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By Krishna, March 5, 2009

Once again raising the specter of a great Depression, the stock markets today are at fresh 12-year lows. Citigroup shares at less than a dollar and nationalization (by whatever term it will be called) imminent. To rephrase a tired joke, you could have made a million dollars in Citi stocks, provided you had 27 million dollars in April last year. If it is any comfort, the slide continues in other countries too, some of them faring far worse than the United States.

I was struck by the precipitous decline of the Indian Rupee against the Dollar as foreign investors have started pulling money out from India. I previously wrote about the speculation caused by the rising rupee. It looks like the party is over now, though it might take many people time to realize this. This is the first time many young Indian adults are seeing the effects of a bad economy, such as layoffs from previously stable technology companies.

One of the worst hit countries was Iceland which went bankrupt (emphasis mine):

In 2003, Iceland’s three biggest banks had assets of only a few billion dollars, about 100 percent of its gross domestic product. Over the next three and a half years they grew to over $140 billion and were so much greater than Iceland’s G.D.P. that it made no sense to calculate the percentage of it they accounted for. […]

From 2003 to 2007, while the U.S. stock market was doubling, the Icelandic stock market multiplied by nine times. Reykjavík real-estate prices tripled. By 2006 the average Icelandic family was three times as wealthy as it had been in 2003 […]

When their three brand-new global-size banks collapsed, last October, Iceland’s 300,000 citizens found that they bore some kind of responsibility for $100 billion of banking losses—which works out to roughly $330,000 for every Icelandic man, woman, and child. On top of that they had tens of billions of dollars in personal losses from their own bizarre private foreign-currency speculations, and even more from the 85 percent collapse in the Icelandic stock market. The exact dollar amount of Iceland’s financial hole was essentially unknowable, as it depended on the value of the generally stable Icelandic krona, which had also crashed and was removed from the market by the Icelandic government. […]

Now many Icelanders—especially young Icelanders—own $500,000 houses with $1.5 million mortgages, and $35,000 Range Rovers with $100,000 in loans against them.

As the article says, “Iceland instantly became the only nation on earth that Americans could point to and say, ‘Well, at least we didn’t do that.’” Writing about this may seem like schadenfreude, but the state of affairs today is truly tragic for people across the globe. Recent globalization had helped in pulling hundreds of millions of people out of poverty in China and India. This economic slowdown will set back poverty reduction by several years. And the economic crisis will throw millions out of their jobs and houses.

When and if the bottom of this crisis is reached, countries will have to focus on some basics. Most of the growth that we saw in the last decade was a result of bubbles in the financial and real estate sectors. Think about this: When the price of milk or oil increases, we call it inflation and treat it as something to be stopped. Yet when the prices of stocks and houses increased without any relationship to real incomes and underlying financials, it was labeled “growth” and encouraged by politicians, bankers and investors.

We have to get back to fundamentals where price is related to value and not financial gimmicks. Steady, dependable growth is preferable to sudden bursts of wealth followed by mass destruction. Because of the hype caused by rising house prices, millions of people have lost their life savings and are deep in debt from which they will take years to crawl out of. Let’s hope, as a society, we can collectively remember these bad times and prevent them in the future.

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By Krishna, March 4, 2009

Every year during election season, we hear politicians bemoan the state of the American education system. We are presented with statistics that show European countries way ahead of America on math and science scores. Also, there is no dearth of horror scenarios where China and India graduate millions of engineers every year with Americans finding no way to compete against them.

In one aspect, as a society, it is good to worry about education because that is one of the cornerstones of progress. But it is unfortunate how the proposed solutions are entirely political in nature. One side rants against teacher unions and asks for more accountability. The other side asks for more money for schools. Every discussion seems to revolve around whether you need better teachers or more funding.

To understand how silly this is, assume that you are a business owner and you want to improve the productivity of your team. Would it help if you hire better managers? Would it help if you start paying more to employees? The answer to both is “yes”, but the more important questions are: Do you have the right employees on board? And are they internally motivated to do their work?

Public school systems don’t have the ability to answer “No” to the first question. They have to accept all students, brilliant or below-average. Private schools, through rationing by high school fees, eliminate poor students thus improving their student pool. Well-off students are more likely to have better scores because of greater opportunities and other factors.

But if schools cannot select their students, they have to work on motivating the students. I don’t deny that at the poorest schools, more money can provide motivation in the form of better conditions (safety, food, etc.) that students cannot receive at home or in their neighborhood. But in most parts of America, that is not the case.

Different students have different levels of motivation for learning different subjects. This is not a stunning insight. Everybody knows this, but which conveniently forget when it comes to education reform. The old saw about taking a horse to the water is applicable here. If someone is not motivated, they will not bother to learn what is taught.

There are many possible reasons for this lack of motivation. Students have a life outside school and studies and are influenced by what their friends do and what they see on television or while on the Internet. Their role models may be in sports, entertainment or public service. Also, many students, even the top-ranked ones, do not see any value in learning some subjects which they think will be of no use to them in the future. For example, someone who has plans to become a doctor may not be very interested in calculus. Or someone interested in computers may not want anything to do with literature.

And that is the fundamental problem with schools: They teach a lot of subjects and provide knowledge on the off-chance that someday we may need them. The fact is that most people will never need much of the knowledge that is imparted. Those who may need it would have already forgotten what they learnt in school and they now have to look it up again in textbooks or Wikipedia.

This could be justified if there was nothing else to teach. But consider what students graduating from high school are unaware of:

1. Basic financial management, such as understanding taxes, retirement, fundamental economics. In fact, if some students only knew how much money they needed for simple expenses, perhaps they would be more motivated to study.
2. Business laws and ethics: Local/state/federal rules and regulation, conflicts of interest, intellectual property, contracts.
3. Personal branding and marketing: Online presence, privacy, personal goals, liability.
4. People management: Working in teams, leadership, negotiation.

Schools do not prioritize teaching the right kind of information that would help students lead a more productive life. Students are never educated on why they are learning a particular piece of information. I suspect that schools and teachers do not know, either, except to say, “It is good for you.” There will always be students who will learn everything and score well. Some students are genuinely interested in learning everything, and others know that they have to accept the existing system to achieve a greater goal. But these students are a minority.

So, I think true reform has to start from the syllabus. What should we teach students that will help them in the real world? That they will actually use when they start working in an organization or start their own business. A syllabus that makes sense to students today in terms of benefits and not some vague justification of future advantages.

This may mean that schools may have to fundamentally change how they operate. They have to provide a justification for every topic that they teach from 1st grade to high school. They will have a major track for all students (for subjects and topics that everyone needs) and then different tracks for students after some years in school (based on the student’s long-term plans and capabilities). Like college, but much before. Parents will have to get more involved in understanding subjects and making decisions for students.

By different tracks, however, I do not mean something that will lock students out of some professions. These could be additional sessions in various subjects that students could participate in, but which they could also pick up with additional training during adult years if they decide to skip subjects (say jump from advanced biology to advanced chemistry). The idea is that students don’t have to waste time learning something that they could easily relearn at an introductory course in college if they ever went deeper into that subject.

Although this may seem like “dumbing down” the syllabus, it doesn’t have to be. I already gave some examples of complex subjects like tax rules and business regulations. You can spend a year teaching a class what they can expect to earn in different professions, how much they can keep after paying income and payroll taxes, how they can reduce those taxes, how they can save for retirement and how they can invest the money wisely.

Of course, some subjects like math are tricky. Do you stop math after they master arithmetic and algebra? Geometry and trigonometry, while interesting, may not be necessary. Discrete math instead, maybe. More applied math in areas like accounting? I will leave the specifics to implementers.

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By Krishna, February 22, 2009

It is Oscar time once again. This year’s favorite for the Best Picture of the Year is “Slumdog Millionaire”. Not that it necessarily means anything, but the best prediction expert in baseball and politics, Nate Silver, gives it a 99% chance of winning both Best Director and Best Picture.

“Slumdog” is a consummate entertainer, but although set in India, it will feel strange to Indian moviegoers. The typical Bollywood movie, i.e., movies made in Bombay (Mumbai), the film capital of India, is a musical drama/thriller/romance around 3 hours long, dumbed down with simple plots and melodramatic acting. There is nothing subtle about Indian movies: both hero and villain are larger than life and rarely show any complexity of character. The songs are extravagant, shot in exotic foreign locales. Sometimes, you get the feeling that if the typical Indian movie spent a tenth of the money of its songs on the plot, maybe they would be more watchable. (wistful sigh)

In comparison, “Slumdog Millionaire” finishes around the 2-hour mark and its only song comes during the credits. This is to be expected as the movie is a British production. The Indian elements come from the Cinderella story and from the filming locations in Mumbai, Agra (the location of the Taj Mahal) and innumerable other locations where the Indian Railways go.

Many critics have praised the realistic portrayal of Indian poverty in “Slumdog Millionaire”, but I felt that it was compromised by the “rags-to-riches” plot. The first half of the movie is brutal in depicting the true nature of Mumbai slums, particular the cringe-inducing scenes at the open outhouses and the children blinded for a begging racket. But the movie quickly moves on to more optimistic territory and we quietly forget those horrific scenes.

The movie sends the message of a developing India where slums are being replaced by high-rise apartments. But that is belied by the reality that the movie was actually shot in a real slum in 2008. There are people today who are living in unimaginable conditions of poverty. Not a decade ago, but today. If you walk the streets of Mumbai, you will still see beggars on the streets. The rivers are still polluted and the air is getting more contaminated.

On the bright side, the liberalization of the last two decades has helped bring hundreds of millions of Indians out of poverty and will continue to do so. The problem is that the growth is still slow, not because of freer markets, but because they are not free enough. India lags behind in several indicators of capitalism, such as enforcement of property rights and an efficient judicial system. Corruption is rampant in India, which ranks a sorry 85th in the world in transparency.

India has a long way to go to bring its people completely out of poverty. It has more work to do in reforming its institutions and improving the quality of its political discourse. Optimism is good, but it should not lead to complacency. Both India and China will also have to figure out how to deal with future challenges to their economy, such as global warming, water shortage, and rise of cheap African exports.

Some people closely watching the movie will notice that the protagonist is a Muslim and wonder, “I thought all Indians were Hindus.” Well, actually, India has the 3rd largest Muslim population in the world, almost equal to the number of Muslims in Pakistan. Next time you read the India-Pakistan conflict portrayed as a Hindu-Muslim conflict, think about that. And also the largest Muslim country by population is not Saudi Arabia, but the archipelagic South-East Asian country of Indonesia. Most people who start linking Muslims and terrorists probably don’t realize how few Muslims come from radicalized regions.

The use of the religious element is skin-deep. Example in point: We see religious riots where enraged Hindus raid the Muslim slums killing many innocents while the police stand nearby, doing nothing. Most non-Indians seeing the movie will not probably understand this scene. The history of conflicts between Hindu and Muslim communities is long and complex, dating from the origins of Islam in northern India to the Partition of India. The 1993 riots have much to do with the rise of Hindu nationalist parties in the late 1980’s and the demolition of the Babri Masjid in Ayodhya. A more serious movie on the Mumbai riots is the aptly-named 1995 Tamil movie “Bombay”. None of this is even mentioned in “Slumdog Millionaire”.

The Islamic faith of Jamal, the hero, weakens the movie in one important respect. The host of the “Who Wants to be a Millionaire” show in the movie mocks the profession of the hero, who serves tea at a call center. The mocking is not done in private, but publicly on live television with the audience joining in the laughter. This scene would have enormous potency if Jamal was a Hindu who belonged to a lower caste. Like religion, violence due to caste tensions is one of the biggest challenges that India faces today. But the movie sidesteps this issue and instead substitutes an economic conflict which may be meaningful to Western audiences, but ignores the reality of Indian fissures.

A throwaway scene involved Jamal’s brother, Salim, doing a Muslim prayer. What this was intended to mean, I have no clue. But the fact that Salim is a criminal suggests that Muslims are involved in gangster activities in Mumbai, which probably is true, but that could have be mentioned without linking devout Muslims and criminals.

As an artistic work, “Slumdog Millionaire” deserves kudos. As a depiction of the true India, it falls short.

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By Krishna, February 18, 2009

The most fascinating professions, in my opinion, are the ones where you make money by preaching what you practice, and where the preaching is the practice. If that is confusing, here are some examples:

1. Blogging about blogging: Every blogger does this to some extent by talking about their experiences with setting up their blog and writing posts, but some make it into a living.
2. Presentations about presentations: How can you explain about giving great presentations? Simple, give a great presentation about it.
3. Speaking about public speaking: Toastmasters is now a worldwide organization and many of its “graduates” are paid for delivering speeches for helping with public speaking. Scott Berkun seems to be going that route too.
4. Writing about writing books: Why struggle with plots and characters when you can teach people how to write stories and get published?

Is writing a compiler/interpreter for a programming language in the same language a recursive profession? Or is that only applicable for creators of programming languages?