Amit Paranjape’s Blog

Pune based Tech Mahindra wins Satyam bid

Posted in Financial Markets/Economics, Information Technology, Pune by Amit Paranjape on April 13, 2009

According to news reports today, Pune based Tech Mahindra has won the Satyam bid. Here is the coverage in The Economic Times “Tech Mahindra wins bid for Satyam Computers”


The other rivals in the race were L&T InfoTech and the American billionaire Wilbur Ross. This news is already being covered in great detail in all the national business media and I doubt if I can add anything new.


My thought would be from a Pune angle. Pune has been amongst the leading IT cities in India for a while now. Infosys and Wipro have plans underway to expand their Pune centers into their single biggest facilities. Yet, a ‘Pune-based company’ has never been in the big league!


It’s worth noting how Infosys started in Pune in the early 1980s and then moved on to Bangalore. In some sense this void can be filled today! Tech Mahindra has its roots in Pune for many years. Here are a couple of links that provide more information about the company profile:


Tech Mahindra Wikipedia Link

Tech Mahindra Official Website (About Us Link)

Demise Of The Big 3: How Detroit Icons Lost Their Way Over The Past 3 Decades

Posted in Current Affairs, Financial Markets/Economics by Amit Paranjape on December 15, 2008

 A lot has been written about the Big 3 bailout. Majority of the articles published thus far talk about all the current problems that are faced by Detroit. Relatively few have discussed how they got here in the first place. I thought I will add my 2 cents to this angle.


“You bailed out the Financial Institutions to the tune of Hundreds of Billions of Dollars! All we are asking for is a fraction!” This seems to be general line of lobbying (pleading is probably a more appropriate word…) that the Big-3 automakers are taking to the Congress. This, coupled with the specter of 3 Million direct and indirect job losses, is creating an apparently ‘strong’ case for them. Yet, I am glad to see that there is still some opposition left in the Congress. The opposition might still be a moot point though, since the White House looks all set to bail the Big 3 out in any case.


It is worth looking at the ‘If for them…then why not us!’ argument. The big financial institutions had catastrophic failures/near failures, primarily due to the housing bubble collapse and risky investments over the past few years. In some sense, this once in a hundred year event had its origin in fairly recent past. The housing bubble began at the turn of this decade. [For a more comprehensive discussion regarding the 2008 Financial Crisis, please take a look at my earlier articles on the same topic: US Financial Crisis: Who Is To Be Blamed? and US Financial Crisis: The Role Of The Consumer ]


Comparatively, the Big 3 automakers have been in their slow death spiral for decades. In fact one can trace the beginning of the end for them, at the 1974 oil shock. Until then, they had a dream scenario of virtually no competition and extremely cheap oil. Hence it didn’t matter what you built; there was demand for it. Engine efficiency was the farthest on anyone’s mind. Those massive 6 Liter V8 vehicles of the 60s and early 70s, often resembling a small aircraft (with those fins!), would make today’s Hummer look like a compact vehicle!


The oil shock was a big wake up call, and the Big 3 scrambled to make smaller and efficient cars. But somehow design and quality took a backseat. It took the large scale arrival of the Japanese imports in the1980s that shook up the market again. Initially, the Big 3 probably didn’t even notice those ‘tiny’ Toyotas and Hondas. But soon as their loyal customers started to defect, due in no small part because of the persisting ‘defects’ in the American cars (no pun intended!), Detroit began to take serious notice.


Lean Production Systems, Total Quality Management seminars started filling up in the Midwest. Consultants started making money of these Japanese ‘best practices’. It was ironic that the person that the Japanese first learnt Total Quality Management Principles from in post WW II era, Edward Deming, was an American. Apparently in that time period, no American industry cared to listen to him.


As the Big-3 started improving their designs and efficiencies in the 1990s, they were perpetually in a catch-up mode. Japanese automakers had taken over a significant lead and they kept widening the gap. At this stage, it is worth mentioning that the legacy labor contracts of the Big 3 started becoming a drag on these companies, while they were trying to be agile and nimble. On a personal note, I can relate to this design gap through first hand experience. In 1994, as a new graduate student arriving in America, I had a chance to rent two different cars in the first couple of months. One was the General Motors Buick Skylark and the other one, the Toyota Corolla. The differences between the two completely startled me. 


Just when it seemed that Big 3 was narrowing the gap towards the end of the last decade; they made another short-sighted cardinal error! The 1997-98 Asian financial crisis drove oil to a low of near 10 Dollars. Suddenly, it seemed Detroit again got into fond memories of the 1960s and threw fuel efficiency out of the window. Instead of trying harder to close the gap on the automobile portfolio; they thought they had discovered a new winning strategy, to once and for all defeat the Japanese! The Big 3 always had a bigger portfolio in the light truck segment. These gas guzzlers were the mainstay of utility workers, farmers and other small business owners. With oil hitting new lows, the marketing geniuses of Detroit spun campaigns that made these trucks, an essential for a common white collar worker as well! Soccer moms were also in their target sight. By simply slapping on a mini-bus like body on top of the truck chassis, Detroit created something called a ‘SUV’. Soccer moms who till the mid 90s were confined to station wagons and ugly looking small minivans, now had a great option. Not sure, if the sheer size of these things made the white collar workers and the soccer moms more comfortable or safer?!


In the short run, these gas guzzling vehicles got handsome profits to the Big 3 and it appeared that they were finally back on track. Yet the foundation was extremely shaky. Japanese automakers also moved into this space in the late 1990s and once again showed Detroit how those same gas guzzlers could be made more reliable and comfortable. The final death sentence came when the oil prices began a steady rise this decade. SUVs and gas guzzlers were again out of favor and smaller, fuel efficient cars were back in vogue. And the Japanese were not sitting idle either with their R&D; even better fuel efficiency was now available from the newer revolutionary breakthroughs such as the Hybrid Technology. Detroit simply didn’t have any answer for this!


The 2008 financial crisis and resulting recession & downturn was the last straw. But, I think attributing this demise to this crisis is extremely short sighted. As described in this article, the demise was around the corner in any case. The present recession was just the ‘straw that broke the camel’s back’!


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Random Thoughts – A New ‘Wall Street’ Trilogy?

Posted in Current Affairs, Financial Markets/Economics, TV, Entertainment & Movies by Amit Paranjape on December 3, 2008

Oliver Stone’s ‘Wall Street’ made in 1987, starring Michael Douglas and Charlie Sheen is one of my all time favorite movies. Who can forget the one and only ‘Gordon Gekko’?!


I was not following the financial markets back in 1987, and hence cannot relate first hand to that period. Still the way this movie captures the core human emotions; especially ‘Greed’ that transcends across generations, and multiple financial crises, is extremely revealing. And Michael Douglas is fantastic. I am surprised that a blockbuster sequel (or a set of sequels) has not been launched since.


Just think about it; this past decade has provided us with so many great real world plots and scenarios related to Wall Street turmoil! These should be a ‘Dream come true’ for fiction authors and script writers. They say, ‘Truth is stranger than fiction’…nothing proves this dictum more than what is happening in the financial world today!


I am writing this short summary piece to capture my random thoughts around three somewhat distinct financial crises during this decade – with specific emphasis on representative players, events, characters, themes and people psyche, as we lived through these tumultuous periods. These three crises can together form a nice new trilogy! Maybe we can all extol the Hollywood Greats to make these into movies. (As if someone is really listening –J… I for one will definitely watch these movies and also buy their DVDs!)



1. Wall Street 1 ‘The Super Bowl Of Crazy Ads’ – The Dotcom Boom & Bust


Think about Super-Bowl 2000. Even though this was one of the best ever Super Bowl games, it will probably be remembered for something other than the Rams-Titans classic. Who can forget that crazy ETrade Monkey ad?! And Pets.Com? This clearly was an era of ostentatious and over the top advertising of businesses and concepts that hadn’t made a single dollar of profit!


The crazy atmosphere in the Silicon Valley…The BMWs as sign-on bonuses… Stock options resulting in instant multi-millionaires! The new ‘internet’ based model…The doomsday scenario for ‘Brick & Mortar’ businesses… Overnight words like ‘B2B’, ‘B2C’ entering our lexicon.


All this should provide a nice cocktail for a heady movie about this period. You have many rags-to-riches stories. You have Geeks; lots of them. You have teenage CEOs. You have small companies buying out industry icons! And then you have the downfall…the flawed business model, the layoffs, the lawsuits, thousands of these ‘paper millionaires’ seeing their net worth vanish as fast as it had appeared…and the tragic cases of folks who got hit by AMT (Alternative Minimum Tax)…Oh, and through all this period, those naïve average mom & pop investors who chased those ‘hot’ stocks and lost everything? Remember those days when NASDAQ had crossed 5000?! And how very quickly it was

under 2000?!


The media played a part too…the constant hyping about the ‘new revolution’. The ‘This time it is different…’ editorials…new magazines coming out every week…and then, as things got tough, those first references to a ‘Bubble’ with artful depictions on cover pages…Treating Allan Greenspan as a rock star…and then pulling him down into the dumps and accusing him of everything that went wrong! Those few months were just astounding!



2. Wall Street 2 ‘How The Mighty Have Fallen!’ – The Enron-WorldCom Saga


How the Mighty Have Fallen! This probably best captures the 2001-2002 period. First Enron, then WorldCom… From extremely complicated financial dealings and transactions to some fairly straight forward ‘creative accounting’. From shredding documents, to massive companies disappearing overnight…From backroom dealings, to whistle-blowers. The court-room dramas, the extended trials (Aren’t court-room dramas an important staple of movies in the ‘Drama’ genre?) The laid-off employees, the retirees who lost majority of their retirement savings…that small sub-segment of fired workers who posed for Playboy!


The sentencing, the handcuffed CEOs, the somewhat vindicated stockholders…and last but not the least, the massive overhauling of accounting standards, procedures by the regulators, including the congress, resulting in a ground-breaking legislation…this drama extends to Washington as well!



3.  Wall Street 3 ‘The Return of the Great Depression’ – The 2008 Financial Crisis


Well…this one, we are still living through it for the past 6 months…Critics are quick to point out that this is the worst crisis since the Great Depression! Maybe we haven’t even seen the end of the beginning! But then that shouldn’t stop moviemakers and fiction writers from creating something around it! (It didn’t stop them in previous major transformational events in history…)


In my view, ‘Utter Disbelief!’ is what can best describe what we are seeing around us. Who would have thought that legendary century old firms that have driven the course of not just American, but Global Capitalistic Economies and the Free Market System, should just collapse?! This was not supposed to happen in a hundred years! Even the Great Depression had spared these firms.


Pivotal incidents would be quite a few – Bear Stearns to Lehman…One bailout followed by the other. Freddie & Fannie, AIG, CitiGroup, the list goes on…The extremely complicated hierarchical CDOs that no one had any idea about…The absurd levels of leveraging…On one side you have these clueless CEOs, and the other side a rescue team led by a man who until recently was part of that same group! How everyone seems to act like those blind men in that ‘Blind men and the Elephant’ tale.


There are enough grass-roots level themes to talk about here as well…The typical suburban American family that is leading a very comfortable life by leveraging on everything from the house, cars and credit cards. The Chinese factory worker who is fulfilling the needs for the increasingly materialistic American way of life…The Indian IIT Engineer who is solving tough technology problems… (How can we forget ‘Asok’ from Dilbert?)…the stereotypical Indian call center worker… (1 or 2 Bollywood movies have already been made on this character…). There is that classic geo-political agent of brinksmanship here as well; ‘Oil’! And a presidential election to add to the mix. There are enough things here for some exciting story –J



What are your thoughts? Any good books that you have read/you can recommend about the first two crises?




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Innovation In America – Professor Amar Bhide’s View

Posted in Financial Markets/Economics by Amit Paranjape on November 12, 2008


Here is a very interesting interview with Amar Bhide, featured in the Professor Amar Bhide is one of the most respected authorities in entrepreneurship and innovation and is a Business Professor at the Columbia University. Prior to that, he was a Professor at Harvard. He did his studies at IIT and Harvard.


Professor Bhide argues that the US Consumer has been one of the important drivers of innovation. The need to consume increasingly advanced and sophisticated products drives new R&D. He further states that innovation is not a ‘winner-take-all’ race and that America is not competing with China and India as feared by what he terms as ‘techno-nationalists’. Scientific innovation in any country benefits the entire world, but specifically that country (like US) whose consumers want to leverage it to the fullest. Even in the 1920s depression era, Americans were actively innovating, leading to the gains at a later point.


These thoughts are further explained in his new book, “The Venturesome Economy”, which was recently published by Princeton University Press. For more information on Professor Bhide’s work, you can checkout his website.


[Note – I have ordered this book and looking forward to understanding his views in further detail. I will post my interpretations here.]



The Illiterate 21st Century Consumer

Posted in Current Affairs, Financial Markets/Economics by Amit Paranjape on October 17, 2008



In the 20th century, illiteracy was something that was thought to be primarily confined to the developing world. Literacy was very simplistically defined as the ability to read and write. By this definition, nearly 100% of the developed world and an ever growing percentage of the developing world would be termed ‘literate’. In the developing world, it is often repeated over and over that one of the primary root causes of all the social, political and economic problems is lack of literacy. However, now that we are turning ‘literate’, are we really resolving these issues? I would like to argue that merely reading and writing doesn’t constitute true literacy. To be literate, one needs to really understand one’s world that we live in. Today, there are ever increasing tools of knowledge and information. Yet real knowledge is seen to be sorely lacking. This lack of basic knowledge about common things is what I would like to term as the ‘21st century global Illiteracy’. In this continuation in the series of articles on the US Financial Crisis, I explore this phenomenon.



Many of you must have seen the ‘Tonight Show with Jay Leno’. A popular segment in this well-known late night comedy talk show is ‘Jay Walking’. Here, Leno interviews regular folks who are walking by on the streets of Los Angeles. Questions are really basic like…”Who is the Vice President of the US”, or “What does ‘UN’ stand for?”, or “What is the currency of Europe?” It’s amazing the kind of answers you will hear! Many folks don’t have the faintest of clues about some extremely basic facts/questions about the world we live in.


This segment is really funny to watch and I really enjoy it. Now, I agree that this represents an exaggerated view of the knowledge of a ‘common man’ and I am sure a lot of editing goes into it to capture those ‘dumb’ moments. Often times though, this is not that far from the truth. It is a sad reflection of reality.


The modern 21st century consumer is living a dream life with all the benefits of developments in science & technology, social development, democratic governments and cultural freedom. The ongoing information technology revolution that started towards the end of the 20th century has placed any information, literally at their finger-tips. Still many are comfortably oblivious of their surroundings. This utter lack of knowledge of basic information, sciences, politics, history, economics and other disciplines is what I am terming as ‘21st century illiteracy’. No one is expecting the common man to be an expert, a PhD in any of these fields. All that is needed is some basic primary / middle school level grounding in these disciplines. Yet one rarely finds it today in many people.


A popular TV show that has run in different variants in many parts of the world, ‘Are you smarter than a 5th grader’ demonstrates this ignorance. Adults routinely stumble on basic primary school level questions. An interesting example that recently came to light in the US was that of the citizenship test on US history and government that is administered as part of the naturalization process for eligible foreign citizens. Apparently, nearly 70% of US adults ‘fail’ this test! Incidentally, when it comes to sports and entertainment, many of these same people excel at statistics and movie trivia.


Some would argue why this knowledge is even important. My response would be – Why was so much importance given to reading and writing in the 20th century? It was done so that we could understand the world around us and make informed and better decisions and choices. Are we really doing that?


Not just in the 20th century, but throughout the history of human civilization, mankind has progressed due to that constant desire to ask questions, and seek knowledge. “How can I master fire?”; “How can I manage cultivation?”; “What causes the planets and sun to appear to ‘move around’ the earth?”; “What causes diseases? How do we prevent them?” and on and on. Have we simply lost this desire today? Or has the current materialistic world completely taken our focus away? Or are we subscribing to these pronouncements ‘That is not my problem…Or as long as things are fine for me, why do I care!’


Unfortunately today, when it comes to financial markets and the global economy, things are not fine. And this is affecting each and every one of us – not just in the US, but in the entire world. How many people really understood the detailed mechanics of adjustable rate mortgages (ARMs)? How many really took time to analyze the potential risks of these instruments based on macro-economic factors? It is easy to now blame Allen Greenspan for keeping rates at historic lows and thereby contributing to very attractive rates on these ARMs at the beginning of this decade. But wasn’t the consumer simply making an assumption (if at all they understood some parts about the ARM…) that these good rates are going to stay on? Was it just wishful thinking? Yes, to some extent – most US consumers are optimistic in nature and prescribe to this ‘good times will continue’ philosophy. But being ignorant about the basics of economics was the primary culprit. There was also a ‘herd mentality’. Since ‘other people’ were taking these mortgages, why not me? How is this herd mentality different from that of illiterate village folks in a third world country?


Many people today invest directly or indirectly (through pension plans) in the financial markets. Yet many do not understand basics such as valuations, Price/Earnings, Dividends, etc. Even fewer understand bonds and treasuries. On a similar note, in a completely different knowledge discipline, how many patients really understand the most basic information about the prescription drugs that they are taking? If ‘Health’ and ‘Wealth’ are the most important things to most people, then this ignorance is appalling.


Lack of books and other reading material contributed to some illiteracy for deprived people in the 20th century. A bright student in a remote village would find it extremely hard to learn any advanced topics due to the lack of resources. However, today there are no excuses for the 21st century consumer.


Even 15 years back in the US, if you wanted to get some basic grounding on some discipline and learn something new, or brush up some old stuff, you probably had to take some time off and head to the local library. There you were mostly reliant on a good librarian to find the right books/journals for you. And then you had to navigate through the big reference books (often times, on library premises) to get to what you were looking for. Compare that with today’s world. How far have we come in such a short period? Almost all of that information is now available at a click of a mouse! And ‘search’ has become so easy! And yet this 21st century illiteracy continues to thrive.


I find it extremely hard to understand why the same people who spend hours online on social networking sites can’t find time to learn something new about economics. Or about basics in medical sciences. Ultimately, your financial health and physical health are amongst the most important things in the world we live in…Aren’t they? I think first we need to acknowledge this 21st century illiteracy phenomenon. Then, we need to understand it and start actively addressing it. A big change is needed, first and foremost in our attitudes towards knowledge. This change is one of the primary steps to create smart, intelligent consumers who truly understand the global world they live in, and make informed choices.

 [You might want to read these related posts; ‘US Financial Crisis – Who Is To Be Blamed’ and ‘The Clueless Global Leadership’ ]


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