The sadhu's dreams, gold and swiss bank accounts

So the sadhu dreamed of 1,000 tons of gold (amazing how precise his dream was, how come mine never are?).. let us suppose it is actually found and the UP government gets it. What will happen to the economy? For a start, certainly the UP government will get wealthier – presumably they will sell the gold and raise cash which they will proceed to spend. Where will that cash go? Back into the hands of people – which people? Probably government contractors, party workers and the like. So what has happened? Has the total wealth of UP increased? It is hard to see how it would. The main effect would be to transfer wealth towards contractors and party workers. Will the total money supply increase? No, because the UP government cannot affect money supply – only the RBI can. The total amount of gold in the economy will certainly increase – which will cause gold prices to fall and those who hold gold today will lose some of their wealth. Since they are mostly haorders, perhaps that is what they deserve. Then there is a clamor for getting the black money back from Swiss Bank accounts (this is also a certain sadhu’s dream, of course, so the two are really the same) – after all, there is much more of it than a few tons of gold is worth. The money in swiss bank account is presumably in the form of dollars or swiss francs, not INR. If that money is brought back, it will have to be converted to INR first, or kept in the reserves of the RBI in its current form, just a transfer of ownership. If it is converted to INR, the INR will certainly rise relative to the USD and euro and so on – which may seem like a good thing, but just ask my friends the software exporters..!. Apart from the price effect, though, does the wealth of the country increase? Again, hard to see how this can happen. It is already the wealth of the country, since it is presumably held by Indians for whatever purpose, and will be spent by them for whatever purpose, sooner or later. The wealth will simply get transferred from private hands into the hands of the government. So, again, it is a matter of wealth transfer not wealth creation. If we think the government spends money more wisely that private individuals do, we should welcome such a move – if we think not, we should not... simple as that.

Organize by Business Model

The first thing any new CEO or COO does is restructure the business. It shows he is in command, shows he has new ideas, he is bringing in wisdom from outside the company, and impresses the board that something is happening. Given that this is inevitable and has its merits, anyway, we could usefully think about a central question: how should organizations be structured? Based on my 28 years of experience, mostly with engineering and IT services companies, I think the best answer is: organize by business model – not by geography, not by product, not by vertical.. There are certainly many good arguments to suggest organization by vertical (business domain) is a good thing, especially for IT companies, to do. If nothing else, it forces the company to learn the language of its customers – if you are the head of the Financial services vertical of an IT company, certainly you will begin to understand the business concerns of the financial services industry. The trouble is, even within a vertical, there are many ways or modes of providing services: product, solution, services, bodies.. each of them has a different business rhythm, a different set of things we have to manage well, in order to be successful. Even within services, T&M contracts have to be managed differently than Fixed Price contracts. If we club them all within a vertical and get the same person to manage them all, he/she will manage none of them well. It is like trying to drive three or four cars at the same time – juggling is easy compared with this. The company’s delivery engine needs to be fine-tuned machine – and every business model requires a different kind of tuning.

Technology and education

What is one to make of this new wave of education on the net (MOOCs), ipad apps for mathematics, and what not? Does it spell the end of schools and universities as we know them? I seriously doubt the first - schools are really extended day-care centers, and will always be needed as such, whether any learning happens in schools or not. The consequences for Universities is probably more real and imminent. Christensen's model of disruptive innovation gives us some helpful pointers on how to think about it..MOOC and apps certainly represent 'disruptive innovations' - the path is likely to be something like this: they will work in some corner of the market for which there is no alternative, or for which the requirements are different from what University education provides, will gradually prove themselves there, and will probably take over the mainstream market in about 20 years time. What are some applications/segments where technology-enabled education will work? Think rural Indian communities (no alternative), or corporate training (where degrees, diplomas, research and brand dont matter, only the quality of the material counts,and cost is also not a primary driver)..

my prediction on the dollar exchange rate

I am always surprised that people are shocked.. shocked, I tell you! that the USD is at Rs. 56 or 57 to the INR. In fact, is it completely predictable.. the exchange rate is simply the price of one currency in terms of another. Over the past 20 years, the USD has declined in purchasing power (as measured by inflation) by about 2% p.a. compounded. The INR has declined by about 7%. So what else would we expect? The law of Purchasing Power Parity (PPP) states that (over long enough periods), exchange rate changes track inflation differentials.. it makes perfect sense. The exchange rate has changed only 3% p.a over this period - we should count our blessings. It should have changed 5% (7 minus 2).. I confidently predict that, in 2023, the USD will be worth somewhere between Rs. 72 (if we continue the current average depreciation of 3%) and Rs. 85 (if we stick to the 5% difference in inflation).. in the long run, all exporters can take heart - the exchange rate is going to move in a positive direction - it simply has to, the law of PPP cannot be denied in the long run.