On Advice

I don’t know why I am writing this. I guess, I need to get it out of my system. So, at the end of it if you are still wondering why, apologies in advance.

In the last eight to nine months, there has been a massive increase in the number of people writing to me, seeking advice on different issues.

Recently, someone wrote to me, wanting to know, if doing a five-year integrated MBA from one of the IIMs, was a good option, if one did not get admission into an IIT that is. My answer was, I don’t know.

He persisted and asked, if spending Rs 30 lakh on an integrated five-year MBA from one of the IIMs, was really worth it? My answer was, I don’t know.

He persisted and asked, if getting a degree in business or economics made a difference if one wanted to become an entrepreneur. My answer again was, I don’t know.

He then thanked me for my suggestions.

Another gentleman had a degree in science and wanted to know if there was any course/internship/job that would help him learn finance. My answer was, I don’t know.

Over the months, I have got many such questions where people seek career advice from me. And honestly, I don’t know why they do this. I am not a career counsellor. My corporate career lasted all of five weeks.

And before that I more or less made a mess out of my education. My formal education is a BSc in Maths and Computer Science followed by an MBA in Information Systems. I lost interest in the MBA around half way through it, but didn’t have the guts to drop out, thinking of all the money that had been spent and the problems it would create for my parents.

So, I persisted and ended up getting a degree which has been largely useless since then. The only thing that I learnt in my MBA and which I still put to good use is how to calculate the internal rate of return on any investment. But one didn’t have to do an MBA just to learn that.

I have spent nearly two decades in trying to make up for this mistake, by making myself learn economics, personal finance and some part of the Income Tax Act, bit by bit, in an extremely unstructured way. (This also explains why I find it very difficult to answer questions like, which are the books I should read to learn economics).

All this unstructured learning could also happen because I lead a slightly unconventional life. I am single. I stay in a studio apartment. And I don’t spend much money on travelling.

Hence, I have been able to dedicate a lot of time to unstructured learning. This is not a formula that would work for most people, especially those who have EMIs to pay, and given that I don’t recommend it to anyone.

Also, the larger point here is, that I have a good understanding of things over a fairly limited area. I understand some fifth standard Maths and some part of India’s economy. I can tell you how to manage your money, on most days, but there are a few limitations to that as well. And that’s about it.

Beyond this, my knowledge is generally useless. I know a few things about Hindi cinema and its music, especially from the late 1980s to the mid 1990s. Like this morning I was discussing with someone, on how a famous Hindi film song of the mid 1970s composed by Laxmikant-Pyarelal, has a tune similar to a famous Sabri Brothers qawwali. But then I really don’t know who copied whom.

I can also give you a lot of gyan on modern crime fiction, especially Scandinavian crime fiction and in particular, the genre of the police procedural. Like I can tell you why the last book in Henning Mankell’s Kurt Wallander series just didn’t make much sense and it was written by a writer who was extremely bored by then. But then what use will this be to you?

Of course, I have written five books in the last decade and these books have sold reasonably well and put me in the public domain. I have appeared on TV (I don’t know why but this is equated to being successful in India. The day I first appeared on TV, one of my aunts just went over the moon. This was after nearly eight years of writing almost every day, first for a newspaper and then freelancing for websites, newspapers and magazines). I have lectured all across India. I have spoken across India’s best business schools.

So, there has been some limited success in my life. But then that does not mean that I have answers to all the questions. Let me give you an example.

A few years back a cousin who wanted to a PhD wanted me to tell her if she should do major in marketing or in economics. Now given that I have no experience of doing a PhD from an American university, I was in no position to answer the question. And I told her so. But she persisted and so I answered.

I told her that she should do a PhD in economics, given that if she had to spend five years on studying something, it rather be something important. Coming from me that should have been hardly surprising. The logic being, what was the point in studying marketing for five years and learning how to sell more things to more people.

Now this is not to say that marketing is just that, it clearly isn’t. It is a very important subject, which can make a lot of difference across various facets of life and it’s not just about selling more things to more people. But then that is the way I was thinking at that point of time, in trying to answer a question, I wasn’t qualified enough to do.

Thankfully, she did not listen to me, and chose to do a PhD in marketing.

The point being it is very important in life who you seek advice from. Wrong advice can prove to be very costly.

There is another dimension to advice, it is a very individual thing.

Around a decade back, an uncle of mine was after me to buy a house in Delhi. Delhi home prices in 2010 were at their peak and anything half decent in the city would have cost Rs 1.5-2 crore. I clearly did not have the capacity to take on a home loan that could have funded a home at that price and I told him so.

He persisted. If not Delhi, look at something in Greater Noida. I didn’t, for the simple reason, I had no plans of living in and around Delhi at that point of time (nor do I currently).

Now ten years later was this a good decision? Yes, if you consider the fact that so many projects in Greater Noida were never completed. The builders took the money and disappeared. Also, I continue living in Mumbai.

And no, if you consider the fact, that I still don’t own a home to live in.

At the end of the day, what advice one seeks and one takes, is a very individual thing.

Anyway, that was the rant. Now let me give you some advice on advice.

1)  If you have to ask, ask pointed questions. Don’t ask stuff like, how do I learn finance? First figure out what does the word finance mean to you.

2) I think, the first point needs to be stated again. Ask pointed questions. Don’t ask stuff like, should I invest in bitcoins? The answer from my end will always be, I don’t know. Simply because I don’t know how you perceive risk, what kind of money you are in a position to lose and what is your current understanding of bitcoins (or any other investment avenue for that matter).

This is not to say that if you were to ask a question like this, people won’t give you an answer. Many people will. But come what may that would be wrong advice.

3) Before asking a question, please think, whether the person you are putting the question to, has the capability to answer that question. Just because he has seen some success in some aspect of life, doesn’t mean he has the answers to everything. Like a few months back, someone asked me, which laptop should I buy. I mean, thoda to dimag lagao yaar.

4) Don’t ask philosophical questions related to your career. You might get an answer but that answer will be wrong. This reminds me of a question someone asked me around a year back. How do I make decisions in my 20s that I don’t regret in my 40s? I almost fell laughing from the chair I was sitting on. Almost all decisions I made in my 20s, I regret in my 40s, expect for the fact that I started reading seriously only in my mid 20s and which is why there is a lot to catch up on.

5) Just because you and I have been brought up writing exams where every question has an answer, doesn’t mean life operates like that. Every question doesn’t have an answer, even though most people will happily give you one. If you are the kind who believes in the fact that every question has an answer then please seek out LinkedIn influencers, you are made for each other.

6) Oh, and finally, please Google. You will be surprised!

Bonus point: Don’t expect me to make a decision for you, simply because you are asking a question.

Not Holding IPL in Maharashtra Will Meet Water Needs of Latur for 42 Minutes

Indian-Premier-League-IPL-logo

In yesterday’s column I had explained why holding the Indian Premier League(IPL) T20 cricket tournament, responsible, for the water woes of Maharashtra, is wrong.

The trouble is that no one is using numbers to make an argument. Emotions are running high—and the typical argument against IPL is when there is no water in Latur, how can we waste water on cricket grounds.

But this argument looks at the issue only in absolute terms. It is estimated that the IPL will use around 6 million litres of water. This sounds a lot on its own. But it amounts to only an insignificant amount of the total water used to produce sugarcane in Maharashtra in 2013-2014.

The basic problem is that Maharashtra should not be growing as much sugarcane as it is. Sugarcane is cultivated on less than four percent of the total cropped area in the state but uses 70% of its irrigation water.

Hence, all the noise around IPL being moved out of Maharashtra is essentially nonsense of the worst kind. People who feel for those who do not have water in parts of Maharashtra can do more for them by stopping to waste water in their daily lives, than agitating about this. Also, they should check for water leakages in their building.

Let’s take a look at Latur in a little more detail. An India Today report points out that the daily requirement of water in Latur is 85 litres per person. As per the 2011 census, the population of the Latur district is around 24.6 lakh (2.46 million).

This means the district needs around 209.1 million litres of water every day (85 litres multiplied by 2.46 million). IPL is scheduled between April 9 and May 29, and will use six million litres of water over a period of 51 days in Maharashtra.

During the same period Latur would require 10,664 million litres of water (209.1 million litres multiplied by 51 days). How will not using six million litres of water at IPL help? If I stretch my argument, not allowing IPL in Maharashtra to happen, will essentially save water that is good enough to meet the water needs of Latur for 0.029 days (6 million litres expressed as a proportion of 209.1 million). This essentially means around 42 minutes (0.029 x 24 x 60), if I were to convert it into minutes.

So not allowing IPL in Maharashtra to happen will supply water to the people of Latur for all of 42 minutes. Of course, I am assuming that all the water that is thus saved can be moved to Latur, all at once, and no part of it is evaporated during the process.

The larger point is that there are better things that can be done to save water.

Further, why is no one talking about the huge amount of water that gets wasted everyday due to leakage as well as theft. A March 2016 report in The Times of India offers some data points. The report points out that Mumbai loses 900 million litres of water daily due to leakage and theft.

An August 2015 report in the same newspaper had put the daily leakage of water in Mumbai at 1,012.5 million litres. The Brihanmumbai Municipal Corporation(BMC) terms this leakage as “non-revenue” water, in a classic bureaucratic way.

In this column, I will work with the former estimate of 900 million litres daily leakage, given that it is a more recent one.

I tried looking for the water leakage numbers for Pune and Nagpur where IPL matches are scheduled along with Mumbai, in the state of Maharashtra, but I couldn’t find any numbers. Given that I will have to work with only the Mumbai water leakage number.

The IPL started on April 9 and is supposed to go on till May 29. Effectively, it is a tournament that will go on for 51 days. Over 51 days, 45,900 million litres of water (900 million multiplied by 51) would have been lost just in Mumbai. The total number would be higher if we had the leakage numbers for Pune and Nagpur as well. In comparison, the IPL will use only six million litres of water, over 51 days. This works out to 0.013% of the total leakage of water in Mumbai.

If only a part of the leakage could be plugged, the water needs of Latur could be easily met. Why is no one really talking about this?

I know I am exaggerating here with my calculations but this is just to show the absurdity of the issue of moving IPL out of Maharashtra in order to save water. The question that crops up here is that why are the NGOs which have filed a PIL in the Bombay High Court asking for IPL to be moved out of Maharashtra, not taking BMC to task as well?

The ultimate idea should be to stop the wastage of water and considerably huge amount of water is being wasted by leakage and municipal corporations not doing much about it. Why is this discussion not happening?

The BCCI, for once, does not appear to be in a confrontational state. An India Today TV report points out that BCCI is planning to move five matches out of Maharashtra. Of this two matches were scheduled in Pune and three matches in Nagpur.

The three matches that were scheduled to happen in Nagpur are now likely to take place in Mohali in Punjab. Like Maharashtra grows sugarcane, a fairly water-intensive crop, Punjab grows rice. Punjab is a semi-arid region and in an ideal world, rice shouldn’t be grown there, because it needs a lot of water, and there is not a lot of water going around in a semi-arid region.

Like Maharashtra shouldn’t be growing sugarcane, Punjab shouldn’t be growing rice. Punjab uses 5,337 litres of water to grow one kilogram of rice. This is more than double that of West Bengal, which takes 2,605 litres of water to grow one kilogram of rice.

In total Punjab produced 11.1 million tonnes of rice in 2013-2014. So how many litres of water did it use in total? The total amount of water used was 59,240,700 million litres (11.1 million tonnes of rice multiplied by 5,337 litres of water per kg of rice).

Currently, four matches are scheduled at Mohali. The India Today TV report suggests that three matches from Nagpur will be moved to Mohali. This basically means that seven matches will be played in Mohali.

In the public interest litigation that has been filed in the Bombay High Court asking that IPL cricket matches should be moved out of Maharashtra, it has been said for each match three lakh litres of water are needed. As Ankita Verma, the lawyer for the petitioners told Rediff.com: “International maintenance for pitch guidelines state that for each match you need three lakh litres [0.3 million] of water for one ground.”

Hence, for seven matches in Mohali, a total of 2.1 million litres of water (0.3 million litres per match multiplied by seven matches) would be needed. This forms around 0.0000035% of water used in Punjab for growing rice.

This is as insignificant as the water to be used for IPL matches in Maharashtra in comparison to the total water used for growing sugarcane. If to save such a small proportion of water, cricket matches can be moved out of Maharashtra, they should be moved out of Punjab as well. The logic is exactly the same.

I know the argument is absurd. But it needs to be made in order to show that the real issues behind the water problem in the country are not being talked about. No one is talking about sugarcane and rice paddy not being the right agricultural crops to be grown in Punjab and Maharashtra. The reason is straightforward, there are political parties which benefit from this.

Further, no one is talking about the astonishing amount of water leakage that happens on a daily basis. While, changing cropping patters is a long term solution, preventing water leakage on a war-footing is a simpler solution, and can be carried out, if the local municipalities get their way around to doing it. The only people who will lose due to this, is the water mafia.

But then this is not as sexy as criticising IPL. I am no fan of BCCI, but IPL is a soft target.

The column originally appeared in the Vivek Kaul Diary on Equitymaster on April 13, 2016

Ek akela is shehar main: This song tells us all that is wrong with Indian real estate

ek akela is shehar mainVivek Kaul

Very few songs survive the test of time. One such song is ek akela is shehar main from the 1977 movie Gharaonda, written by Gulzar, set to tune by Jaidev and sung by Bhupinder Singh. As the lines from the song go:

ek akela is shehar main
raat main aur dopahar main
aabodana dhoondta hai
aashiyana dhoondta hai

(aabodana = food and water. aashiyana = a home)

This iconic song has an iconic scene which most people miss. Some 3 minutes and 26-27 seconds into the song there is a shot of what looks like Marine Drive. The road is full of Premier Padminis (or Fiats as they were better known as) and Ambassadors. If you look carefully enough there is even a white Mercedes somewhere.
The movie
Gharaonda was released in 1977 and those were the days when Indians had the option of buying either the Ambassador produced by the Birlas at Uttarpara near Kolkata or the Premier Padmini produced by the Doshis at Kurla in Mumbai. The situation was akin to the early days of the American automobile. Henry Ford, the pioneer of the assembly line system of manufacturing remarked in 1909 that: “any customer can have a car painted any colour that he wants so long as it is black.”
In short the customer did not have any choice. The same was true about India in 1977. If one were to paraphrase Ford, “ any customer could buy any car that he wants so long as it is a Padmini or an Ambassador.”
But things have changed since then. Some 37 years later in 2014, a similar shot of the Marine Drive would show so many models of cars that it would be difficult to count the number quickly. This is the impact of competition and a largely free market which operates in the Indian automobile sector with very little interference from the government and in turn politicians. The companies compete with each other in order to offer the best possible features to consumers at the best possible price. This wasn’t the case in 1977 and the Indian consumer had a choice of two models of cars. The free market has clearly changed that.
Now let’s go back to the 1977 song that we started with—
ek akela is shehar main. The song is about the inability of a man to buy a home in Mumbai in 1977. Thirty seven years later nothing has changed on that front. In fact, things have only gotten worse.
And the reason for this is very simple. Most homes across Mumbai and large parts of this country remain unaffordable for the same reason as the Indian consumer had a choice of only two cars in 1977. There is no free market in real estate.
Most real estate companies are fronts for politicians. What makes this very clear is the fact that even though there are thousands of real estate companies operating across India, there is not a single pan India real estate company. Forget pan India, there are very few companies that operate across large states. Most of the big real estate companies have an expertise in a particular part of the country. Why is that the case?
The answer lies in the fact that for any real estate company to operate in any part of the country it needs the cooperation of local politicians. And politicians in every area have their favourite real estate companies. This effectively ensures that even though there are many real estate companies there is very little genuine competition among them to offer the best possible home at the best possible price to consumers. Also, it limits the ability of a real estate company to grow in different parts of the country. It is not possible for the same real estate company to manage politicians everywhere. In short, the free market is not allowed to operate.
There is huge government interference in the sector to ensure that the favoured real estate companies continue to benefit. As
Bombay First points out in a report titled My Bombay My Dream “Government and the land mafia in fact do not want more land on the market: after all, you make more money out of the spiraling prices resulting from scarcities than you could out of the hard work that goes into more construction.”
Over the years, the major infrastructure projects in Mumbai like the Bandra-Worli Sea Link or the Versova-Ghatkopar metro link, have addressed areas that have already been built up. The Sewri-Nhava Sheva link, which will open up a lot of land for housing is yet to see the light of day.
One excuse that is constantly offered by the real estate companies to justify spiralling prices is the lack of land. While this may be true about a city like Mumbai it is not true about most other Indian cities.
The 
Indian Institute for Human Settlements in a report titled Urban India 2011: Evidence esimates that “the top 10 cities are estimated to produce about 15% of the GDP, with 8% of the population and just 0.1% of the land area.” So clearly scarcity of land is not an issue.
This situation can be improved significantly if some of the land that the government has been sitting on can be made available for affordable housing. KPMG in a report titled 
Affordable Housing – A key growth driver in the real estate sector points out “The government holds substantial amount of urban land under ownership of port trusts, the Railways, the Ministry of Defence, land acquired under the Urban Land (Ceiling and Regulation) Act, the Airports Authority of India and other government departments.”
Over and above this the end consumer has almost no access to price and volume trends. He has to go by what brokers and real estate companies tell him. And for these insiders the real estate prices are always on their way up. In this scenario the real estate market is completely rigged in favour of brokers, real estate companies and politicians. This is what the Nobel prize winning economist George Akerlof called a scenario of “asymmetric information”.
As Guy Sorman writes in
An Optimist’s Diary “Economic actors don’t all have the same information at their disposal. Without institutions to improve transparency, insiders can easily manipulate markets.” This is precisely what is happening in India—politicians and real estate companies acting as their fronts, have been able to manipulate the entire system in their favour.
And unless this changes, the dream of owning a house will continue to be just a dream. Until then we can thank Gulzar, Jaidev and Bhupinder Singh for this beautiful song and hum it…
ek akela is shehar main…

The article originally appeared on www.Firstbiz.com on August 4, 2014

(Vivek Kaul is a writer. He tweets @kaul_vivek)