread violence isn’t quelled, even as peaceful protesters just outside the White House gates were dispersed with tear gas, flash grenades, and rubber bullets.

Source: CNN

Reminds you of Tiananmen Square? Maybe all the hate directed at China is just love in disguise! You see we often do the worst things that we can to those we love the most.

The last time that social and economic inequality was rising, new political ideas were emerging, economic mismanagement and environmental factors led to agricultural failure, unmanageable national debt, and political mismanagement were rife; it was January 1793 and King Louis XVI was executed by the guillotine at Place de la Revolution in Paris. 

Revolutions tend to start in this climate.

G7 or G10 or G11

In the first post which I had written in this series, I had mentioned the oil crisis of 1973 which had brought the USA to its knees when the Saudi’s refused to sell them oil. This oil crisis led to an informal meeting of Western Finance Minister which resulted in the creation of the Group of Seven – G7. Seven developed countries for geopolitical purposes met each year to plan how to carve up the world, each year. The world has changed a lot in the last 50 years. Trump wanted the composition of this group to change. Perhaps rightly so.

“I don’t feel that… it properly represents what’s going on in the world. It’s a very outdated group of countries,” Mr Trump said on Saturday.

The G7 group, which the US hosts this year, includes Canada, France, Germany, Italy, Japan, and the UK.

The president said Russia, South Korea, Australia, and India should be invited.

Source: BBC

Economics

Transparency

Closer home we have the PM Cares Fund. An opaque account that has been taking in Crores from every organisation that can afford to curry favours. At the same end of the Spectrum are US and UK who have been putting the country under greater debt and distributing the money to keep the shareholders rich. There is a growing call for transparency and the call to know who were these companies that were supported by the government.

While it’s not naming recipients, the UK-owned development bank said it will, sometime in the near future, provide information about the amount of emergency funding each lender has made available to help small businesses weather the coronavirus disruption.[…]

In the meantime, a firestorm is brewing in the US. More than $500 billion has been shovelled out through the government’s Paycheck Protection Program (PPP) that provides forgivable loans to smaller enterprises. Controversy erupted when it emerged that large, publicly traded companies like Shake Shack had accessed the borrowing (the burger chain and others have since returned the money).

Source: Quartz

Flattening the Curve

In India, the lockdown has devastated several businesses especially the small ones. In addition to this, the stimulus announced has had little or no support for the small businesses. Now that the lockdown is being relaxed, India is having a ‘Hold my Beer’ moment. The number of daily cases has surged upwards from 4000 per day to close to 10,000 per day. The government had the entire population locked up for 8 weeks and did nothing to ramp up testing! And even now very little is being done. 

The city tested between 4,000 and 4,200 daily, even as the number of positive cases detected rose steadily. Mumbai has the capacity to carry out about 10,000 tests every day.

The city’s stagnant testing numbers were in sharp contrast to the daily testing figures for Maharashtra as a whole, which saw a 100 per cent jump over the same period — from 7,237 tests on May 1 to 14,504 tests on May 31.

Source: Indian Express
Source: @20ncounting [twitter]

Indian has the unique distinction of ending the lockdown as the cases began to surge.

As Rajiv Bajaj aptly said – “We seem to have flattened the wrong curve – The GDP Curve”

Business

Space

The US and USSR embarked on their respective space programs in the 1960s out of fear of one another. Once the fear died, so did the space programs. None of it has been for the want of Investment. 

The USA retired its Space Shuttle Program which had outlasted its expiry date by over a decade. In 2010, under the Nasa Authorisation Act, the Space Launch System (SLS) contract was awarded to ULA backed by Boeing. They have since taken in USD 18.6 Billion and delivered zero flights. SpaceX, the new kid in town has posed a credible threat to Boeing and this week managed to put a man in space for the first time.

With privately-led spaceflight, NASA will once again be able to send astronauts to low-earth orbit, expanding its scientific research and preparations for missions to the Moon or Mars. Today’s launch is also a crucial step toward a new orbital economy, which SpaceX founder Elon Musk believes will have the same impact as the internet.

Source: Quartz

Board Games

Charles Darrow is improperly credited for the creation of Monopoly. It was created by Elizabeth Magie, who in 1903 created the game in Washington DC. Monopolists were big in those days and Elizabeth, a stenographer would spend her nights trying to create this game, to create a world where anybody could be one. The lockdown has given board games a second life. Families can play them together. Most of them last for some time and they are very engaging. 

When most people hear “board games” they think games like Monopoly, Clue, and Guess Who?—household names that many of us played as children. The biggest companies like Hasbro, which makes Monopoly, would consider anything less than a million copies sold as a failure, says Englestein.

But hobbyist tabletop games are a different breed. Some of them, like Settlers of Catan or Pandemic, are fairly popular. But there are hundreds and thousands of smaller games that most people will never hear of. In this industry, selling 20,000 units is considered a success, says Englestein. While a single large mainstream gaming company may bring in $10 billion in annual revenue, the entire hobbyist industry could generate just $1.5 billion.

Source: Quartz

Technology / Science

Perception

When a professional tennis player delivers a service, the ball goes from one end of the court to the in about 200 milliseconds. The player at the opposite end of the court has already decided what shot he/she is going to play based on the way the ball is thrown up. Professional players can predict where the ball will go based on the shape of the body as the opponent begins to serve. 

Turns out we can hear hand movement even we don’t see it. So would hand movement have a role to play in communication? Can you predict what is about to be said?

There’s a strong chance that your conversation partner’s movements will leave an acoustic signature that you may be able to perceive, says Wim Pouw, a cognitive scientist at the Donders Institute for Brain, Cognition and Behaviour at Radboud University Nijmegen in the Netherlands and the author of a new study on this topic recently published in the journal PNAS.

Source: Quartz

Misc

The American Supreme Court has offered an incredible amount of protection to Cops who have killed citizens. Here is an incredible article from Reuters on the subject. Worth a read!

The Cyclone that landed in Mumbai caused rains in Patna. The winds were strong and took it all the way across, saving Mumbai from prolonged showers which we know the city cannot take. 

Signing off…

Categories
Learning by Proxy

China V India – Telecom – Social Network | Learning by Proxy

Every Saturday, I publish this series called ‘Learning by Proxy’. It is a capsule of some of the stuff that I found interesting over the week along with some context to it. I hope you enjoy it.

I was planning to follow-up on some of the topics that I had written the last time. But the geo-politics of it is so interesting, it almost turned into an essay in and of itself. I lost the politics section to it.

Follow Up

See below!


Politics

Chris Voss is a former CIA negotiator and the author of the book ‘Never split the difference’. The premise of the book is – when you are negotiating for the life of a hostage you can’t agree to split the difference. You have to get it the way you want it. One of the lessons therein – When negotiating, always give your adversary a way out. If you corner them – expect the unexpected. 

Some context first

China had started down the path of world dominance a few years ago. They decided to use the American (actually British) play of economic dependence = political dominance. They announced this thing called One Belt One Road, which was to be second coming for the Silk Route. They engaged over 130 countries and poured in hundreds of Billions to create infrastructure such as Road, Ports, Airports, etc. Every continent apart from North America was involved. India refused to be a part of it.

Now let us see the corner China has been painted into.

Hong Kong was an itch which has been hard to scratch for the last 3 years. In addition to that Trump and his trade wars had made life difficult. 

The Coronavirus put a new spin on things. Many of these countries that China has lent to are poor Asian and African nations and with Coronavirus ripping up their economies, they have requested loan waivers and renegotiation. 

As the coronavirus spread around the globe, Pakistan’s foreign minister called his counterpart in Beijing last month with an urgent request: The country’s economy was nose-diving, and the government needed to restructure billions of dollars of Chinese loans. […]

With each request, China’s drive to become the developing world’s biggest banker is backfiring. Over the last two decades, it unleashed a global lending spree, showering countries with hundreds of billions of dollars, in an effort to expand its influence and become a political and economic superpower. Borrowers put up ports, mines and other crown jewels as collateral.

Source: New York Times

Pakistan was supposed to keep India in check. They are now broke. The Middle-East is in a financial crisis of its own with oil prices at historic lows. This implies very limited options available to finance terrorism. Therefore, Trump is not going to give money away to Pakistan as liberally as Obama did. 

Further, not agreeing to the cries of the poorer countries will make it seem like it was an engineered Virus. The optics of it all are terrible! 

Trump called it the ‘China Virus’ and has been pressuring WHO to investigate them – WHO acquiesced. India supported the probe into China. China grudgingly agreed.

A pretty deep corner you see. Now for the push back.

China put an end to Hong Kong by passing a law that forever ends Hong Kong’s democracy – at least the way we knew it. With Pakistan now being rendered incompetent, they had to take matters into their own hands. They started trouble in Ladakh and Sikkim. India pushed back. Both sides said they will protect their sovereignty. All good distraction. But then…

Chinese President Xi Jinping on Tuesday ordered the military to scale up the battle preparedness, visualising worst-case scenarios and asked them to resolutely defend the country’s sovereignty.

Source: Economic Times

That escalated fast!

Then Trump tweeted offering to arbitrate between India and China. China changed course and figured this was one more thing they would want the American to stay out of.

On Wednesday tensions between the two nations seemed to de-escalate as China took an apparently conciliatory tone by saying that the situation at the border with India is “overall stable and controllable.”

Source: India Today

While there is a change of tone, satellite pictures show artillery build up on the Chinese side of the border. The US in the meantime is preparing to pass a law rescinding Hong Kong’s trade status.


Economics

Truth

It was a couple of editions ago that I had mentioned that the truth about the actual economic state of India will emerge post-COVID when nobody is paying attention. It is happening. 

Bank lending to MSME collapsed after 2016 as per RBI data. This during a time when the government claimed to have 7.2% GDP growth rate. Many of the MSMEs are critical suppliers to large industries how could they not want loans? If they saw an opportunity, they would have taken loans to grow. 

While large industries saw their credit expand by Rs 1.73 lakh crore, or at an annual growth rate of 1.9 per cent between April 2016 and March 2020, micro and small industries saw their credit expand by only Rs 10,335 crore, or at a 4-yr CAGR of 0.69 per cent during that period.[…]

The decline in demand for credit by the industry, however, coincides with the decline in the demand in the economy and falling capacity utilisations. The RBI’s Order Books, Inventories and Capacity Utilisation Survey (OBICUS) for the October-December 2019 quarter shows that the capacity utilisation declined to at least 12-year low of 68.6 in the quarter ended December 2019.

Source: Indian Express

Repo Rate

The interest rate is an instrument that is used to stimulate the economy when the times are good, expectations form the future are clear and risk can be estimated. When none of this is clear – the Interest rate becomes merely a number. If you play with it unnecessarily, you diminish your power. Modi placed a historian at the head of the RBI to act as his puppet and the bankers are giving him a lesson. RBI dropper repo rate (the rate at which banks borrow) once again to 4%. An all-time low.

“When a heightened level of risk aversion exists among banks, lower cost of capital alone incrementally will not translate into higher lending in the current situation,” said Sreejith Balasubramanian, an economist at Mumbai-based mutual fund IDFC AMC. “Banks make lending decisions based on their risk appraisal and appetite which is currently low.”

Source: Quartz

Business

Sizzling Telecom

In a world that is locked inside their homes, connectivity is a very valuable resource. It is the only thing that preserves a certain degree of sanity and allows for commerce in whatever form to thrive. Connectivity is unlocking its value.

A couple of editions ago, I had mentioned how Reliance has used Jio to free itself of debt. Also last time I had shared the surprise upswing that Airtel had registered. Airtel is now borrowing a trick or two from the Reliance Playbook. They have raised over a Billion dollar through a stake sale and reduced their debt burden. 

Bharti Airtel’s promoter firm Bharti Telecom raised Rs 8,433 crore on Tuesday, selling 2.75% stake in the telecom major to institutional investors through an accelerated book-building process in the secondary market. With this, the Sunil Bharti Mittal led-Bharti Airtel’s promoters are ostensibly looking to go ‘debt-free’, a path similar to the one chosen by Reliance Industries’ Mukesh Ambani. Bharti Airtel share price traded flat on the BSE on Wednesday. After the sale, the promoter group will continue to own 56.23% in the company.

Source: Financial Express

Also, rumours are that Google is planning to buy into Idea-Vodafone.

Not to be upstaged – Jio Platforms as it continues to raise its Billions announced Microsoft as one of the suitors willing to throw in USD 2 Billion. And they also announced their wishes to list on an international stock exchange. 

Post bagging multi-billion dollar deals from marquee investors in the last one month, Billionaire Mukesh Ambani’s Reliance Industries is said to be now considering an overseas listing of Jio Platforms, according to people aware of the development.

Source: Mint

Technology

Social media is an echo chamber and that echo chamber has resulted in far too many countries in the world having right-wing governments. India included. Life is good so long as you are on the right side of the line – White in the US – Hindu in India and so on. Facebook knew what it was doing and why it was wrong. An explosive and incriminating report exposes the upper echelons of the company brushing aside genuine concerns. 

“Our algorithms exploit the human brain’s attraction to divisiveness,” read a slide from a 2018 presentation. “If left unchecked,” it warned, Facebook would feed users “more and more divisive content in an effort to gain user attention & increase time on the platform.” […]

But in the end, Facebook’s interest was fleeting. Mr Zuckerberg and other senior executives largely shelved the basic research, according to previously unreported internal documents and people familiar with the effort, and weakened or blocked efforts to apply its conclusions to Facebook products.

Source: WSJ

The person who made this presentation was the head of the ‘Integrity Team’ at Facebook. The company has none of it.

Twitter has been a haven for trolls permitting harassment at an unprecedented level. It came as a huge surprise when Twitter which is in part responsible for Donald Trump being president decided to flag this tweet at false.

[click on the tweet and open it to see the flag]

The move, which escalates tensions between Washington and Silicon Valley in an election year, was made in response to two Trump tweets over the past 24 hours. The tweets falsely claimed that mail-in ballots are fraudulent. Twitter’s label says, “Get the facts about mail-in ballots,” and redirects users to news articles about Trump’s unsubstantiated claim.

Source: Washington Post

The president threw a fit on Twitter about Twitter. Then announced on Twitter that he would be releasing an Executive Order against Twitter. 

In the meantime, Kellyanne Conway his “Counselor” went on a rant against – guess who? – the head of the Integrity Team of Twitter; Yoel Roth. He has been subjected to a lot of trolling by Republicans and Trump supporters – where else – on Twitter.

Here is a list of all the false claims made by the President of USA to date – all 18,000 of them. – https://www.washingtonpost.com/graphics/politics/trump-claims-database/

And Twitter is not backing down!


Misc

The Indian Government is using drones to chase away locusts.

These are designed to spray 10-litre of chemicals, along with creating a sound that would disperse the locusts into different areas. “It has successfully contained the movement of locusts in an open area and on the foothills where it was not possible for the usual tractors to make it reach. A detailed assessment of its impact is being studied by the field officers,” said Om Prakash, commissioner, state agriculture department.

Source: Times of India

The Democrats are using the Republican playbook – GOD. Only God can save them now. God is peddling conspiracy theories on Trump!

Go on check out the twitter handle. It’s got a lot more there. About Ivanka’s Shoplifting and much more…

Signing off…

Categories
General Thinking

Demonetisation is a lost opportunity for digital payment providers

The move made by Modi to Demonetise 86% of the notes in circulation might be a move that was triggered with various interests in mind. The one thing that it has undoubtedly made many Indians do it use digital payments. I was speaking the other day to one of the managers at National Payments Corporation of India (NPCI) and he was telling me that the numbers of transactions have spiked many folds!

For those who do not know NPCI is a quasi government body that creates the standards such as IMPS and UPI using which many of the online transaction networks function.

Yes digital payments and transactions are spiking to new levels.

This was quite possibly the best opportunity to transition the vast majority of Indians who are currently dependent on cash transactions for the most part to digital payments. Are we really doing what is necessary?

 

Let me share an incident that happened:

I had to travel to Mumbai the day after the demonetisation scheme was announced. When you land at the international airport in Mumbai for some reason they change a toll only in cash. I did not have any, so the Uber driver paid for it. We did not find a single ATM on the way which could dispense cash and hence upon reaching my destination I asked my driver if he has PayTM so I could transfer him the money. He had the app installed but did not have an account. I asked him to create an account. He looked at me uncertainly. He proceeded only to get stuck at the point where the app asked for him to put in a password. He did not wish to set a password in English, he was afraid he would forget it. PayTM does not offer the choice of any other language. So after much goading he set a password and I was able to transfer him the money.

Seems like a minor oversight; but affects Millions if not a Billion people in this country.

 

Arguably e-wallets have a critical role to play in this context since there are a lot of small and micro payments for which using the card (credit or debit) does not make a lot of sense. Besides there are a lot of small businesses and stores that do not possess the infrastructure necessary to (PoS Machines) to process payments using cards. In such cases it is very easy for the merchant to get up and going & start processing payments.

If this was the opportunity straight out of a dream, all of the wallets have blissfully squandered it away.

The most significant error in judgement that was made when all of the VC firms came rushing in to setup shop in India was to assume that India was going to be next China. India is nothing like China, with over a 100 languages, poor digital infrastructure and still poorer adoption of digital payment services; India was and still is nothing like China.

As of 2012, the best estimates put a population of 125 Million English Speakers in India. For the sake of argument let us assume that this number has grown to 200 Million today. That still leaves aside 1.07 Billion people, who do not know the language.

How many applications do you use which have a non-english version?

This was probably one time when almost every Indian has had the need to rely on digital solutions in order to make sure their lives were not hindered greatly. Under such circumstances, it is a priority to ensure that all of the solutions are able to cater to the needs to all Indians, English speaking or not.

It seems rather sad that someone like Vijay Shekhar Sharma who himself came from a Hindi medium school did not see this need. The only wallet website that at least makes an attempt is Mobiqwik, which translates ONE page on the site to Hindi. All of the other wallet or payment applications continue to be exclusively English.

As English literate technology savvy Indians take advantage of technology and make things easy for themselves, a vast majority of people in this country cannot access these services because of language barriers.

I would have expected these wallet companies to translate their apps to 30 languages over the course of a week (at least on Android) and send teams of people out with missionary zeal to convert as many merchants as possible to wallet users. For the merchants everyday is a lost opportunity and hence they would have embraced and also taken the time to educate their customers of the product to make transactions possible.

But that is not how it played out. There companies continue to target an English speaking audience and make a whole host of payment processing solutions possible for English literate customers alone.

We in the “Startup” universe need to start looking at this entire nation. To start looking beyond what is “low hanging fruit” and can be targeted through Google AdWords alone. We need to start building solutions for the people of this nation, in all of their diversity and limitations.

You can build a billion dollar enterprise by making a million people pay $1000 or by making a billion people pay $1. There has been a preposterous degree of focus on the former. While the possibility of the former going from paying $1000 to $2000 is limited; the possibility of $1 going to $10 in incredibly high.

What kind of company do you want to build?

 

Categories
Entrepreneurship

Blablacar – Thoughts to ponder about India (Updated)

Blablacar is a French startup that recently scored a USD 100 Million in funding to expand beyond Europe. One of the countries that the company is considering entering is India. India is a large market and has a huge number of cars on its roads. Blablacar is a company that allows for car-pooled rides over long distances (100 Kms to 500 Kms). Let us say I am driving down from Bangalore to Mangalore alone, I could put out an invite asking others who might like to join me at a cost. I get to subsidise my ride and those who are looking to travel, would be able to hitch a ride. The ride might cost as much as the bus but would be more comfortable and faster.

The idea seems very slick at the outset but deploying it in India is nevertheless going to be fraught with challenges and the need to overcome certain fundamental issues.

It is easy to assume that a company of this nature would find a huge market in India, since India had about 21 Million cars on road as on 31st March 2012. We can easily add another 12 -15% to arrive at the current figure. With so many cars, there are bound to be people who are not driving their vehicles filled to capacity. Blablacars offers an interesting way to monetise these empty seats while at the same time doing a little, in terms of helping the environment and reducing fuel burn.

Yes. But they are not going to have it easy in India.

In India, cars represent a status symbol. They are not just a means of transportation, because the best means of transportation for Indian roads are the two-wheeler, given the congestion and poor state of the roads; not to mention the huge gap in terms of mileage. Indians do not like to share their cars, They buy it to show off and that they do by waiting for hours at the traffic lights. I know several families who have cars but use a two-wheeler for most of their moving about. This has been part of the reason intra-city car-pooling has not taken off in any meaningful manner in India.

Coming from Europe, you might be very tempted to say; “Yes, but you cannot undertake a long distance travel in a two-wheeler”. True that, you cannot.

But.. 

India is not a country of highway loving people. Highways are seen as unsafe and it is assumed that you need some kind of training (which only taxi drivers have) to be able to drive on the highway. Yes we might travel on the highway once in a while, but we won’t put our own cars on the highway and much less drive them there. Highways are fundamentally badly built (barring a few segments/routes) and considered rather unsafe. Unlike in Europe not a lot of people take to the roads during vacations, and even if they do, they hire a cab. Most of them prefer bus and train.

Watch this Canadian driver get a load of Indian road.

There are certain segments which tend to travel by road. But the only reason for doing that is for the purpose of flexibility. When you travel by road by yourself, you get to stop where you like, take the trip at your pace, fast/slow as you may like and also the trip can be more impromptu. Most importantly, you need not follow somebody else’s time table. 

There are four segments of people who take to the highway: 
Business people who want the flexibility.
Students who do it for the thrill of a road trip. (18 to 25 years of age)
Vacationers who are used to driving on road. (Very small segment)
People who work in a city very close to their native place. (Bangalore to Chitradurga over the weekend)

When you look at it like this, the market shrinks very rapidly. 

It not all bad.

If Blablacar has to successfully enter India, it has to do it very strategically with focus on very targeted segments instead of going to the entire market. You would start by making a list of highways that are most well suited for drives. Highways which have some of the best roads in India and get frequented often, such as Delhi-Agra, Delhi-Chandigarh, Bangalore-Chennai, Mumbai-Goa, etc. These highways are a pleasure to drive and increasing numbers of people are beginning to use these roads. Focusing on these markets help define the segment that you most wish to cater to and also increases the possibility of closing greater number of transaction.

Like buses, in India there are a large number of taxis which serve a certain route. You would mostly find these taxis parked near Interstate bus terminals (ISBTs). When I used to study in Agra, I would often take these taxis, which were often Tata Sumos which would load up 9 others and drive from Delhi to Agra. They were invariably quicker than the buses would not stop as often and cost slightly more than the bus.This segment is completely disorganised, it would take someone with a keen eye and with experience to even spot these guys outside bus stops. Blablacars can do for them; what Redbus was able to do for bus operators. 

Over the years, roads have been improving in India and that will continue and probably convince more Indians to take to the roads. At such a time, Blablacar might be well poised to take advantage of the growing market.

I feel currently, this route would be best way to enter India for Blablacar. What they do, how they do, if they enter India at all, remains to be seen.

As the french say, “Nous verrons”.

Update:

I drive a lot on the highway. So during my recent trips I have been noticing another things. I have finding the many individuals who rent a car from Zoom and driving by themselves on the highway. The simplest explanation for this is since they charge by the day, it works out cheaper to rent the car and drive it by yourself rather than to take cab. Since this segment of crowd would be cost conscious and by default are not using owned cars, would be much more willing to share their ride to drink the cost down further. Should be a sweet market for Blablacar.

Categories
General Thinking

Modi – The Storyteller

I recently completed a course on Storytelling by Jennifer Aaker from Stanford. At the core of it, the course explains four steps to telling a story which are:

1. Single Focussed Goal

2. Grab Attention

3. Engage

4. Enable Action

In the context of the recent victory that Modi registered in the elections in India. As I was listening to Modi’s victory speech it just hit me how he had used each one of these elements in a very pointed manner, in order to win the elections.

He had a Single Focussed Goal of winning the elections and becoming the Prime Minister.

In terms of Grabbing Attention, he did something that was never done in India. He ran the campaign like a presidential campaign. The entire campaign was centred around himself. It was not about the party or its values or anything of that sort. It was a huge risk given the 2002 riot issue was sure to rear its head, but he was confident enough that he could pull it off.

He captured the imagination of the country by promising decisive leadership. He spoke of his track record in Gujarat as the Chief Minister and there were sufficient people willing to back his credentials (definitely more than the number of detractors). He promised the same kind of development for the entire country if he was made PM.

He engaged the people of the country through social media as well as the ‘Chai pe Charcha’ meetings that were held in different cities.

#AbKiBaarModiSarkaar was trending on twitter. If only to make jokes about him, but still. Who was talking about Congress? Any publicity is better than no publicity.

He also engaged by extensively travelling, addressing rallies, BJP say that he travelled 300,000 Kms. How much did Rahul Gandhi travel? To add to that he even used technology, holographic projections to address gathering where he could not be personally present.

BlrAM7WCIAAsz9b.jpg-large

The call for action was simple, get out and vote. The positive externality of all this was campaigns such as ‘You Vote, You Decide’ which was run in Bangalore.

8-Will-India-Rise-_-You-Vote-You-Decide

The result – Well, all of us know.

As I watched the speech that he gave after he won the election, I could not help but compare it with the ‘Dear Sophie’ ad which Google rolled a few years back. Modi repeatedly made the voter the hero and the achiever in the entire story. He said, he was there to serve to act a tool to help India reach the development goals which should have been achieved many years back.

Modi, the PM is the tool. The voter is the protagonist who is able to see great things done through this tool. Just as in Dear Sophie, where the user is the protagonist and google merely provides the tools.

All in all a great story told and a great story sold. What happen here forward will determine if this story can be sold again or not!

Categories
Entrepreneurship

Investing in a Startup

I have always thought that investors had the easier end of the bargain. They had people coming to them to present their proposals, which they would evaluate based on their knowledge and accept or reject. All that changed since we put in place a Student Project Grant at VIT University, Vellore.

The premise was that there are a lot of engineering students who have great ideas that they wish to pursue but are unable to find the base seed money that they need to get off the ground. We thought if this support was provided they could get going. We had planned to support between 5 and 10 student projects. Bare in mind, we were just trying to stimulate the eco-system not profit from it!

Well… It was not all that simple. What was even more surprising was that we faced problems with sourcing quality proposals!

In the first round of call for proposals, we got 24 proposals out of which 4 were given the grant. In the next round we got 33 proposals, out of which we have still to approve even one. Looking at the odds we might have to seek a third round.

The first challenge was that most proposals although extremely great research projects but did not make good business proposition. They lacked any kind of validation (Technical, Consumer, etc.).

50% of the proposals were rejected for this reason alone.

Then there were proposals which were extremely great on paper, but we did not feel that the students would be able to execute the Project that they were proposing with the kind of resources, financial and otherwise at their disposal.

This ensured that another 35% of the proposals left aside.

Then can the few which seemed interesting enough. There was a possibility that those projects could see the light of day. The ability to execute was there, but we felt that there was a lack of sincerity. In the sense that I had my doubts that they would follow through on it.

This took out about 7% of the proposals.

With that gone, we have a very small basket of proposal that we are actually supporting. Not to mention, there is money left behind in the grant.

So the fun does not end there. So, we went like, this needs an eco-system boost and there needs to be more exposure and education about Startups and what is possible. We setup The Blueprints Club as a means of reaching out to students and giving them learning and support.

Guess what happens?

We get a dozen students who are actually working on a real product and even have a prototype ready! They are just too vary of trying to do a real business with it. I got to see some real amazing stuff, which may be ripe for commercialisation; if only the students would be willing to take a plunge! We tell them there is grant available.

At this point you get three categories for students:

  • Those who wanted to apply for the grant, but did not really bother about it
  • Those who will go ahead with a startup idea ONLY if they get the grant
  • Those who don’t want the money at all; all they need is inspiration!

This got me thinking, is this the same problem that most VC Funds face in India. People with ideas and probably capabilities as well, just lacking the inspiration or the courage to go out there and build a business!

Is this really the problem that confronts VC investors in India?