Ravi, in Conversation

Energy Efficiency Pricing Model

noreply@blogger.com (TeleRaviRays) — Mon, 18 Jul 2011 04:52:00 +0000

Energy is finite in nature as defined by the currently known principles of physics and thermodynamics. The process of creating energy cannot be completely efficient and involves the loss of energy in some form or the other and not only that, certain processes or certain outputs can be harmful to the environment around us. Combine this with ever-increasing need so that we keep the engines of economic growth chugging, and we have the biggest problem for human survival in front of us.

Despite the increasing number of options for energy production and dissemination, most of the world depends on proven fossil fuel sources. One reason for this is the availability and concurrent lower cost of producing such energy. But our current model of pricing energy based on supply and demand is heavily flawed since it does not take into account the environmental ramifications of each source of energy. For instance, availability of already built infrastructure and resulting economic and political costs of dismantling such facilities is what drives the adoption rate of newer technologies, rather than the amount of good it does to the world. The environmental costs of a source of energy are completely ignored by the current pricing structure. Take for instance the first generation biofuels initiatives in the United States, many of which are currently proven to be more damaging to the environment that the very fossil fuels that they want to replace. However, an infrastructure, a political mandate and a regime of subsidies is already in place and trying to alter them can be a huge challenge.

When supply and demand are the only factors determining price, of course, along with the volatility due to speculation, we have a situation where we have multiple competing technologies, some with an unfair advantage over others due to factors other than what is best for the long term. As long as fossil fuels remain cheaper than alternative sources, the world will continue with the "drill baby, drill" mantra, piling on economic costs in the form of environmental damage. Imagine a situation where the price of oil was to include a component of cost to clean up the environment. The price of nuclear energy will include the costs of getting rid of nuclear waste. All forms of energy will be pitted against each other based on their inherent worth, and demand will go for the supply that becomes cheaper.

The beauty of such an energy efficient pricing model is that is can even affect the choice of a consumer by increasing the price of the less efficient filament bulb in comparison to a compact fluorescent lamp. An organically manufactured food item can be cheaper than a food that uses growth hormones, and chemical fertilizers. In the same way, your super energy efficient car will be cheaper than your neighbour's gaz guzzler, though the cost of manufacturing your machine was higher. In some way, such a pricing mechanism is revolutionary in terms of bringing transformation in energy choices.

How will one go about implementing such a model? Assuming that energy efficiency is measurable in terms of horse power output for unit input, as long as we consider even environmental factors as input costs, and take disposal of residues as part of the product cost, we should be able to determine a "Cost to Environment" factor from a few samples from each energy production mechanism or energy consuming equipment. The easiest way will be for a global agency to collect this as a tax at source. This tax will be ultimately passed on to the consumer, and the consumer will be paying more. But, the long term effect will be that this pool of funds can fuel further research in the most promising technologies. Since all production mechanisms or consumption mechanisms are lossy, the cost in general will go up. But this ideally will push the demand to the cheapest available option, which will also be the best to the environment. For instance, our auto-makers will finally get an incentive to produce more energy efficient cars. The governments do not have to earmark new funds for research, as the model contains a feedback loop to push it towards better ends.

Controlling Bias in Small Organizations

noreply@blogger.com (TeleRaviRays) — Thu, 04 Dec 2008 21:07:00 +0000

A small organization has many advantages that a large organization can hardly duplicate. One of them is the proximity between different stakeholders of the organization that fosters synergetic teamwork and an open-minded culture. As much as we enjoy the fruits of this benefit, we often overlook the lurking menace in the form of personal bias. Decisions in a small group often tend to be filtered based on personal judgment rather than what works best. When bias creeps into a small organization, the decision-makers award all the opportunities that arise in that organization to the same set of people, effectively letting them carry home the rewards and, at the same time, further enhancing their prominence among peers.

Some people combine the positive bias that supports them with their personal relationships to take up more opportunities than they can possibly handle. We cannot deny that there are a smaller percentage of people who are in the limelight because of their talent, even though they do not specifically nurture that idea. In smaller firms, the two groups of people mentioned above end up getting more responsibilities than they ever asked for. News spreads fast in a small organization and capable people who do not fall into either of the above groups feel under-utilized and unmotivated. Though we need to give a fair amount of weightage to personal judgment, we can easily see that determining just based on bias can be detrimental to a small organization. For instance, even though Person A and Person B have similar skills to perform a certain Task A, Person A gets selected if Person A had been selected to a analogous role earlier or if the selector has heard about Person A doing well in another unrelated and different Task B within the same organization. But as we can find out, this selection strategy is not always the best. In the first case, it is possible that Person B did not get an opportunity to demonstrate his or her prowess through prior experience though equally capable. In the second case, Person B might have more skill in that specific area of responsibility compared to Person A, even though the decision-making is clouded by Person A’s performance in Task B. But since the decision-makers have already made up their minds, Person B cannot do much to change their verdict. I suggest two alternatives to remove bias and create an environment that prevents some people becoming “more equal” than the others utilizing a favorable bias: distribution of opportunity and process-orientation.

Distribution of opportunity by making sure that one person does not get involved in too many activities at the cost of others who are equally interested or skilled is one way to solve this issue. A pertinent question at this point is the capability of Person B to perform. Assuming that small organizations are usually highly selective, we can imagine that each person is an iceberg, and that 80% of the responsibilities would not require more than 10% of their skills. Even otherwise it is usually the right opportunity that creates leaders, not higher skill, as we can learn from the biographies of world leaders. As we mentioned above, the takers of the first few opportunities usually stand to gain a positive bias for every future opportunity that may arise. By making sure that these first-movers stay away from grabbing every other opportunity, we may find potential talents who may outshine the first-movers. This actually works to the benefit of small organizations who cannot rely on a few people who take all the work and make (Hidden here is some suggestion for a person who joins a small firm and wants to make it big: Grab those first few opportunities – you’ll be there to stay!)

Process-orientation is another approach to solve the bias problem. Process-oriented firms are usually the big organizations – and they implement processes for completely different reasons. Big organizations want to make sure that their size does not constrain them to end up becoming the biblical Towers of Babel. By implementing strictly enforced processes for even minor activities, the big organization tries to make sure that each of its departments work towards the same objectives with complete transparency without a need to employ too many people to manage the show. Also, they can make sure that the work is done in the same manner even when the responsible people move or quit. In other words, big organizations avoid silos through process-orientation. The automation brought in by an efficient process is effective to a small organization where every decision-maker and even every individual acts as a silo, and is prone to personal bias. We need to notice that we often find the small organization to be lacking in efficient processes, mostly because the inputs and the feedback channels to a process have minimal contribution. Small organizations are often reluctant to adopt defined processes and treat them as a burden rather than as a necessary value-add. When we probe deeper, we can find that the culprit is usually the same – it’s personal bias that makes the implementation of processes complicated in a small organization!

Quo vadis, finance professional?

noreply@blogger.com (TeleRaviRays) — Wed, 22 Oct 2008 03:36:00 +0000

Though the finance sector has seen an erosion of jobs, I believe that this is short-term, and just one of the side-effects of being greedy and not focusing on the bigger picture – going too thin to get too deep, whether it is into progress or into calamity. In other words, my premise is that we are limiting a lot of our energy and effort into a subset of economics, viz. finance, without considering the macro-economic implications and micro-economic fundamentals that lie embedded in the time value of money.

The debate between the behavioral economists and the quantitative economists has been widening as new events unfold, and we find ourselves scampering around for all-encompassing explanations and accurate predictions of the future. We still lack an understanding of what we have ourselves created in the likes of asset-backed securities and credit default swaps, their implications, and why we failed to predict what was coming. We do not know what a drop in the interest rates mean, or where the 700-billion dollar bailout package is going to end up. This, I would argue, implies that an influx of fresh talent into finance is increasingly necessary. We can smell opportunities for budding finance professionals who have the credentials to take a long-distance satellite snapshot in order to drill deeper, by effectively integrating other fields of management, literature, history, psychology, biology and technology into our financial thought processes – which essentially means that our future finance practitioners need to come from all other areas of art and science. It is also necessary that these minds are given ample freedom to break-out of routine models to build integrative approaches that can stand the tests of time.

The BRIC economies are all the more in need of such talent that has survived and understood turmoils such as the one we currently face, since these nations would want to progress without struggling at the same stumbling blocks as the present-day US economy does. For instance, in a sector like energy, we can expect huge infrastructure investments in India and China in the days to come (remember the Indo-US nuclear deal, and GE's investment) and we need financial talent to channelize and manage these investments on the basis of interdisciplinary knowledge rather than complicated spreadsheets.

I am not sure whether we will find jobs in such interdisciplinary areas in the near future, but this is certainly going to be the long term trend. So, the best thing for finance professionals to do today is to read, think, understand and prepare oneself for the future. I would suggest to everybody, myself included, to accept jobs that can take us a step nearer to where we want to be, rather than stressing ourselves out because we didn’t get what we set out to achieve.

The same way as a language will survive as long as (wo)men want to communicate, finance will remain as long as (wo)men want to transact.

The global financial meltdown and India

noreply@blogger.com (TeleRaviRays) — Fri, 10 Oct 2008 10:53:00 +0000

It is becoming increasingly clear that India is no longer shielded from the global credit squeeze as it once used to be. The effects of the collapse in the financial industry in U.S. and Europe are evident in the heavily U.S. dependent Information Technology sector that has started lay-offs, as well as the Real Estate Industry which is facing dropping property rates. Both I.T. and non-I.T. companies in India are already facing a liquidity crunch as international investors are pulling their money out and banks are becoming more cautious with their lending. Traditional low leverage financial management methods and operational efficiencies are going to be the strongholds for India Inc. to survive this economic turmoil. Unless the recession extends beyond a year, much of this crisis does not seem to trickle down to India’s common man unlike in the West, mostly due to cultural differences due to which people save for a rainy day coupled with the effects of internal consumer demand.

IT and Real Estate

I had heard that Real Estate prices in India, especially in Bangalore, were undergoing huge correction as early as April or May 2008[1]. I believe this correction is going to continue in most other cities as well, because the property valuations have been sky-high until now, triggered by the booming I.T. sector and property purchases by cash-rich NRIs. On the lending side, Indian banks continue to be commendably conservative, and do not carry any “sub-prime”[2] mortgages in their assets like their U.S. counterparts. Indian loans are mostly fixed rate[3] mortgages and the family-backed and savings-oriented culture of the Indian population, combined with the shame of going bankrupt will come to the rescue of I.T. people facing job-loss. Therefore, loan delinquencies will not be too high, and the markets will not turn as sour for the common man as it is happening in the U.S. But definitely the real-estate brokers and land-owners are going to be hit hard[4] - in fact deservingly, because they were until now making too much money way too effortlessly.

The effect on the Indian I.T. industry is two-fold. I.T. companies will lose a string of projects, because the clients themselves are not going to sustain their business. Companies like TCS[5] and Infosys that have a bigger BFSI and retail component[6] will have a higher impact. This said, I.T. companies recognize that there is light at the end of the tunnel. They are sure use this opportunity to prune their workforce by laying-off non-performers, and correct salaries, in a job market which had been highly inflated until a year ago.

In tough times, like for individuals, cash is king for I.T. companies (even for any other company, since credit is soon going to be tight even in India). I.T. companies in India have been traditionally effective in managing their cash, and will be able to survive with what they have for the next year or so. As U.S. and European banks consolidate and re-configure their operations, opportunity knocks in two ways – projects to integrate I.T systems of merged entities, and further out-sourcing of non-core financial analysis activities. Companies like TCS are already active in the latter. With the acquisition of Citi’s BPO division in India[7], TCS is trying to cash-in on the opportunity to bring a larger part of the banking pie offshore[8]. HCL’s acquisition of U.K.-based Axon Group[9] beating Infosys is an effort to provide more value-adding end-to-end services. Acquisitions will trigger growth as long as companies do not compromise their cash position.

All the small I.T. start-ups mushroomed by the thriving industry which are not in a position to offer end-to-end services will eventually get washed away or taken-over as they face a dwindling client-line and worser cash-position. Of course, the super-specialized ones that have a solid value proposition on offer have a chance to survive. The last thing I would want to see in such a scenario is some big company panicking and removing talented people, which will in turn affect all the other players and spiral into a much larger crisis. But I believe that NASSCOM, CII, FICCI and other industry associations are strong and experienced enough to proactively prevent such a situation.

Therefore, not everything is bad for I.T. companies in India. India still maintains a huge though comparative advantage over other countries. This advantage will eventually erode as cheaper economies adopt similar game-plans, but such an effect seems to be a long way away. A recession can even be good for Indian IT[10] because companies suddenly find that land costs are back to normal and talent is getting cheaper helping them bring in more outsourcing investment to the country. Indian I.T. companies have grown large enough to establish themselves outside India as well – going where the money is. Moreover, as long as the dollar remains stronger against the Rupee, the I.T. exporters are better off, and have enough clout that the government will not do much to help the other importing companies for whom stronger dollar brings bad news.

Causes for the crisis and overall effects on India

At the core of the U.S. crisis, is the lack of regulation in two key areas, one, the derivatives market (which led to soaring oil prices, which are back to normal now due to slackening demand) and two, the investment banking area (which led to crazy subprime mortgages and securitization).

Second is the huge dependence of U.S. companies as well as individuals on credit, whereas Indian companies traditionally keep cash in their balance sheets. The bailout package will temporarily ease credit for a few months, but as many economists predict, might not be enough to completely reverse the effects of a recession. In fact most of the effects of the infusion of taxpayers money into the financial system are yet to be seen, and may be beyond prediction since it depends a lot of human behavior in times of crises.

Third but not the least, is the mishandling of the economy by a frightened U.S. government, reducing interest rates and prolonging the effects of recession rather than waiting for the system to cure itself. Allowing Lehman to fall has already shown up a strategic mistake since it triggered a lot of panic among investors, spreading the crisis to Europe and resulting in WaMu’s and Wachovia’s sell-off at a fire sale prices.

The derivatives markets in India are relatively undeveloped, and investment banking activity is limited and regulated. Indian interest rates are still high, and Indian companies are not credit dependent, and do not have a huge investment in the US markets. The only predictable effects on India will be due to the slackening I.T. sector, reduced international trade opportunities and withdrawal of funds by FIIs. As long as Indian consumers keep their jobs and keep spending and infrastructure needs keep growing, India will still keep a healthy 6 - 7 % growth (not as high as last years' 9% or the predicted 8%)[11].

Nevertheless, India should look at this crisis as an opportunity to learn from what went wrong in aggressively capitalist Western economies and proactively implement regulations to avert such a crisis in the future.

[1] India Real Estate: Price Correction Looms, http://www.businessweek.com/globalbiz/content/feb2008/gb20080228_460701.htm?campaign_id=rss_daily

[2] Sub-prime accountability issues to the fore, http://www.hindu.com/biz/2007/11/26/stories/2007112650041500.htm

[3] US sub-prime lending crisis – Is it a worry for India?, http://www.hindu.com/pp/2007/08/25/stories/2007082550310500.htm

[4] In India, Global Financial Crisis Really Hits Home, http://online.wsj.com/article/SB122349471199216315.html?mod=googlenews_wsj

[5] TCS Analyst Presentation (see Pg. 5), http://www.tcs.com/investors/Documents/Presentations/TCS_Analysts_Q1_09.pdf

[6] Flat Q2 likely for IT firms, http://www.business-standard.com/india/storypage.php?autono=336927

[7] Citigroup, Lehman Bros. Sell India Outsourcing Units, http://www.informationweek.com/news/services/business_process/showArticle.jhtml?articleID=210800517

[8] TCS’ exposure to banking sector, http://www.livemint.com/2008/10/10000039/TCS8217-exposure-to-banking.html

[9] HCL Tech now talks of 'cultural fit' with Axon, http://economictimes.indiatimes.com/Infotech/Software/HCL_Tech_now_talks_of_cultural_fit_with_Axon/articleshow/3552091.cms

[10] (A counterpoint) How the financial crisis will affect the outsourcing industry, http://www.economist.com/business/displaystory.cfm?story_id=12376813

[11] Is India second fastest growing economy? http://timesofindia.indiatimes.com/India/Is_India_second_fastest_growing_economy/articleshow/3578347.cms

Financially viable healthcare systems for the rural poor

noreply@blogger.com (TeleRaviRays) — Fri, 02 May 2008 02:03:00 +0000

Aravind Eye Hospitals (AEH) and Narayana Hrudayalaya (NH) are two pioneering India-based social enterprises providing healthcare to the rural poor. Let us attempt to study their individual models and compare and contrast them emphasizing their long-term sustainability and scope for expansion.

Aravind Eye Hospitals and Dr. V

Social Issue. 45 million people around the world lack eyesight while another 180 million have impaired vision. The annual global economic burden of blindness is around 25 billion USD. Almost 90 percent of the blind live in developing countries, and India, with around 15 million blind people and 52 million visually impaired[1] people, has the largest burden. 75 percent of the blindness in Asia and in India is due to cataract and is mostly curable. More than 80 percent of cataract is age-related[2]. 70 percent of India's one billion people reside in rural areas and over 70 percent of the people live below the $100 (Rs. 2,500) per capita per annum poverty line. However, 80 percent percent of the ten thousand ophthalmic surgeons live in the cities[3]. This presents a clear gap of supply and demand in terms of the quantity as well as the price.

Organization. In 1976, upon retirement from his medical career, Dr. Govindappa Venkataswamy (favouritely called Dr. V) started the Govel Trust under which he founded the Aravind Eye Hospital with a modest 20-bed facility in Madurai, Tamil Nadu³. Today, with a 3500-plus-bed multi-hospital system, it is one of the largest and most productive eye care facilities in the world[4]. It treats over 1.4 million patients each year, two-thirds of them for free and performs over two hundred thousand sight-restoring surgeries each year. With less than 1 percent of the country's ophthalmic manpower, Aravind performs about 5 percent of all cataract surgeries in India.

Aravind takes its services to the rural poor with its unique outreach services conducted with community participation. Aravind’s facility includes an international resource and training centre and has developed a cost-effective method to develop mid-level ophthalmic personnel. The hospital has also contributed to transforming hundreds of eye care programs in developing countries by partnering with over a thousand community organizations and international NGOs. The hospital also has several specialty clinics and comprehensive support facilities, and also a lab producing low-cost ($7) intraocular lenses and other ophthalmic supplies to make eye care affordable.

The model. Aravind has pioneered a model that follows the principle that large volume, high quality services result in sustainability and lower costs. The revenue generated from the "paying" patients fully offsets the cost of caring for the poorer two-thirds of the total number of patients with the same quality of care received by both segments. Aravind effectively markets itself by organizing camps to attract patients in rural India. The hospital even takes up the responsibility to pick up diagnosed patients from rural areas and to send the patients back to their homes when the surgery is completed. HBR mentions that an average ophthalmologist in India performs about 200 cataract surgeries a year, while "an Aravind doctor performs about 1,500 - an efficiency multiple of 7.5." The technology used at Aravind is cutting-edge. The effective management makes sure that the operations are streamlined and effective.

Narayana Hrudayalaya and Dr. Devi Shetty

Social Issue. Cardiovascular disease is the world's leading killer, accounting for 16.7 million or 29.2 per cent of total global deaths in 2003[5]. In India alone, around 2.4 million people need heart surgery annually, but due to the high cost of treatment, only 60,000 surgeries are performed. The average age for heart attacks in the West is 65 years, whereas in India, it is 45, making a significant impact on the workforce[6]. World Health Organization (WHO) estimates that by 2010, 60 percent of the world’s cardiac patients will be in India and by 2015, half of all deaths in India will probably be due to coronary artery disease[7]. Around 224,000 newborns in India are affected by congenital heart disease annually. Given that less than 14 percent of the population is supported by health insurance and that the ratio of physicians per 1,000 people is just 0.5 in India compared to 2.7 in the USA, the treatment options are limited.

Organization. In the year 2001, Dr Shetty started a heart specialty hospital called Narayana Hrudayalaya (NH: meaning ‘God’s Compassionate Home’) in Bangalore, Karnataka[8]. The hospital now has more than 500 beds, 10 operating theatres and two cardiac catheterization units. NH performs around 24 open heart surgeries and 25 catheterization procedures a day which is eight times the average at other Indian hospitals. Under normal circumstances a person recommended for surgery needs less than 10 days of wait time for the surgery. Almost half of the patients are children and babies and NH provides 60 percent of the treatments below cost or free of charge. With the help of Indian Space Research Organization (ISRO), NH has developed a telemedicine program to provide cardiac care for the rural poor through nine cardiac care units (CCUs) across India, linked to NH. This also lets the general practitioners access the expertise available at NH. The state of Karnataka has planned to sponsor 29 additional CCUs in the next few years. In addition to training doctors, the staff of NH has trained over 700 nurses. The hospital offers India’s only formal training program for pediatric cardiac surgery, reflecting the expertise of NH in pediatric care.

Since 2002, NH also operates an insurance scheme called “Yeshasvini” for the 2 million farmers in the state of Karnataka. Subscribing farmers will pay Rs. 5 (12 cents) a month and will have access to free treatment at 150 hospitals in 29 districts in the state for medical procedures costing up to Rs. 100,000 ($ 2500). Less than ten percent of the cardholders would require medical procedures; therefore, the total funds collected will cover the cost of the treatment for those in need. The premium amount is collected annually to reduce administrative costs.

The model. NH operates based on the belief that hospitals can make profit by offering inexpensive quality treatment if “physicians are devoted, new technologies are used, and insurance packages are designed to serve the poor[9].” Dr Shetty calls his strategy “Walmartization of healthcare.” NH provides low cost high quality treatment implementing several cost saving methods, increasing the volume of patients served, using assembly-line processing of surgeries and accepting donations. The exceptional reputation of the staff at NH brings in a large number of wealthy patients as well, who make up for the cost of treating the poor. In 2004, the proportion of patients who paid NH’s full price to those that could not afford to pay was about 60:40[10]. NH also organizes outreach camps for cardiac diagnosis and care.

Comparison and Contrast

Both Aravind and NH tried to make a difference in a situation where there was a social need but neither the government nor the market forces were able to step in. Both organizations have applied the best of management tools and economic models to aid the efficient delivery of service. In essence, these organizations represent living examples of what C K Prahalad talks about in the book “Fortune at the Bottom of the Pyramid.” Both the organizations started from the passion of highly skilled individuals with revolutionary ideas and social service intent. Though both NH and Aravind accept donations, both of them are self-sustaining and work independent of donor motivations. Both the organizations have overcome the inefficiencies that afflict non-profits by not limiting themselves to the rural poor. NH and Aravind possess the latest technological advancements in their respective fields.

Aravind has different hospitals for the free and the paying patients. Anybody can choose to go to the free hospital, which will provide the same quality of medical support as the paid hospital but not necessarily the same facilities. In contrast, NH has the same facility for all patients though it does provide luxury facilities for the wealthy. NH, working in a more complicated domain like heart-care that needs costlier amenities than eye-care, was not only able to replicate the model but also become profitable within a shorter period of time. Moreover, by combining insurance into his ambit and directly reaching the rural population through the telemedicine facility, Dr. Shetty is taking NH one step ahead.

Sustainability and scope for expansion

The organizations possess proven strategies and are mature enough to pursue expansion. The organizations are no longer dependent on their visionary founders and will be able to sustain themselves in the long term. But we notice that these organizations have not spread their operations across the country. Acquiring talent willing to sacrifice a part of their earnings for a social cause is obviously a hurdle. They have to spend a part of what they earn from the paying customers to serve the poor and that imposes capital constraints. Finding money for expansion is not an easy task. Aravind was pursuing options for expansion akin to what the McDonalds and the Pepsis do in private enterprise domain by franchising their brand. Though highly debatable and risky there, could be options which can make this idea work.

The mix of paying and nonpaying patients is critical to sustain the objective of reaching the poorest of the poor. This mission requires careful planning, internal financial controls and operational efficiency. In order to make sure that the wealthy people continue to prefer to obtain treatment from these social enterprises rather than choosing other competing private enterprises, NH and Aravind have to ensure that their reputation and goodwill does not get tarnished in any manner. High emphasis on quality and technological innovation are some of the few means to maintain the reputation. Capacity utilization and productivity are important to drive the costs down in order to be affordable to the poor. Reaching the masses and convincing them of the safety and efficacy of treatment is a gargantuan task. It needs the involvement of community service professionals and the media. Both these organizations get sufficient media coverage by performing complicated surgeries and developing innovative programs for social outreach.

Blindness and heart-ailments, though entirely different in their effects, have one factor in common – the poorer sections of people choose to live with these diseases even after being diagnosed for surgery, instead of getting them treated. This is usually due to the potential economic burden the treatment costs would put on them and their families, and also partially due to the fear of the consequences of undergoing a surgery. Their heightened suffering and the incapability to work for a living nudges these families into even greater distress and poverty. Social enterprises like NH and Aravind help such people by spreading awareness and treating them for free. In effect they help to eradicate poverty by removing the uncertainties and unemployment caused due to such debilitating diseases.

Aravind and NH have a lot in common and are organizations that should essentially work together. There are many more areas of healthcare and many more regions of the world where the same model can be replicated with little adjustments. By joining forces, for instance, Aravind could gain from the telemedicine facilities set-up by NH. This provides NH an opportunity to expand their services to markets in regions where Aravind operates and vice versa, allowing patients to get better facilities without having to travel in search of medical aid. Also, the two organizations could strive for an insurance scheme that covers the rural poor for expenses around $5000 for the same premium of 12 cents utilizing the larger population base.

References and Further Reading

[1] Orbis, Blindness in India. http://www.orbis.org/Default.aspx?cid=5713&lang=1. Accessed: 29 Apr 2008.

[2] Professor V. Kasturi Rangan. “The Aravind Eye Hospital, Madurai, India: In Service for Sight”. Harvard Business School, 1993. Updated 2006.

[3] Schwab Foundation for Social Entrepreneurship Brochure 2008. http://www.schwabfound.org/docs/web/Brochure_Schwab_Foundation_2008.pdf. Accessed 25 Apr 2008.

[4] Aravind Eye Hospitals, http://www.aravind.org. Accessed 20 Apr 2008.

[5] Dr Rajesh Pande. “Cardiovascular disease in India and the impact of lifestyle and food habits”.

http://www.expresshealthcaremgmt.com/20041215/criticare06.shtml. Accessed: 25 Apr 2008

[6] Schwab Foundation for Social Entrepreneurship Brochure 2008.

http://www.schwabfound.org/docs/web/Brochure_Schwab_Foundation_2008.pdf. Accessed 25 Apr 2008.

[7] Rao, Gundu H. “Need For a National Platform and Action Plans for Primary Prevention and Integrated Treatment of Heart Disease in India”. IACS, CV Network Online, Vol 6, No. 1. http://www.heartacademy.org. Accessed: 25 Apr 2008

[8] Narayana Hrudayalaya. http://narayanahospitals.com. Accessed: 25 Apr 2008

[9] Rita Anand, Umesh Anand. “India Needs its NGOs”. http://www.harvardir.org/articles/1465/. Accessed: 25 Apr 2008.

[10]Tarun Khanna, V.Kasturi Rangan, Merlina Manocaran. Narayana Hrudayalaya Heart Hospital: Cardiac Care for the Poor. HBS, June 14, 2005.

U.S. agriculture and the subsidized crops

noreply@blogger.com (TeleRaviRays) — Thu, 06 Mar 2008 19:19:00 +0000

We are prone to imagine that cultivating vegetables, given a choice between, say, tomatoes and corn, would not make sense, since tomatoes are less useful than crops like soy and corn. Corn recently has had a surge in demand due to its utility ranging from High Fructose Corn Syrup (Coke and Pepsi, you got it right!) to renewable ethanol fuel. This is what Wikipedia has to say about HFCS:

High-fructose corn syrup, derived from corn, is more economical since the American and Canadian prices of sugar is artificially far higher than the global price of sugar and the price of #2 corn is artificially low due to both government subsidies and dumping on the market as farmers produce more corn annually. The food industry turned to HFCS as a substitute, with both Coca-Cola and Pepsi switching to HFCS in 1984.

Do you know that some crops are subsidized in the U.S., like corn, soy (which again gives you oil and even milk - now with all the enzymes, since you can't be sure of the quality of cowmilk, people seem to be switching to soymilk!), cotton (all your clothes - fashion has overturned the hierarchy of needs), wheat (all that bread), and rice (that most common cereal after wheat), while other vegetables are not?

Well, who cares about vegetables anyway, when we have all those chickens and cows? Wrong; when did we imagine we can survive just on meat! Well, don't we need to subsidize some of these crops, so that farmers "become intelligent" and start to produce more of them? Wrong; when did we imagine that farmers don't know their markets?

Here is an op-ed article in NYT by a Midwest-based farmer which talks about the lack of freedom that farmers face when they try to meet the demand for fresh fruits and vegetables. This gives us some insight into how government policies can unnecessarily skew the food habits of a population. Another good read would be this article in the Feb 2008 issue of USDA AmberWaves. The graph below is from that source:

Use and Throw Cars - a lesson from India

noreply@blogger.com (TeleRaviRays) — Wed, 02 Jan 2008 09:49:00 +0000

A friend who used to work for one of the largest car companies of yesteryear tells me that Detroit is now a scary place. The automotive industry is struggling so much to turn profits that layoffs are the order of the day. One of my professors who used to teach at Ross School of Business’ Professional MBA program talked about the increasing number of automobile professionals who enroll with the intention to switch away from the self-evident downward spiral facing these corporations. “In 2000, only 28% of 15 year old cars were still on the road; now 43% are. For Toyota and Honda, it is up to 54%.”, according to DesRosiers Automotive Consultants, with data from R.L. Polk Canada[1]. Which means that you sell fewer cars because your models have a longer roadlife. I imagine it might not be surprising if some brainy chap tries to sell us the concept of use and throw cars in the imminent future, however inconceivable it might sound. For today’s GM, Ford and Chrystler, making Americans buy more cars is something better than doing nothing, given that that they have been heavily unsuccessful in replicating the cost efficient models of the Japanese automakers.

Digging deeper, I find at least two important public functions that a developing economy like India or China does better than the prosperous United States, which I will elaborate in the following paragraphs. The existence of these facilities are taken for granted in the developing nations because they are a necessity for the teeming millions, there being an already established correlation between population and the line that separates a developed nation from a developing one, when we hold the Malthusian ideas to be true[2]. And in some cases, the population is so much that there is demand for a lot more of such facilities that the authorities there find themselves at a shortage.

The average American is so used to throwing away stuff that might work with a small repair compared to the reuse culture prevalent in a developing nation. Especially when it comes to extravagant convenience packaging, “we are paying…twice, first when we buy waste-generating, wastefully packaged products and then when we send them into our publicly supported waste management systems.”[3] Even though the mantra of sustainable development models have been reduce, reuse, and recycle, we heard only the third part. This might have been influenced by three facts – the need to attract a customer based on factors other than the quality of the product alone due to heightened competition, the non-availability of cheap labor in the United States leading to unavailability of repair workers, and the incentive provided by the government and the capitalist mechanism to promote replacement of products and parts compared to repairing them as a means of driving industrial growth.

This does not mean that the goods in question are any cheaper in the US that they get thrown away and replaced – in fact they might be doubly costlier, being shipped from manufacturing facilities at infinitely cheaper locations spread across Asia. This might be one reason why certain economists point out, contrary to the ideas stated a little while ago that population might be a boon as much as it is a bane for an emerging economy, given that another richer nation needs the working hands of the poorer millions. “There is no causal connection between the size and the growth of population and high rates of inflation, unemployment crimes and traffic accidents and culture of violence. At best population may be an aggravating factor.”[4] It is understood that the spurting growth in these nations is going to make labor costlier, and this has been evident for companies like Apple which burnt its hands when it tried to set shop in Bangalore and found that the costs did not work out.

Companies will search out cheaper destinations and their nomadic movement will continue until it finally boils down to raising the prices for their products in the United States. It is difficult to see an average American finding her earnings increasing at the same rate. I would assume that the economy has already reached its upper bounds and is most likely to stay at the plateau unless something drastic happens[5].Of course, there might be an intermittent bubble like the Internet and the more recent housing bubble triggered by the crisis in the sub-prime mortgage loans which cause nothing but the re-distribution of the same amount of money more unevenly among the population. All these ideas put together point out that it’s high time America starts to think of promoting the repair and reuse culture.

One thing we did not consider all along this discussion was the environmental impact. If a company like Waste Management can find itself in the Fortune 500 list[6], it’s enough proof that the per capita waste generation for an average American is pretty high. Recycling can be a trend, even a buzzword – using recycled stuff can be fashionable, but then it comes with a cost. Our Einsteinian principle of equality of mass and energy would imply that there is avoidable energy expenditure when you recycle something that could’ve been made more reusable in the first place.

Let’s take a common shaving razor for example. The use-and-throw sticks are cheaper than the regular stick that comes with replaceable cartridges (yeah, a friend pointed out that the use-and-throw stuff are of much lower quality that they can be used only once). The companies find it easier to do so because the bulk purchase effect of the use and throw razor equals that of the individual blade in sale. Similarly nobody ever cares to replace the refill catridge in the refill pen – the pen itself is tossed away once it stops writing. Now don’t be surprised when you see that your new gifted pen set is made of recycled material. Also, imagine the last time you carelessly printed something out at office to throw straight into the trashcan – it’s so commonplace now with printers at every corner of the office floor, the blue recycle bins helping us to ensure the mental satisfaction that this paper will get recycled.

Equality of labor, where the hardworking janitor gets the same social respect as the Wall Street banker has been the cornerstone of American capitalism. But when the society demands a certain lifestyle that you should adopt, it means that even a laborer needs to maintain certain standards. Life is as costlier for the workman as for the investment banker that his labor becomes costlier. Wherein lay the solution? It’s really a tough question.

***

One recognized need for any American of the age of 18 or above is a car, compared to the luxurious connotation that owning a car has in poorer Asia. This need is aggravated by the lack of public transportation – you’re doomed without a car of your own. One might find it unbelievable that a nation as prosperous as America never found the need to travel in trains when we compare it to countries in Europe or to Japan which are as prosperous. Did someone say that the need for the growth of the automotive industry at a time of recession was reason enough to purposefully undermine the fledging American Railroad? The present day American just loves to travel 8 to 10 hours in cars, and the quality of roads make it so easy. In fact, she has to, even if she doesn’t loathe it as much - the ones who can live with the crowding airports, delayed flights and such, can always choose the airplane. Nobody ever wants a train, then why talk about it all!

Houston, the fourth largest city in the States is proud of its roads and its position as the energy capital of the most powerful nation in the world. When it came down to the launch of a 5-mile stretch of the metro railroad, Houston saw protests all around[7]. Concerns of safety drowned the larger strategic importance of a mass rapid transit system - this rail route was badly planned that it moved in parallel with the road and followed the same traffic signals causing a high rate of accidents.

Friends of mine who’ve been held up in Houston three years back when Katrina threatened to hit the city said that all the big roads in the city seemed not enough at that time. When every American hit the road with her car, bumper to bumper traffic made the same highways that the cowboy country is proud of to be its ill equipped curse. The airports located far from the city did not help either, as the approach roads to the airport were all blocked. After the hurricane devastated New Orleans while Houston thankfully escaped without much damage, a few with forethought realized the importance of public transportation in evacuating a city, however strong the alert mechanisms were. Ironically, there is a large amount of protest to any expansion of the existing metro route which currently covers only a small stretch of the widely spread out city.[7]

Ask any Mumbaikar and he’ll go on proudly detailing his ‘wonderful’ experiences with the metro in that city – life without the metro rail is unimaginably hard in Mumbai, which is proven every time an unfortunate cyclone hits this commercial capital of India, crippling the network of trains to some extent. But it does not take too long for Mumbai to be up on its feet and carry on with business as usual. Chennai already has an efficient metro rail system, which it is expanding as the city grows bursting all boundaries. Delhi’s metro rail system is on a fast forward, finishing phases before deadline, and also aiding the conversion of the city into a modern capital, with the parallel enhancement of the road and bus transportation network. Bangalore and Hyderabad which saw a sudden spurt of growth with their infrastructure paning to catch up do not want to be left far behind. For instance Bangalore’s hastily approved Namma Metro is all set to complete its first phase by 2011, a year before Houston’s metro will be completed[8].

All this was just about the metro railways. But what forms the central nervous system of India, and profitably so with its cheap passenger fares is the Indian Railways – the world’s largest railway system under one management and the largest employer as well[9]. Possibly one city that cannot live without the noisy criss-cross of its round the clock trains is New York. NJ Transit and AmTrak connect it commendably to NJ allowing thousands of office-goers to live away from expensive Manhattan, yet earning their bread in this city. The buses act as a feeder service, but are not an ideal replacement for the trains which get affected as much by the morning and evening rush-hours and a perceived lack of comfort. But, when compared to gas and parking needs of a car, buses and trains offer a much more viable alternative in such a crowded city.[10]

Something we did not consider all along is how much accustomed an average American is to traveling in trains and buses. The automotive industry will be pissed at any proposition that might nosedive their expectations of turning a profit. They won’t want to look at the possibilities in becoming the Mistubishis of America by developing engines and parts for tomorrows’ public transportation systems. But in fact, this is the reality – the Americans are going to be forced to take this route twenty years from now for the same reason the population in the developing nations is doing so – affordability and freedom of movement compared to replacement costs and need for road space.

***

Few in the United States except the futurists think of these as essential for their day-to-day living, mostly due to the presence of alternatives. The average American has been used to living this way all his life that she does not want to be bothered. Here’s the catch – the population of USA is also outgrowing its infrastructure at a fast pace that these are going to be of utmost importance 20 years into the future. It’s time that the American opens its eyes to reality and thinks about embracing product reuse and public transportation. Let’s hope that the American won’t be gullible enough to let Detroit sell her a detestable use and throw car.

References & Further Readings:

[1] “Another Reason Detroit is in Trouble: They Are Building Better Cars”, by Lloyd Alter, Toronto on 11/22/07; Treehugger Blog, Accessed 01/01/2008; http://www.treehugger.com/files/2007/11/another_reason.php

[2] “The Impact of Population Growth on Well-Being in Developing Countries”, Dennis A. Ahlburg, Allen C. Kelley, Karen Oppenheim Mason.

[3] “The End of the Throwaway Society - May 2005”, Nancy Myers, Science & Environmental Health Society, http://www.sehn.org/Volume_10-2.html

[4] “Book Review: Population growth — boon or bane? MALTHUS AND HIS GHOST: Dr. Girish Mishra; Manak Publications” The Hindu, 12/25/ 2001; Accessed 01/01/2008; http://www.hindu.com/thehindu/br/2001/12/25/stories/2001122500200400.htm

[5] “In the Land of Many Ifs”, Peter S Goodman and Vikas Bajaj; New York Times, 1/2/2008; Accessed: 1/2/2008; http://www.nytimes.com/2008/01/02/business/02econ.html?ref=business

[6] "Fortune 500 2007: Waste Management"; Accessed 1/1/2008;
http://money.cnn.com/magazines/fortune/fortune500/2007/snapshots/1555.html

[7] MetroRail - Wikipedia article; Accessed 1/1/2008;
http://en.wikipedia.org/wiki/METRORail#Other_controversies

[8] Namma Metro - Wikipedia article; Accessed 1/1/2008; http://en.wikipedia.org/wiki/Bangalore_Metro

[9] Indian Railways - Wikipedia article; Accessed 1/1/2008; http://en.wikipedia.org/wiki/Indian_Railways

[10] “Rail Transit In America A Comprehensive Evaluation of Benefits”, Todd Litman, Victoria Transport Policy Institute, 10/8/2004; Accessed 1/1/2008;
http://www.publictransportation.org/reports/asp/evaluation_of_benefits.asp

Insights and Ideas

noreply@blogger.com (TeleRaviRays) — Sat, 24 Nov 2007 07:18:00 +0000

Stickiness in Communication

noreply@blogger.com (TeleRaviRays) — Sat, 24 Nov 2007 06:30:00 +0000

Chip Heath is an Organizational Behavior professor at the Chicago GSB, and holds a Stanford doctorate in psychology. He, along with Dan Heath, is the co-author of the book Made to Stick: Why Some Ideas Survive and Others Die which has been a New York Times, Wall Street Journal, and BusinessWeek bestseller.

According to the interview published in the McKinsey quarterly,

Chip Heath’s research suggests that sticky ideas share six basic traits.

Simplicity. Messages are most memorable if they are short and deep. Glib sound bites are short, but they don’t last. Proverbs such as the golden rule are short but also deep enough to guide the behavior of people over generations.
Unexpectedness. Something that sounds like common sense won’t stick. Look for the parts of your message that are uncommon sense. Such messages generate interest and curiosity.
Concreteness. Abstract language and ideas don’t leave sensory impressions; concrete images do. Compare “get an American on the moon in this decade” with “seize leadership in the space race through targeted technology initiatives and enhanced team-based routines.”
Credibility. Will the audience buy the message? Can a case be made for the message or is it a confabulation of spin? Very often, a person trying to convey a message cites outside experts when the most credible source is the person listening to the message. Questions—“Have you experienced this?”—are often more credible than outside experts.
Emotions. Case studies that involve people also move them. “We are wired,” Heath writes, “to feel things for people, not abstractions."
Stories. We all tell stories every day. Why? “Research shows that mentally rehearsing a situation helps us perform better when we encounter that situation,” Heath writes. “Stories act as a kind of mental flight simulator, preparing us to respond more quickly and effectively.” Example:
One such pattern was that a campaign like Bud’s iconic “Wassup” registered more powerfully with consumers than Miller Lite low-carb ads that essentially just said, “We’re better than the other guys.” Why? Because Bud told a story about friends connected by a special greeting. (Source: Brandweek)

Source: McKinsey Quarterly