Changing Education Sector

I have just typed some of my thought. My views are not very concrete, its changing based on new input that I come across with time. Anyways read ahead and share your opinion.

There has been a new dawn in the education sector or segment what ever may please you. Its called open online education system.

The reason for writing it down is to clear my own head about my understanding. For last few months I have been following the stories of MOOC (Massive Open Online Courses). The concept is simple while education is being given to people in schools/colleges for paid. Make everything available to those who would like to learn, have the capacity, patience and all other virtues etc etc but cannot afford it.

The classes are put up by some of the best faculties in the world for free. Anyone can learn from it. The downside is they will not be given any certification from the university or by the professor, this is because it will remain free.

What is more important to understand is that the world's education system might change. There are few things that may actually take place over the next few years, 5 or less is my guess.

During my father's time. being a graduate was a big deal. Over the last few years, I see that most people are doing and Masters and its becoming mandatory to hold some Master's degree. Fancy names are also good but better brands have an edge. A generation ago bachelors degree was good. Now a masters is considered as essential. And then PhD will become a norm..

In the next few years what will become more important is the practical or real life implementation of the course and how fast can you implement your learning. Innovation will be paid more focus that making things lean and being bothered about lean. Flux management and change management will see more role being played. Educational qualification will not be a problem then usability of learning, and understanding what Steve jobs meant by "Stay hungry, Stay foolish" will become the new mantra.

Or my entire understanding could be wrong. In which case. I think there would be more jobless people.

Anyways things either change too soon or too slow. It will be interesting to see what changes shall take place.

The Noon-light robbery: LIC

There is a lot of coverage to the LIC's investment in ONGC's share auction. So I thought will just explain it in the simplest possible way.

*What was reported/what happened
ONGC was auctioning its shares. Since the oil marketing company is in losses and is expected to remain in losses, so the investor community didn't show enthusiasm. The government sprang in action and called the LIC's big boss. The boss (at LIC) told his minions to buy ONGC in the auction. The minions also followed their orders.

Now the investment has been screwed: LIC bought the share around either INR 392 or INR 303.67 (this is a new controversy, I havent fig out the discreparency either), but the current price of the ONGC Share is INR 282. So either way the company LIC has made poor investment.

*Insurance?
The idea of insurance is to protect one self against an unforeseen problem. Most of the time the company takes into account that only 10-20% of the people taking out an insurance will file claim. If there is a risk of more people filing for claims then the premium amount will rise.

*Business model for an insurance company
Roughly, the insurance company invests 60-80% of the money collected in business from where it can get higher returns. Only a part of the money is kept with the insurance company so that it can give out claims and run its day-to-day activity. For this the company claims a service charge and all money made out of the investment remains with the company/shareholders.

(The exact business is more complicated but in simple terms we can state as above)

*The twist
In India LIC sells insurance product which guarantees a return at the end of the tenure. This return is linked to the performance of stock market, which is based on the number of units. So if LIC makes a bad investment then it is the policy bearer who will register the losses.

*The noon robbery
LIC is making poor investment knowingly because the Govt has directed its Chairman to do so. This hurts the company from a business sense but also because it is doing against the best interest of its policy investors.

*The biggest problem
Years ago, there was a mammoth company called UTI which used to collect money and invest. But it failed because it came out with a product with guaranteed return and it invested in stocks but around the same time stock market collapsed and hence it didnt had enough money to meet its obligation.

LIC may not have to share the fate of a govt bail-out now but if its decision making is not give the due freedom then it will go the Air India way and face the prospect of being bankrupt.

Democracy and Crony Capitalism

The story about the crackdown on the Occupy Wall Street is interesting. Of what I had read these demands were made first by Michael Moore.

The story seems a bit exaggerated, but then it can also be the truth. But there is an interesting point to study in terms of democracy. 'Does democracy exist or is it crony capitalism all the way?'

There would be about 3 steps to see it.  

Step one: Choose 10 countries which have functioning democracy for last 2-3 decades. (This will remove rogue states)

Step two: Establish which of the countries have placed maximum information online regarding level of transparency.

Make a grid column and check how each country fares

(1) On bio and financial info of its elected leaders available to the public

(2) Access to voting patterns of each representative at the democratic forum (Senate, Parliament etc.)

(3) Publicly if it’s possible to establish if the close relatives such as spouse, child, father, mother are related to which companies/conglomerates. Listed companies in India/US have to declare who all are on the board of the company and also about individuals/companies that hold more than 1 per cent of the company. 

Step three: The five countries with highest score on democratic transparency can be studied.

(1) Mark what questions were raised by a peoples representative?
(2) Was the question positive or negative for the company/sector/ business
(3) Establishing if the individual has financial interest to the company/sector/business
(4) Also, how a representative vote on laws affecting sectors of an economy against the individual's financial interest in that sector or on a specific company.

P.S.

1. A friend of mine had done a story in 2008 for Economic Times where he sifted through the question hours of Lok Sabha and came out as which national/regional party had questioned for which company/conglomerate. I don't remember if the questions were marked as positive and negative to check the biasness or not.

2. It seems like a lot of work and there will still be scope for error. (Perhaps using the capabilities of the software written in this article -- Palantir -- should make the work relatively possible.)

3. If you have ideas to improve the way in which one should do the story then feel free to share the ideas or if you come across a similar story do share that as well or if you plan to take up the study then feel free to ask for any assistance 




Continued to 

A policy error on Maruti's part

There is continuous problem that has been cropping up at the Maruti's plant. Every now and then they are shutting it down for fairly long period.

But no one, it seems is actually trying to solve the underlying problems they are just playing the immediate game.

To start with the main problem is that temporary workers are paid less and have less amenities but companies prefer them because its easy to issue them pink slips (in other words fire them) when there is a slow down.

This is definitely a skewed system.

The solution would be to pay higher wages (i.e. cash in hand) to temporary workers.

The easiest I could think of was to pay 20% more to temporary workers than the permanent workers. That should even out the playing field between temporary and permanent workers.

Permanent workers get less cash in hand and more benefits plus firing them would be difficult. Meanwhile temporary workers will be paid more because they will have more risk, the risk of losing the job.

Why is the state government not suggesting such simple solution or coming up with a solution that is (a) practical (b) solves the real problem?  A policy problem cannot be solved by signing agreement and playing strikes and suspension.

What Recession ?

A friend of mine asked me to write something on recession; although I am not an authority on it but then this is just a blog so I will write.

- - - - - - - - - - - - - - - - -

On using Google and reading many different sites, if one has to explain what is recession then it would be this -

"A true economic recession can only be confirmed or announced if GDP (Gross Domestic Product) growth is negative for a period of two more consecutive quarters."

What are the causes for recession? When did it start? What was the exact point is difficult to ascertain. According to one website, ‘the true starting point actually rest in the several quarters of positive but slowing growth before the recession cycle really begins. Often in a mild recession the first quarter of negative growth is followed by slight positive growth, then negative growth returns and the recession trend continues.' (recession.org)

Although the truth is there is no pattern, look at the graph given on the right. Or if the above statement is right, in that scenario the worst is not over.

Also though the two quarter theory is generally accepted but most experts do not agree on it.

Just for information, so that there is no misunderstanding. In the US it's the National Bureau of Economic Research (NBER), which announces if the country is in recession. And they use a multitude of factors before announcing that the country is in recession like unemployment, industrial output etc.

Now in India's case there is no defined authority, at least not to my knowledge.

If you are to ask me then I would say, probably RBI will announce, if there is ever such a situation. Then stock markets will crash, therefore, the Finance Minister would cry foul. So, the governor of RBI will file a case and the law ministry will give its own interpretation. I think after the first announcement and the denial it will be another quarter when the Supreme Court will give the verdict, "WE ARE IN RECESSION".

Now no need to panic that was just a scenario "if" there is a recession in India.

India is not in recession. Our growth has just slowed down and from IMF to the individual experts are all saying that India will see growth although a small one which can range from 2 percent to 5 per cent for the calender year 2009. Although I personally would put it between 1.5 per cent to 4 per cent at best. If it goes more than 4 we should celebrate, that we managed more than 4 when the world shrank .5 percent or more.