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Sunday, August 28, 2011

Steve Jobs and Tim Cook: Timeline of Work at Apple

Apple's co-founder and CEO Steve Jobs has called it quits. However, he will remain chairman of the company. His successor will be the company's Chief Operating Officer (COO), Tim Cook.

Two Reuters blog infographics, which I found here and here, detail the careers of both Jobs and Cook. Incidentally, the story of Jobs' time at Apple is also the story of the company itself.








Saturday, August 27, 2011

A Reality Check on Market Experts

I am travelling and hence this week's The Explainer will not be published. But let me share this wonderful cartoon, which reflects the truth about so-called market experts. I found this at the Abstruse Goose.







Thursday, August 25, 2011

Go Green: Eat Insects!

Any discussion on climate change throws up a lot of terms like global warming, acid rain, greenhouse gases, chlorofluorocarbon, and carbon trading. 

I am not going to any of these; instead I will share an interesting infographic on how our consumption patterns influence emission levels. I found it here

This one says that eating insects, rather than red meat and other types of meat, can reduce emission levels. There are a lot of communities around the world that eat insects; take for example, the folks in Thailand and China and a lot of tribes in the Agency area in Andhra Pradesh (north coastal Andhra Pradesh).

However, some of you will find the idea of eating insects revolting; whatever I found this seriously share-worthy!

I wanted to title this post, 'What's your favourite insect?'. But then I settled for a little less sensational title!


Tuesday, August 23, 2011

Google: A Short Pictographic History

Last week, Google announced that it would buy Motorola Mobility, for U.S.$12.5 billion. Along with the handset business buy, Google also gets hold of over 17000 patents, which will come in handy in its fight against rivals, like Samsung and Apple.

Reuters has an interesting infographic that details the timeline of Google's products.



Monday, August 22, 2011

The Arab Revolutions: A Story in Pictures

The Arab Revolutions started on December 17 last year. Check out this photo and article series that traces the evolution of the so-called Arab Spring. I suggest that you check out the relevant articles by clicking on the relevant links. I found it on The Economist Web site.



Saturday, August 20, 2011

The Explainer: Stock Market - Part III

About an hour ago, the courier guy delivered a parcel containing a copy of Monsoon by Robert Kaplan. Geopolitics and geostrategy have always fascinated me; in fact, along with history, philosophy, and literature, I just love these two ideas. 

I will keep this post short, that is because I am eager to start reading the panoramic sweep of ideas that this book promises. In this week's The Explainer, I will focus on factors that influence share price. 


What factors influence share price?

The major factors are:
(a) company performance & dividend income;
(b) speculation;
(c) industry prospects, and
(d) government policy.


(a) Company Performance & Dividend: 
Investors often keep an eye on a company’s performance, especially with regard to its earnings. Often, you must have observed that your investor-parent / uncle / sibling or simply any player in the stock market pays great attention to the declaration of the company’s earnings (quarterly or half-yearly or annual).

If a company is running profitably, investors would definitely show interest in owning shares of such a company. As the business churns out profit, it may reward its shareholders with rising share prices.

Also, some investors buy shares with an eye on dividend (distributed profit; return on investment in shares). When the company declares dividend, it distributes the profit among the shareholders. A company that declares dividends on a consistent basis will attract investors.

However, there is demand from investors even if the company does not declare dividend. Thus is because if the company does not declare dividend, it would convert the profit into cash reserves, which can be used to buy other companies, invest in better technology, and to ride over rough market times.

For example, Apple Inc. has not declared a dividend since 1995! It is sitting on a cash pile of U.S.$75 billion. Its share price has gone by more than four times in the last four years. I think you have got the point.

(b) Speculation
In India, most people invest to reap a profit in the short term, and not to maximize the value of their capital appreciation in the long run. Given the nature of India’s stock market, speculation is the norm, not the exception!

Speculation can lead to volatile movement in share price, even in a short time. A few years back, in a mail to a student I explained speculation in the following manner:

You buy the shares of Company A because you believe somebody else will pay more for it in the future. Now the reasons for the expected price rise do not really matter. All that matters is the belief that the share price will rise. Such speculators (short-term traders) don’t base their buying behaviour on factors like company performance. Most bubbles in the stock market are the result of large-scale speculative trading. It is in the nature of a bubble to burst, and when it bursts, it takes with it a large number of speculators down the drain.

In the same way, a company’s poor performance, poor earnings outlook, missed dividend payment, or even speculation can drive its share price down. 

(c) Industry Prospects
Another major factor that plays a major role in determining the share price is the industry outlook. Investors (am not talking of speculators) like certainty; stability is good for business. The nature of business environment often determines the growth of an entire industry. 

For example, the current outlook of the U.S. and Eurozone economies is pessimistic and negative; these are the major markets for the IT and ITeS (IT-enables Services, like BPO) sectors. Now if the clients in these markets scale down their deals with Indian companies in these two sectors, the latter's performance will also suffer. This will, in turn, impact the revenues, profits, and overall business. It is these negative factors (i.e. downturn and fears of recession in the U.S. & Eurozone economies) that have brought down the share prices of IT companies in the last few weeks.

(d) Government Policy
Government policy can also play a vital role in influencing share prices. The government's has a positive attitude toward a particular sector / industry can help send positive signals to the investor community. Government incentives may include tax holiday and supply of land and power at concessional rates.

For example, if the government gives tax holiday (no tax payment for a specific number of years) to companies in a specific sector, then the company need not pay tax, thus saving precious money and build reserves or pay dividend. 

There is another major factor: the company's performance against its peers. But I will stop here. Monsoon is waiting for me! Thank you!

(Please select your reaction to this post; see below.)

Thursday, August 18, 2011

The Evolution of Knowledge Management

Knowledge Management (KM) is a fast-growing domain. Here's an interesting infographic that traces the evolution of KM. I found this on the SocialCast blog here.

Click on the graphic for a larger view.





Tuesday, August 16, 2011

Technological Revolution: Some Milestones

Technology has seeped deep into our lives, so much so that we can not think of running through a day without our communication devices, like mobile phone and the Internet.

Was it always like this? Not really. Electronic mail (e-mail) was created by Ray Tomlinson just four decades back, in 1971. Incidentally, Ray, the father of the e-mail, was also the first to use the @ symbol in the address bar. 

Similarly, the first cell phone was created by Martin Cooper of Motorola in 1973. It is for this reason that Cooper is often called the father of the cell phone. 

Just to bring it in here, yesterday Google, the maker of Android, acquired the pioneering Motorola Mobility for a little over U.S.$12 billion, along with over 17000 patents. The deal is likely to usher in some real hardcore mobile wars. In the dynamic mobile ecosystem, it is now going to be Google vs Samsung vs Apple vs RIM vs Nokia. 

Here is an infographic, found at Rackspacethat captures the evolution of the Technological Revolution. 




Monday, August 15, 2011

How the U.S. Debt Deal Will Work

After months of public wrangling over the debt ceiling and ways to reduce deficits, the Democrats and the Republicans finally reached a deal on July 31. The public spat did much to damage the global image of the U.S. and eventually led to a downgrade in its much-vaunted AAA credit rating.

The New York Times gives an interesting lowdown on how the debt deal will work. You can find more here.

Saturday, August 13, 2011

The Explainer: Cash Reserve Ratio


In 'The Explainer' this week, I will focus on a not-so-well understood economic term: Cash Reserve Ratio (CRR). The Cash Reserve Ratio (CRR) is used by the RBI to control the supply of money in the economy. The amount of money determines the rates of interest and the prices of different commodities.

What is Cash Reserve Ratio?
In terms of Section 42(1) of the RBI Act 1934, Scheduled Commercial Banks are required to maintain with RBI an average cash balance, the amount of which shall not be less than three per cent of the total of the Net Demand and Time Liabilities (NDTL) in India, on a fortnightly basis and RBI is empowered to increase the said rate of CRR to such higher rate not exceeding 20% of the Net Demand and Time Liabilities (NDTL) under the RBI Act, 1934.
In simple terms, all scheduled commercial banks must keep a 'certain percentage of their total time and demand liabilities with the RBI'. 

This is all Greek to me. Please explain the definition.
A liability is also called a loan. Here, a liability is simply a deposit account with a bank, i.e. what we call a deposit is called a liability by the bank as it would have to repay us (the money in that account). In other words, a deposit is our LOAN to the bank (and hence the interest paid by the bank).
There are two kinds of liabilities (hereon, we will use the term, 'deposit'): (1) time deposit, and (2) demand deposit.

Explain Time and Demand Deposits.
A Time Deposit is a type of account from which you can withdraw your money ONLY after a specified period of time. An example is a fixed deposit account. Hence, it is also called Term Deposit.
A Demand Deposit is one from which you can withdraw your money on demand. For example, from your Savings or Current account, you can withdraw money at anytime. (Also, you must have observed that an ATM is card is typically issued on these kinds of accounts, though they are also issued on some special types of fixed deposits).

Now, having understood the backgrounder on deposits, let's go further on CRR. 
Under the CRR, every scheduled commercial bank has to keep a certain percentage of such deposits with the RBI. The percentage lower limit is 3% while the upper limit is 20%. The current CRR is 6%. (You can access these data points here.)

How does this affect people like us and the economy in general?
As mentioned earlier, the CRR is used by the RBI to control the supply of money in the market. The amount of money determines the rate of interest and the prices of different commodities.
How does this work?
0.25% roughly equals about Rs8000 crore (Rupees Eight Thousand Crore only).
Let us say the RBI increases the CRR by 0.25%. This would mean that banks would have to keep more money with the RBI (Rs8000 crore will go into the RBI). This would reduce the money available with them. So this brings down the overall money supply in the market. A lower money supply would raise the interest rates (as demand for money is always high).
Now look at the reverse scenario. A reduction in CRR by 0.25% would release Rs 8000 crore into the market. As the money supply rises, the interest rates decrease. 

What do we do when the interest rates are high?
Common sense dictates that when interest rates are high we SAVE money and not Spend it. On the other hand, lower interest rates would make us SPEND more and not Save.
Lower interest rates would boost demand for goods and services. In the short run, this results in inflation as supply may not be able to match consumer demand. 
However, in the last three years, the RBI has raised the CRR from 3% to 6%. A higher CRR would mean that there is less money in the market. So there will be less money with people, which would mean that their demand for goods and services would be low. So the prices would be low. Hence inflation will be low. 

Just think about an increase in CRR of 3% in about three years; over Rs2 lakh crore has been sucked out of the system into the RBI! Though such a large amount has gone out of the system, it still has not brought down the rate of inflation.
As we can see today, inflation is very high and is impacting the common man in a very negative way. The RBI has tried various measures, like raising the CRR, to bring down inflation but to no avail. 
Sometime in the next four weeks, I will write on why the inflation rate is so high and how higher interest rates may impact economic growth in a negative way.

(Please select your reaction to this post; see below.)

Friday, August 12, 2011

Note on The Explainer

'The Explainer', which appears every Friday in this space, will be published tomorrow, i.e. on Saturday (August 13). 

Thank you!

15 Most Heavily Taxed Nations

If you believe that the personal Income Tax rates are high in India, spare a thought for the citizens of these 15 most heavily taxed nations in the world. The source for the infographic is Turbo Tax.

Please check out the Strange Tax Law under each country's name. 




Thursday, August 11, 2011

Get to Philosophy Game


For most MBA aspirants, philosophy is a dreaded word. Most aspirants dislike philosophy-themed RC passages. I guess this comes from a (general) lack of interest in general reading, and more particularly, in reading philosophy. 

Immanuel Kant’s ‘Critiques of Pure Reason’ was the first philosophy book I read. At the time, I was in Class X. I understood most of the stuff; however, whatever I did not understand I simply ignored it by moving to the next line or paragraph or page or chapter!

Last night, I came across this wonderful tech tool, which links ideas (topics) that you pick up on Wikipedia, including almost any random topic, to philosophy; this idea is being called the ‘Get to Philosophy Game’.

For someone who loves philosophy, this wonderful tech tool has only reinforced my belief that philosophy is the mother of all thought and vice-versa.

Here’s Wikipedia on the ‘Get to Philosophy Game’:
The object of the 'Get to Philosophy' game is to click on the first link in the main text of a Wikipedia article and repeat the process. As of May 26, 2011, 94.5% of all articles in the English Wikipedia lead eventually to the article Philosophy. The rest lead to an article with no wikilinks, links to pages that do not exist, or get stuck in loops.
I tried this with some random words: Ratan Tata, Hyderabad, Bharat, Cricket, Rig Veda, Colombia. And yes, all of them linked back to philosophy!

Here is the end result.


I found this tech tool here. Try your combinations. Trust me you will also agree with my thought that philosophy is the mother of all thought and vice-versa.

Media's Double Standards & Mexico's Deadly Gangs


  • Link-fest on how the U.S. debt downgrade & economic turmoil might impact the Indian IT sector. (Economic Times)

  • Mexico's deadly gangs are spreading their tentacles. (BBC)

  • The real solution is growth. (Harvard Business Review)

  • Indian media's double standards - The Sohrabuddin Killing. (The New Indian Express)

Wednesday, August 10, 2011

Guest Column: Mahip Rekhani on Demat Account

A few weeks back, I published The Explainer: Stock Markets – Part I on this blog. The post generated tremendous positive reviews; however, a few readers commented that they could not understand the note on demat account. 

About two days after I published that post, I received feedback from Mahip Rekhani, a management graduate from the Indian Institute of Management Indore (IIM-I). After reading the comments on the post, he sent me a mail with a short explanation of demat account.

Find below Mahip’s wonderful short note on demat account, aimed at helping confused readers. His note is brief and informative.

(a) Demat is nothing but holding your physical shares in a soft copy form, i.e. earlier one used to get hard copy of the shares, now they are issued in soft copy form.

(b) Demat account in India is opened with the National Securities Depositary Limited (NSDL) and Central Depositary Services Limited (CDSL).

(c) Opening a demat account can be done through a depository participant (basically, an agent), which can be a bank or a broking house.

(d) Your demat account is mobile, i.e. it is not bound with an agent and can be shifted to another service provider.

(e) In addition to a demat account, an agent may also provide an investor with a trading account in order to facilitate buying or selling of shares.

You can check out Mahip Rekhani’s Facebook profile here.

My profound thanks to Mahip!

Monday, August 8, 2011

In Perspective: European Economies

Following the first-ever downgrade of the U.S.'s credit rating from AAA to AA+, global markets are in turmoil. There is a bloodbath in almost all important stock markets. 

(Read The Explainer on Credit Rating.)


Its just not the U.S. economy (and the impact of the debt rating downgrade) that is giving the world the jitters; for three years now, countries in the European Union have emitted negative vibes and have been a constant worry for investors. The Economist has an interesting interactive feature on the multiple crises (including growth & debt) that are gripping both major and minor economies in the Eurozone.




The interactive graphic above (updated July 25th 2011) illustrates some of the problems that the European economy faces. GDP picked up in most countries through 2010 but there were marked differences in performance. Germany was especially sprightly: its economy expanded by almost 5% in the year to the first quarter of 2011. But GDP in Greece has crashed under the weight of austerity; Ireland contracted sharply in late 2010; and Spain’s economy is barely growing. 
Click here for more.  

Sunday, August 7, 2011

Weekend Music Video: Like a Rolling Stone

After many weekends, finally a music video. Bob Dylan's Like a Rolling Stone is ranked as the greatest song ever written. 
Once upon a time you dressed so fine
You threw the bums a dime in your prime, didn't you?
People'd call, say, "Beware doll, you're bound to fall"
You thought they were all kiddin' you
You used to laugh about
Everybody that was hangin' out
Now you don't talk so loud
Now you don't seem so proud
About having to be scrounging for your next meal.
Check out the complete lyrics here



Friday, August 5, 2011

The Explainer: Credit Rating

In the wake of the twin crises of Eurozone economy and U.S. debt ceiling, the concept of credit rating has come into sharp focus. This week's The Explainer features a Q&A on credit rating.

What is Credit Rating?
Any form of debt (i.e. money borrowed) has to be repaid. So before you lend money, you would like to perform a background check on the borrower’s repayment capacity, i.e. ability and willingness to repay the debt. In other words, this background check is used to test the creditworthiness of the borrower.

Based on the result of the background check, a credit rating is used to assess the creditworthiness of a borrower or issuer of debt.  This kind of credit rating is assigned by a credit rating agency.

Name some famous Credit Rating Agencies.
Globally, there are three famous credit rating agencies: Standard & Poor’s (S&P), Moody’s, and Fitch. ICRA, CRISIL, and CARE are some of the credit rating agencies in India.

On what basis is Credit Rating assigned?
These agencies assign ratings to issuers of debt, such as companies and governments. To arrive at a credit rating, the agencies evaluate not only current and historical information but also assess the potential impact of foreseeable future events on the borrower’s capacity to repay the debt.

While assigning a credit rating to a country (like India), the focus is on political stability, monetary stability, impact of global events on the country’s economic and political stability, and overall debt burden.

When it comes to rating a company for its creditworthiness, the factors taken into consideration are:  company’s past and current performance, industry profile, company’s position in the industry and how does it compare with its competitors in the industry, revenue model and cash flow, projected earnings, current debt load, corporate governance, and accounting practices.

If a country or company has AAA rating, what does it mean?
The AAA (triple A) rating is the highest possible rating that can be given to a country or company. S&P says that it gives AAA when there is an “extremely strong capacity to meet financial commitments” and is the least likely to default on its debt payments.

The major benefit of AAA rating is that it helps a country or company borrow at low rates of interest. This is because lenders know that lending to such a borrower comes with low risk as it would almost not default.

Important to remember:
Credit ratings reflect relative opinions about the creditworthiness of a borrower, from the strongest (AAA) to weakest (D). 

For example, a company or country that is rated 'A' is only less likely to default on a debt payment than a country or company with a 'BBB-' rating. It is not that it will not default, but only that the possibility of a default is less likely than those rated below it. 

Also,
 note that different credit rating agencies may assign different credit rating depending on its analysis of the company or country's situation.

In the space below, you will find three different graphics:
 

(a) Types of Credit Ratings and what they mean:





(b) Current Global Credit Ratings




(c) Current Credit Ratings assigned to Eurozone countries:
The Greece Mess
As you can deduce from the last graphic, Greece is on the verge of a default while Portugal runs a substantial risk of default. 

For want of space, I will share only a short backgrounder behind the credit rating assigned to Greece.

Just look at Greece's financial condition: its external debt is at U.S.$380 billion, which is 142% of its GDP! Its economy is not doing well; in fact, its GDP contracted by 10.2% last year (i.e. its GDP fell below previous year's amount). Some of its debt was due for payment; however, it does not enough money to pay back the huge debt it has accumulated over the years. Hence it had needed bailouts (emergency funds) to overcome the debt payment crisis. In fact, you could apply, more or less, the same reasons for both Ireland and Portugal. 

I know this was a difficult topic to deal with; but I am sure that since I have used pretty little jargon, you will understand most of this complex stuff.

(Please select your reaction to this post; see below.)

Who's Laughing at the U.S & Other Reads


  • European Central Bank and the Eurozone Crisis. (BBC)

  • North Korea is one of the most politically and economically isolated nations in the world. Here's a rare set of photographs that captures life inside the Hermit Kingdom. (The Independent - Article - Pictures)

  • 2G Scam Saga: M. J. Akbar on the Revenge of the Scapegoat. (India Today)

  • Who's Laughing at the U.S. (FP)

Thursday, August 4, 2011

100 Years of IBM

Today's short post features of one giants of the technology world. IBM, one of the pioneers of the IT world, has completed a century! Before you check out this Reuters infographic that details the milestones in the eventful hundred years of IBM, here are some basic details about the technology behemoth: 

  • Founded: 1911
  • Originally name: C-T-R (Computing Tabulating Recording)
  • CEO, Chairman & President: Sam Palmisano
  • HQ: Armonk, New York
  • Nickname: Big Blue
  • Turnover: U.S.$99.8 billion (2010)




Wednesday, August 3, 2011

Three Decades of HIV

Today's post is neither on economics nor on politics. However, it is in many ways a malaise that is symptomatic of the society's and government's rotten attitude toward a disease called HIV.

Ever since its discovery, HIV has been described as a 'modern day scourge'. While it is only a disease, its occurrence, unfortunately, often brings ostracism and social stigma. 

While no single effective cure is available, anti-retroviral drugs often slow down its spread and are effective in prolonging life. However, such drugs are very expensive and are beyond the reach of most HIV patients, especially in Sub-Saharan nations, where the incidence of the disease is widespread.


HIV can devastate not just a country's social fabric but also its economy. The African nation of 
Botswana is a case in point. For nearly two decades (1980-90s), it experienced one of the fastest economic growth rates in the African continent. In its wake, it generated employment, brought higher incomes, helped gain access to education, sanitation, and healthcare; all these brought about a general improvement in the overall quality of life for lakhs of people in Botswana.

However, all these benefits of economic growth are threatening to unravel because of the widespread prevalence of HIV in Botswana. The current
 national prevalence rate, i.e. rate of incidence, among 15-49 years old is 24.8%! 

As an entire generation falls victim to HIV, families have to spend more money on buying medical care for the afflicted, thus reducing the family's access to a better quality of life (including reduced expenditure on food).


Also, as productive people contract HIV, they can no longer work (because of health conditions and social stigma), thus robbing the economy of its productive workforce and the family of its breadwinner. In fact, to put the matter in perspective, by 2020 Botswana would lose 20% of its farm labour to HIV. To this, add another fact: between 1999-2005, the country had lost 17% of its healthcare staff to HIV. 


A few years ago, the UNDP had estimated that by 2010, nearly 20 per cent of all children in Botswana will be orphaned. The situation for the children is likely to get worse as the primary care-givers (
in the absence of dead parents) - the current generation of grandparents - begin to die. To compound the misery of these children, they will have to drop out of school to work and earn to contribute to family income. 

If you believe that faced with a tragedy of such gigantic proportions, people in Botswana would be sympathetic to people living with HIV, then you are mistaken. Social stigma and boycott continue to dog the victims of HIV. Most people are socially boycotted; they suffer economically too as they are denied jobs.


Here is a graphic that captures the history of the HIV. As the graphic shows, I sourced it from Reuters.





(Please select your reaction to the post; see below.)

Tuesday, August 2, 2011

Rupert Murdoch's Global Media Empire

Rupert Murdoch owns News Corporation, one of the world's largest media companies. The company's media products reach practically every part of the globe. Such media tycoons have the power to shape and manipulate news and information to their taste or political and business interests, just like the villainous Elliot Carver in the James Bond flick, Tomorrow Never Dies. Yes, it is scary!

You must have read about the phone-hacking scandal involving the News of the World, Britain's largest-selling tabloid. (If you wish to know more about the key players in the phone-hacking saga, click here for a terrific graphic.) It was closed down after it got mired in what is probably the worst crisis to have hit Murdoch's media empire. In fact, he was grilled by the British MPs in Parliament, an episode telecast live across the world. 


Indians know him as the guy who owns STAR Network, which runs a bouquet of channels including STAR Plus and Channel V. 


Here is a Reuters infographic that captures Murdoch's global media empire.





(Please select your reaction to the post; see below.)

Monday, August 1, 2011

The Lowdown on the U.S. Debt Deal

What is the Debt Ceiling and other pertinent questions. (ProPublica)

Reaching a Deal (BBC)


Democrats & Republicans: Who got what in the U.S. Debt Deal (WaPo)


Has the bitter acrimony preceding the debt deal done lasting damage to the U.S.'s global standing? (NYT)


Click here for an interactive feature on who owns the U.S. debt.