COMMENTS

This is a joke doing the rounds currently. But, I can't but help draw the parallels with the thriving gen-set/ battery, borewell/ tanker/ bottled-water, car/ two-wheeler industries under the existing regime

HOW TO SELL TOOTHBRUSHES

The kids filed back into class Monday morning. They were very excited. Their weekend assignment was to sell something, then give a talk on productive salesmanship.

Little Sally led off: "I sold girl scout cookies and I made $30," she said proudly, "My sales approach was to appeal to the customer's civil spirit  and I credit that approach for my obvious success."
"Very good," said the teacher.

Little Jenny was next: "I sold magazines," she said, "I made $45 and I explained to everyone that magazines would keep them up on current events".
"Very good, Jenny," said the teacher..

Eventually, it was Little Johnny's turn. The teacher held her breath ...Little Johnny walked to the front of the classroom and dumped a box full of cash on the teacher's desk. "$2,467/-" he said.
"$2,467!" cried the teacher, "What in the world were you selling?"
"Toothbrushes, " said Little Johnny.
"Toothbrushes! " echoed the teacher, "How could you possibly sell enough tooth brushes to make that much money?"

"I found the busiest corner in town," said Little Johnny, "I set up a Dip & Chip stand and gave everybody who walked by a free sample."
They all said the same thing, "Hey, this tastes like dog shit!"
Then I would say, "It is dog shit. Wanna buy a toothbrush?"

"I used the governmental approach of giving you something shitty for free, and then making you pay to get the taste out of your mouth."

 

• thumb_up 27 Likes
• · login or register to post comments

Excerpts from the colunmn by Swaminathan Aiyer in today's Sunday TOI (for the full text, click here)

In the West, innovation is done by scientists using expensive equipment. In India, it's done by every housewife, farmer, transporter, trader and industrialist. It does not require high-spending R&D: it simply needs creativity and imagination. Anil Ambani once said Reliance succeeded through innovation, not invention.

One avatar of jugaad is what management gurus call "frugal engineering", exemplified in the Tata Nano, the cheapest car in the world. India's telecom companies provide calls at Re 1 a minute, the cheapest in the world.  Narayana Hrudayalaya and Shankara Nethralaya provide the cheapest heart and eye treatment in the world.  Indian reverse-engineering of patented drugs is also frugal engineering.

Some management experts warn that jugaad uses any means, legal or illegal, to get a job done. They say bribery and manipulation must not be confused with genuine creativity. I disagree. The creativity in unethical activity is, with rare exceptions, not fundamentally different from the creativity that yields frugal engineering. The incentives and rewards of the political-economic system determine whether creativity is used mainly for unethical profit or heroic productivity.

The hawala market, for instance, is used by drug lords for money laundering. But it is also an example of jugaad, enabling poor migrants to remit money across countries, faster and more cheaply than any formal bank system. Hawala was legal for centuries before modern governments declared it illegal.

Dhirubhai Ambani was the master of jugaad. The licence-permit raj made it impossible for him to progress legally, so he exploited the corruption and cynicism of the system. He exported junk to get profitable import entitlements. He created industrial capacities vastly in excess of licensed capacity. He imported huge textile machines as "spare parts". He engineered highly profitable changes in rules for polyester imports and telecom licences. The jugaad he used to overcome hurdles was not distinguishable from crony capitalism. Yet when the licence-permit raj gave way to a more open and deregulated economy, Dhirubhai used the same jugaad to scale dizzying heights of productivity and become world class. His giant refinery complex in Jamnagar had the highest refining margins in the world, beating the Singapore refineries. He converted to reality his vision of making telephone calls cheaper than a postcard.

Dhirubhai showed that manipulation and world class productivity are two sides of the same coin called jugaad. If governments create business constraints through controls and high taxes, jugaad will be used to overcome those hurdles. But if deregulation abolishes these hurdles, the main business constraints become lack of quality and affordability, so jugaad shifts to improving productivity, quality and affordability. That ultimately makes you world class.

Jugaad is amoral. If laws are oppressive, jugaad will seek ways round the law. Yet this amorality kept Indian business alive in the 1970s when controls were buttressed with income tax of 97.75% and wealth tax of 3.5%. Honest businessmen would have been taxed into bankruptcy. But jugaad, including innovative tax dishonesty, kept Indian business alive, and enabled it to surge when economic policy moved away from insane socialism.

Socialist politicians viewed themselves as golden-hearted geniuses who knew better than greedy Marwaris about what should be produced. Nobel Laureate Friedrich von Hayek pithily called this "the fatal conceit".

Socialist planning was supposed to optimize use of India's resources. But it assigned no value at all to the marvelous innovativeness and enterprise of Indians in every branch of activity.  Five-year plans sought to optimize financial resources, mineral resources (like coal and oil) and administrative resources. But they sought to crush enterprise and jugaad, the most precious resource of all. That has now been liberated by economic reform, and the value of jugaad has gained worldwide recognition.

The delivery of government services — education, health, infrastructure —remains terrible. Here too socialist control needs to be replaced by jugaad.  Alas, politicians and socialist ideologues will not allow it.

How can anyone defy Aiyer's plain and simple logic? His comlumn is must on my Sunday reading list.

• thumb_up 27 Likes
• · login or register to post comments

The government doesn’t fine another government agency, since they are all run from state money. By the same token, an agency of the state doesn’t wind up for reason of loss of business or money; governments make the rules on taxes and money. A private company which has to pay a penalty or otherwise loses money will have to pay from its own coffers, which means from the money it earns. It cannot pass on the demand to the parent ministry or the treasury. The imperative for competition and choice, and keeping the state from being both umpire and player, in other words, isn’t because non-government staffers are intrinsically more efficient or their systems are. It is because they have to, at some measurable point, deliver or pay up; this is not true of the state.

Nothing concentrates the mind as clearly as the prospect of your pants being sued off you if your calculations go wrong. Governments or legislatures may choose not to enforce that option due to lack of will or to help a pal, but it is very much available.

For the full text of the editorial in the New Indian Express, click here

How much more convincing does it need to be?

• thumb_up 27 Likes
• · login or register to post comments

Now that the Commonwealth Games have commenced, glitches and all, we can assess them more soberly than the high-pitched media sound bites of recent weeks. Many critics complain that the Games show India in a terrible light. In fact, they provide a pretty accurate representation of the country.
    
Globally, the big picture shows India as a major success story. In fact, it is largely a story of private sector success and government failure. Many Indian companies have emerged as world class, but government services and corporations have, with some honourable exceptions, remained ridden with waste, corruption and callous inefficiency. The Commonwealth Games accurately mirror this reality: they too represent a mix of private sector success and government failure.
    
The contrast with China’s successful management of the 2008 Olympics is truly stark. But it is not the case that India is universally shoddy. Ambani, Infosys or Tata are known for completing large, complex projects on time and within budget. The public sector, alas, is known for the very opposite.
    
China’s success has been largely government driven. Even so-called private companies in China are often controlled by party bosses and officials. The state mercilessly destroys slums and other structures without adequate compensation when it so feels, as in the 2008 Olympic facilities.
    
The contrast between China’s management of the 2008 Olympics and India’s management of the CWG shows, yet again, that China is largely a government success, while India is largely a private sector success. Economic reforms have enabled the private sector to bloom in India, but many key tasks can be done only by the government — law and order, justice, rural infrastructure, welfare measures, basic education and health, and much more. Unless the government improves its performance dramatically, India cannot hope to catch up with China.

For the full text of the column by Swaminathan Aiyer in the TOI, click here

 

• thumb_up 27 Likes
• · login or register to post comments

Now, if the government sold a majority stake in public sector units, allowing new private sector management to take over, that would hugely improve efficiency. But only minority stakes will be sold.

For the full article by S A Aiyer in TOI, click on http://blogs.timesofindia.indiatimes.com/Swaminomics/entry/selling-family-silver-to-fund

And, that doesn't help!

• thumb_up 25 Likes
• · login or register to post comments