Friday, December 19, 2014

What would happen if conventional antitrust acts were applied globally, on an inter-country level, on countries such as Cuba and the USA

When seen from the perspective of antitrust law, the decades-old US embargo on Cuba - America's tiny neighbour - starts to look criminal. In the case of companies, if a monopoly or a near-monopoly engages in practices that are anti-competitive and unfair, antitrust laws attempt to stop and punish the aggressor in order to restore fair competition in the market. Applying this to countries, in the case of Cuba, a powerful neighbour abused its dominant position and, by way of embargo/sanctions, brought misery to the lives of Cubans for several decades. Located in close proximity to the USA, Cuba's fate depended and depends on its much-larger neighbour, a fact the larger neighbour exploited neatly.

Perhaps some day the world will start to question practices such as the one utilized by the USA against Cuba, and perhaps some day there will be mechanisms in place to stop the bullying of smaller nations by larger nations.

Wednesday, December 17, 2014

NSA, et al., will likely support spying on people's conversations even inside their cars, homes, hotels, etc., based on their "finding the needle in the haystack" argument

NSA and other related entities have frequently defended their global spying operations by appealing to the argument that they need to own the haystack in order to be able to find a needle in it. It is easy to understand that several times more communication takes place offline than online, meaning thereby in real-life and without involving modern technology such as phones, emails, FB, etc. [sitting around a lunch table, talking in a restaurant, a private conversation in a room, an executive meeting in a conference room, posting a letter via postal mail, etc.].

Since NSA and its other gang members are supportive of collecting as large a haystack as possible, it is therefore logical to conclude that offline communications are also in their line of fire, even if they aren't [yet] publicly talking about it, likely because of fears over public outcry.

That doesn't mean that they won't try to record people's offline conversations in the future, whether through miniature drones covertly and silently recording vocal conversations in rooms, or through exploitation of IoT devices which are spreading all over our cars, homes, etc.

The important point to note here is that the NSA will try to monitor people's offline conversations and their overall lives too - the agency's past behaviour makes its future trajectory clear. It is up to the people of the world to defend one of their fundamental rights - the right to privacy.

Update [27-Jun-17]: The true colors of these so-called civilized/developed nations can be seen in the actions they conduct when no one is looking. Australia wants to weaken encryption. So does UK. These barbaric nations package and present such anti-public proposals and actions in such a way that it appears that these are in the interest of the public. In reality, however, such actions are meant to monitor and control the public, so that it keeps working, earning and paying taxes, so that these tax collections can then be merrily looted by corrupt bureaucrats/politicians.

Thursday, December 11, 2014

Google News itself doesn't make any direct revenue - but it doesn't mean that Google News doesn't indirectly increase Google's revenue

Today Google announced that it's shutting down its Google News service in Spain, because of a new Spanish law requiring Spanish publishers to collect a charge from services such as Google News. Google's argument is that its News service doesn't make any money, and hence it is not sustainable for Google to continue the service in Spain if it has to pay a charge to Spanish publishers.

I don't agree with Google's argument.

Google News is not a charity product, and Google is not a charity organization. The reason why Google News exists is because it is a vital component of the network of Google products, even though on surface it might appear that the service is really free since Google neither charges for it nor shows ads on it.

How then does Google News earn Google something, even if a little? Three ways.
 

First, by feeding into Google's databases information about users' interests [tracked via both clicks on news articles and search queries entered into Google News]. It is of course difficult to accurately measure the contribution to revenue from the user information that Google News generates, but what is clear is that Google News data definitely gives positive help to Google's algorithms to better understand a user, thus improving the overall effectiveness of ads shows on various Google properties to that user.

Second, Google News improves user stickiness [retention]. Google doesn't want folks to go to Yahoo or MSN or others in order to look for news, and Google News plays its part in helping to increase retention. If there wasn't any Google News, people would flock to products such as Yahoo News, and maybe would've tried out other Yahoo products as well. Again, it is difficult to measure the precise extent to which this service contributes, but again, what is certain is that the help is positive.

Third, since Google News results frequently/sometimes appear on Google's flagship search results page, and since Google shows ads on its main search results page, it is logical to conclude that out of the total revenue earned from ads on the search results page, some contribution comes from the results from Google News. Again, it isn't straightforward to measure the exact percentage of revenue that comes from News results, but it can be stated confidently that the positive contribution exists.
 
 

Tuesday, December 2, 2014

The genesis of 'time value of money' is probably the limited lifespan of us humans

I studied time value of money during MBA. Till yesterday, I had accepted the existence of this as a matter of fact, as if this was another law of nature akin to Newton's laws of motion. But yesterday a small thought occurred to me - does time value of money exist because us humans have a limited lifespan? What if there existed a guy who never aged and never died? Would he too value INR 100 today more than INR 105 after a year [assuming the prevalent interest rate is 10% p.a., thus making INR 105 look like a bad deal to us mortals]? Probably not, because he would be in no hurry to get money. From his perspective, waiting one year to get INR 105 is also okay [assuming he can't take the INR 100 and invest it elsewhere to get INR 110 after a year], since he has a limitless life ahead, and he doesn't really spend any time of his life. Would time-driven interest rates even exist?

Which brings me to the money value of time. Since we all [currently] have limited lives, every second of our life has a value, and it is this money value of time which gives rise to the time value of money.

Update [21-Jun-15]: There's of course this oddity in this post, where on one hand I say that the prevalent interest rate is 10% p.a., and on the other hand I say that the immortal guy cannot invest the INR 100 anywhere to get INR 110 after a year. I need to think more about this idea when I'm free, to remove this oddity.

Sunday, November 23, 2014

When everyone in a company is an employee and nobody is the owner

In my opinion, it is important that at least several folks in the leadership of a company be the "owners" of the company. If this isn't the case, and if everyone in a company is an employee and no one is an owner, then there is little incentive left in the leadership to take the company forward. In fact, the senior executives - who are all paid a fixed salary, right up to the CEO - could actually start to leech the company for private gains.

This is probably what happens in government-owned companies such as ONGC or SAIL in India. Everyone is an employee, and the Indian government is the owner, so the executives are almost free to be as corrupt and inefficient as possible. This can explain, to some extent, the gap between the performance of private and government-owned companies.

Saturday, November 22, 2014

Credit period given to a buyer is distinct from the safety of your payment - this must be remembered always

Sometimes a business can confuse the duration of credit period given to a buyer with the safety of the payment. While it cannot be denied that a longer credit period [say six months] introduces the risk of unforeseen events taking place which could put the safety of the payment in jeopardy [compared to, say, a credit period of two weeks, in which you don't expect anything unforeseen to take place], still, these two things are distinct and should be treated that way. It's possible that your payment isn't safe with a buyer even if the credit period is only two days. It's also possible that a different buyer is so strong that your payment is safe even if the period is six months. Of course, a longer credit period means that you build the cost of capital appropriately into the price.

Friday, October 31, 2014

Many family-owned SMEs in India do not even get a return equivalent to the interest on the value of the capital invested

Suppose there is a hosiery factory in Ludhiana, India. Suppose it is family owned, and that the net value of all the assets/liabilities of the factory [current market value of land + current market value of infrastructure + current market value of stock + value of receivables - value of paybles] is INR 5 crore. Also, the current interest rate on a secured business loan is about 12% per annum.

This implies, roughly, that if the owners of the factory sell their factory/firm in its entirety, they'll pocket INR 5 crore, and if they lend out this money into the market, they'll start to earn INR 5 lac per month, purely as interest income, without having to make any additional/further physical or mental effort.

The sad truth about many SMEs in India is that these SMEs aren't able to earn even the equivalent of this 12% per annum. You will find many such 5-crore-value SMEs in India which generate only about INR 2-3 lac of net income per month, and that too after a significant amount of physical and mental labor put in by the owners.

A truth that is even more unexplained is that if these owners are made aware of the above calculations, they're still not willing to sell-off the factory/firm in order to almost double their monthly net income and eliminate their physical/mental efforts almost completely.

Sunday, September 21, 2014

Internal trading is a problem faced by firms of all sizes

By internal trading, I refer to the situations in which an employee or say a manager purchases a product from the market at price X, but "sells" it to his employer at price X+Y, where the differential Y can be considered as a sort of the employee's "trading margin". For example, an employee goes to the market to buy a stack of white A4 sheets for the printer. He buys it for, say, INR 150, and comes back and charges his employer INR 160, falsely quoting the price as INR 160. Since it is usually not possible to determine the actual market price of every little thing first-hand, and firms have to rely to a certain extent on "trust" on employees, this sort of "insider trading" is commonplace. Even a mandatory policy where bills must be produced for every purchase is not fully effective, since employees can easily ask the seller to produce a bill with price X+Y.

Sunday, February 16, 2014

Double-entry bookkeeping system also works across a pair of firms

We're traditionally made to believe that the double-entry system used in accounting is applicable only on an intra-firm level, that is, on the account books inside a firm. So any financial transaction a firm conducts has the effect of debiting at least one account and crediting at least one other account in the firm's books.

Taking this idea one step further, the double-entry bookkeeping system is actually also applicable on an inter-firm level. For example, suppose firm A supplies some goods to firm B, then in firm A's account books, the transaction will be recorded as a debit in the ledger of firm B. Conversely, in firm B's account books, the transaction will be recorded as a credit in the ledger of firm A.

Looking closely, this is nothing but yet another form of the double-entry bookkeeping system. This system, on an inter-firm level, ensures that the ledgers two firms maintain of each other [firm B's ledger in firm A's books and firm A's ledger in firm B's books] are mirror copies of each other [assuming no bookkeeping errors occur on either side].

Once again, just like in the traditional definition of double-entry bookkeeping system, the sum of all credits must equal the sum of all debits, even on an inter-firm level.

Saturday, February 15, 2014

Some real-life examples of the economic theory - the tragedy of the commons

These days I'm thinking about the tragedy of the commons, and it seems to me that several problems around us are actually examples of this theory.
  1. Military-industrial complex: In this problem, which is most pervasive in the US, some or several defence companies get the ruling government to allocate/release funds for defence projects by greatly exaggerating the threat to the security of the nation [in this example, the US]. This results in some of the taxpayers' money unnecessarily getting diverted to the defence companies [the companies' private gain], resulting in slightly less government services available to each citizen [public loss, distributed over the entire population].
  2. Disclosing secrets behind magic tricks: When a magician ties up with a TV channel to do a show in which he is supposed to show the public the secrets behind popular magic tricks, he is actually a casualty of the tragedy of the commons. He agrees to reveal the secrets for a good fee [his private gain], while the disclosure of the secrets hurts the entire magician community [the loss, in the form of less curious and less impressed public, is shared by the entire magician community].
  3. Cutting of wild trees: When someone cuts and sells a wild tree on an unclaimed forest land, the gain from the sale of wood is his private gain, whereas the loss to the world [in the form of slightly reduced oxygen, slightly reduced habitat for other creatures, and slightly less flood-stopping ability] is distributed over a very  large population, so no one even notices.
  4. Hunting of endangered animals: Similarly, when someone hunts an endangered animal, the gain [enjoyment derived through hunting + profit from selling the animal's body parts] is his private gain, whereas the loss to the society does not affect a single individual but is distributed over the entire population [and thus gets diluted on a per capita basis].
  5. Parents bringing infants to cinema halls: The infants cry loudly, disturbing everyone who is watching the movie, and parents are able to enjoy the movie, even if partially. The private gain of the parents comes against the loss to the other movie-watchers.
  6. Puppet ruler [Oct'14]: A puppet ruler practically sells the country to outsiders, destroying its culture, economy, heritage and independence, in order to get private gains [bribes, etc., from the masters - his private gain]. Since this puppet ruler holds decision-making power over the entire nation, the bribes he receives result in a total sell-off of the nation. An example is Petro Poroshenko selling Ukraine to the West. Herein lies the answer to the West's question ["...why do Russia’s neighbours trust it so little?"]. It is not Russia's neighbors who trust Russia little. Rather it is the puppet ruler who has covertly accepted West's bribes in order to give the world a false impression that the nation he presides over fears Russia [allowing the West to justify extending its influence to that nation].
  7. Transfer of best-practices/know-how/secrets/technology [Dec'14]: When a Swedish-American executive takes a job at a major Russian carmaker and promises to overhaul it in order to bring it in line with leading global carmakers, he's basically playing out the tragedy of the commons. In order to receive private gains [a high salary], he decides to disclose/share knowledge and practices/processes that will eventually do harm to his previous employers as well as to the people of his previous countries [presumably Sweden and USA], by strengthening the Russian carmaker.
These examples show that many common real-life problems are actually examples of the tragedy of the commons. This shows that this economic theory is quite important, as it explains many of our problems.

Update [Dec'15]: A related thought on mortality is here.

Sunday, January 19, 2014

Google Search should allow reproducing a Google News cluster for any link for which one ever existed

Every day, perhaps tens of thousands of new URLs are grouped by Google News into different news clusters, with the links in one cluster indicating that they're reporting the same story [determined algorithmically]. That's how Google News works. Google News machines do a lot of hard work to determine which stories should be grouped together into a cluster, but Google Search is not properly utilizing this hard work.

For example, this is an actual screenshot of one news cluster from Mar'10, about a massive recall of cars by Honda. The top link in this cluster is from Bizjournals.com.


Suppose at that time you had saved this story from Bizjournals.com, and opened that saved PDF file only today, in 2014. And suppose that today you are interested in looking at the perspective - on the same event - of other news outlets. Clearly, if you had access to the original news cluster that Google News had produced and shown back then, it would solve your purpose.

However, if you copied the title of the saved Bizjournals.com story that you have on your hard disk into Google Search and look at the results, you'll notice that you cannot recall the original news cluster of which this story was a part of. In fact, you cannot even know or be sure that this story was even a part of some news cluster back then. Google Search does not give you any way to know, or to reproduce the original cluster.


I think Google Search should indicate - perhaps by way of a small icon beside the result - that one or more of the search results on the page can be expanded into a Google News Cluster, thus adding much depth for those who are interested in exploring that particular result.

Pretty confident that this feature will be useful to users.

Wednesday, January 15, 2014

How the NSA could be using that dead, old smartphone lurking in your cupboard to covertly spy on you

Today's revelation that America's NSA has implanted spying hardware/software into perhaps 100,000 computers all over the world raises a possibility that might have seemed far-fetched a few months ago, but looks not just possible but in fact probable today.

Just think of that long dead, old smartphone lurking inside the cupboards at the homes and/or offices of so many of us. It is possible that that device is actually bugged with a tiny hardware+software package [courtesy the NSA], so that while it seems dead/dormant to you, it is actually not. What this tiny hardware implant inside your smart device could be doing is to quietly receive radio signals of a certain frequency transmitted by a NSA control box located far away, and use those signals to both generate energy [to charge the batteries of the device, and thus to keep itself alive] and to conduct spying on your home's/office's Wi-Fi network [using the software part of the implant].

It could be doing this spying every night, when everyone in your home is asleep, but when some or all of your computers/servers and smartphones are on and connected to your Wi-Fi network.

That dead iPod touch in your cupboard could be leaking out a lot of details.

Sounds better than what 007 would possess? It is not. Such a device and such a scenario is technologically possible today, and as we've seen over the last several months, whatever illegal or legal activity is possible technologically, America's NSA will do it. Hence we should assume that the scenario outlined here is already being exploited by the NSA.