Why Govt Loves Income Tax and Isn’t Going to Scrap It

One suggestion that I see people constantly make on the social media, particularly on Twitter, is that the government should do away with personal/individual income tax. They often say this with a lot of confidence, giving the impression that they have thought through the argument. Over the last one week, since the presentation of the annual budget of the union government, such  suggestions seem to have made a comeback.

But the confidence of the people making these suggestions largely comes comes from two things. One is that they haven’t had a look at the government data on taxes, which leads them to believe that barely anyone pays income tax and hence, it should be scrapped. Two, they have no idea as to how most governments operate.

Let’s take a look at a few charts to understand why this logic is all wrong. The following chart plots the individual income tax collected by the government as a proportion of the Indian gross domestic product (GDP), a measure of the size of the economy.

Source: Centre for Monitoring Indian Economy.
Revised estimate for 2020-21.
Budget estimate for 2021-22.

As can be seen from the above chart, income tax as a proportion of GDP has only gone up over the years. In 2019-20, it peaked at 2.68% of the GDP. In 2020-21, thanks to the economic contraction due to the spread of the covid pandemic and falling incomes, the income tax to GDP ratio is expected to be at 2.36% of the GDP. It is expected to rise again to 2.52% of the GDP in 2021-22.

The typical argument suggesting that the government should do away with income tax, goes somewhat like this. Oh, but very few people pay income tax. Now that is true, but that hardly means that the government will stop collecting income tax.

A slightly more sophisticated argument (at least the person making it, feels it is a sophisticated argument) goes somewhat like this. Oh, but income tax collected forms just a couple of percentage points of the GDP. That’s nothing.

Honestly, I find both these arguments hilarious. Guys making these arguments have no idea about how the data looks and as I said, which is where their confidence comes from.

Let’s look at the following chart, which basically plots corporation tax (income tax paid by corporates on their profits) and personal income tax as a proportion of gross tax revenue, over the years. Gross tax revenue is basically the sum of different taxes (corporation tax, income tax, union excise duty, customs duty, central goods and services tax etc.), earned by the union government.

Source: Centre for Monitoring Indian Economy.

What does the above chart tell us?

1) The corporation tax collected as a proportion of the total taxes collected by the government, has been falling over the years. In 2009-10, corporate taxes formed around two-fifth of the total taxes collected by the government. In 2021-22, the tax is expected to be at around one-fourth of total taxes. There are multiple reasons for this. Corporate revenue growth has slowed down over the years. Along with that corporate tax rates have also come down.

2) The importance of income tax in the overall taxes earned by the government has gone up in the last decade. In 2009-10, they formed around one fifth of total taxes and in 2021-22, they are expected to form around one fourth of the gross tax revenue earned by the union government. In 2019-20, income tax formed around 23.9% of overall taxes.

Hence, all taxes may appear small as a proportion of the GDP, but that does not mean that they are not important for the government. The government isn’t the entire economy as represented by the GDP but only a part of it and the taxes earned are a part of that part.

Now tell me which government in its right mind is going to drop a tax which is likely to bring in one-fourth of the total taxes earned by it. This especially in an environment where corporation tax collections as a proportion of the GDP have been falling over the years.

Another argument that is made is that income taxes should be eliminated and indirect taxes should be raised. So, with no income tax, people will earn more and hence, spend more, and the government will end up collecting more indirect taxes, and these taxes will more than make up for a loss of income tax.

While this sounds good in theory, the trouble is that unlike the physical sciences, in economics you cannot carry out real life experiments. So, no government is going to risk one-fourth of its revenue just because in theory they could do something else. Nah, not going to happen. The whole argument rests on the idea that if income tax is done away with people are likely to spend more. What if they don’t and decide to save more? There is no way of knowing in advance about how people are going to behave.

Actually, a more refined argument can be made here. People who pay a bulk of India’s income taxes already have most things that they need in life. Hence, their marginal propensity to consume will be low. This means that the extra money they earn thanks to lower taxes, they are more likely to save/invest it than spend it.

Hence, the argument that people are likely to spend more because they will earn more thanks to no income tax, doesn’t really hold. One thing that can be said for sure here is that if income tax is done away with, the stock market will go through the roof (not that it isn’t already).

A better way to increase consumption and hence, indirect tax collections is to reduce goods and services tax on mass produced goods. The impact is going to be much greater in this case.

There are other reasons here as well. There is a huge income tax bureaucracy in place. What happens to those people with no income tax? Income tax is also used by politicians in power to harass those in opposition or other people opposing them. Why let go of such an option?

All in all, income taxes are not going anywhere, even though when the BJP was in the opposition, it was pretty vocal on the issue of doing away with them.

But now they need to run the country and the gross tax revenue collected by the government, has come down over the years. The gross tax revenue as a proportion of the GDP peaked at 12.11% in 2007-08. In 2019-20, it was at 10.61%. It is expected to fall to 9.75% of the GDP this year and rise to 9.95% of the GDP next year, still significantly lower than the all-time peak level.

So, next time you want to go shouting on Twitter asking the government to do away with personal income tax, please do remember these points.

Why Facebook does not have a dislike button


A few days back a couple I am friends with on Facebook ‘announced’ the arrival of their child into the world, on Facebook. The ‘announcement’ read like a press release and seemed more like an announcement of a new ‘product launch’ than the arrival of a new baby.

When I was cribbing about this to a friend, she asked, how else could they have done it? “They could have just said, we became parents,” I replied.
This wasn’t the only case. In the past I have seen couples ‘announce’ their weddings, their ‘engagements’ and even their ‘honeymoons’ on Facebook, making it sound more like a new ‘joint venture’ between two companies than the coming together of two individuals.

In fact, one Facebook friend even uploaded extremely intimate pictures of his week-long honeymoon on a daily basis and marked it with headings like Day 1, Day 2, Day 3 and so on. This led me to comment that we live in an era where we see honeymoon updates of people whose weddings we don’t attend.

Honestly, it is at moments like these when I really wish Facebook had a dislike button as well. The trouble with Facebook is that you can only like something, but the moment you do not like something, there is no way you can go about expressing it immediately. While one can always write a comment, but that needs some mental effort, which is not always forthcoming when one is Facebooking.

So the question is why does Facebook only have a like button? As Dan Ariely writes in Behavioural Economics Saved My Dog: “Facebook “Like” button is much more than a way for us to react to other people. It is a social-coordination mechanism that tells us how we can, and should respond. It subtly gives us instruction on what is OK (and not OK) to post and it gently tell us how we can and can’t behave on Facebook.”

And why does Facebook not have a dislike or a hate button? As Ariely  explains: “Adding buttons such as “Dislike” or  “Hate” would  change our mindset when we read different posts; it would prompt us to have more negative reactions and I suspect that very quickly it would destroy this social network’s positive atmosphere.”

This explains why Facebook does not have dislike or a hate button. While the atmosphere does turn nasty on Facebook once in a while, on the whole it has a positive atmosphere. In fact, Ariely even suggests that “for what it’s worth my preference would be to add a button for “Love”.”

This is something that Twitter did recently wherein they added a heart button which signifies “like”. Earlier this used to be called the “favourite” button.

Anyone who has used Twitter extensively would know that the medium has a very negative atmosphere on the whole unlike Facebook. It’s a medium where you have many people fighting, criticising, abusing and misleading, all the time.

Other than births and marriages, people also announce the deaths of their loved ones on Facebook. Now this is a tricky situation. Often such ‘announcements’ are accompanied by a very emotional write-up, which as a reader you may want to like, but then how do you like a post announcing someone’s death? This doesn’t stop people from liking posts which announce deaths of individuals as well.

As Mark Zuckerberg chairman and chief executive of Facebook said sometime late last year: “Not every moment is a good moment, right? And if you are sharing something that is sad, whether it’s something in current events like the refugee crisis that touches you or if a family member passed away, then it might not feel comfortable to Like that post.”

“What [users] really want is the ability to express empathy. Not every moment is a good moment,” he added.

I for one am waiting for some sort of an empathy button. Maybe a hug button to start with. How about you, dear reader?

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared in the Bangalore Mirror on February 10, 2016

The death of Facebook

 facebook-logoVivek Kaul 
A friend of mine had a rather unique problem sometime back. His daughter’s class teacher had started putting their daily homework online on a Facebook page. She wanted the parents to follow that page, so that they knew what was happening in the class.
“So what is the problem?” I asked him.
“I don’t have a Facebook account,” my friend replied.
“So open one,” I suggested.
And this is when things got really interesting.
“I don’t like the voyeurism that comes with Facebook,” he said, trying to give me a reason for his reluctance to open a Facebook account.
“Yeah. Like you may get to see the honeymoon pictures of a couple holidaying in Goa. The irony of course is that you had not been invited for their wedding.”
“Come on, you are nitpicking here,” I tried to protest.
“No I am serious. Think about the digital footprint that you are leaving out there. And that is something that makes me uncomfortable. What if someone tags some old pictures of mine from my engineering days, where I am looking drunk or maybe even stoned? You may tell me you can always remove the tag. Yes, but it is not always possible to keep track. And given this, how will I tell my daughter in the years to come that smoking pot and excess drinking are not good for health. Also, what I write will stay there forever. Have you ever thought about these things?”
I guess my friend had a point. In fact, my mind went back to a conversation I had had with Ferdinando Pennarolla, an associate professor at the department of management and technology, Bocconi University in Milan, Italy, a few years back. Pennarola had made several interesting points during the course of our conversation about our digital lives.
“The consumers are not asking themselves to what extent their digital lives are there forever. When you write something on the internet it is written on the stone. It is forever. It is very difficult to erase things on the internet. Once you get Googlised it is very difficult to cancel or erase your news. There are many stories where people cannot erase their contribution to things like community groups and forums,” he had said.
Also, as we spend more and more of our lives on the internet the question of what happens to our digital lives after we die, comes into the picture well. We spend a lot of our time these days reading emails on Gmail, making friends and posting pictures on Facebook and telling the world at large what we think about it, in less than 140 characters, on Twitter.
Other than this we have subscribed to newsletters, articles from various websites, blogs and so on. We also have multiple logins and passwords that we have created on various e-commerce websites. What happens to all this when we are no longer around?
Or as Pennarola put it “Who will have access to all of this? Will these accounts just be cancelled because they will remain unutilised? Will the vendors still keep on bombarding our mailboxes with news and advertising? I think there is a need of an integrated service that in the future will take care of all our digital and networked life, and pass it to our loves, according to our will.”
For people like me, who primarily write for websites, there is also the question of who gets the copyright for all the writing that has been published and will continue to be published digitally. That is one part of the problem that most of us are not thinking about.
A few days after meeting my friend I happened to start reading a rather fascinating book called Who Owns the Future? written by a philosopher and computer scientist called Jaron Lanier. In this book Lanier raises many other fascinating questions regarding our digital lives that do not have easy answers.
Take the case of Gmail, Facebook and Twitter. A large portion of people who use email these days use Gmail. When it comes to social networking, Facebook happens to be the number one preference. When was the last time you logged onto Orkut? And do you even remember Bigadda?
As far as micro-blogging goes, have you even ever heard the name of any other website other than Twitter?
By concentrating our digital lives around a few companies, we are working with the assumption that they will stay around forever. But for anyone who understands a little bit about technology companies, knows that has never been the case.
“It’s sad to say, but all young things change over time. The prototypical great Silicon Valley company Hewlett-Packard, which inspired all the rest to come, encountered in the not-too-distant past a period of now only crummy management, but weird, tawdry scandals, board intrigues, and demoralization. Chances are that some of today’s bright young companies will go through similar periods someday. It could happen to Facebook or Twitter,” writes Lanier.
Lanier then discusses the case of Facebook in some detail. As he writes “Suppose Facebook never gets good enough at snatching the ‘advertising’ business from Google. That’s still a possibility as I write this. In that event, Facebook could go into decline, which would present a global emergency…If Facebook starts to fail commercially, suddenly people all over the world would be at the risk of losing old friends and family ties, or perhaps critical medical histories.”
The same argument stands true for Gmail as well. For most of us it is a repository of a large amount of information, communication and documentation, that we need to keep going back to time and again.
In that sense, these websites are becoming more like electric utilities as every day goes by. Something that we really cannot do without. As Lanier puts it “It’s a piece of infrastructure people need, and when people need something they eventually ask the government to make sure they have it. That’s why government ended up in the middle of water, electricity, roads, and the like.”
These are things that no one has really thought about, which is clearly worrying. As Lanier concludes “The death of Facebook must be an option if it is to be a company at all. Therefore your online identity should not be fundamentally grounded in Facebook or something similar.”
This article originally appeared in the Wealth Insight magazine dated Feb, 2014

(Vivek Kaul is the author of Easy Money. He can be reached at [email protected])  

How internet makes only a 'few' wealthy and destroys jobs

Vivek Kaul
In 1996, Kodak was ranked as the fourth most valuable brand in the world by Interbrand. In January 2012, it filed for Chapter 11 bankruptcy. A major reason for its fall was the inability of the company to go ‘digital’ fast enough.
Ironically it was an engineer at Kodak who invented digital photography. As Mark Johnson writes in 
Seizing the White Space – Business Model Innovation for Growth and Renewal“In 1975, Kodak engineer, Steve Sasson invented the first camera, which captured low-resolution black-and-white images and transferred them to a TV. Perhaps fatally, he dubbed it “filmless photography” when he demonstrated the device for various leaders at the company.”
Sasson’s new product was shown to the top bosses at Kodak. He was told “that’s cute – but don’t tell anyone about it.” The reason for the reluctance of the top brass to what would become digital photography was very simple. Kodak at that point of time was the world’s largest producer of photo film. And any camera that did not use photo-film was obviously going to be detrimental to the interests of the company.
So ‘Kodak’ missed the digital revolution despite having invented the digital camera. As marketing guru Al Ries wrote in January 2012 column, just after Kodak went bankrupt “In 1986, Kodak announced the development of the world’s first megapixel digital sensor small enough for a handheld camera, one that had 1.4 million pixels. In 1994, Kodak introduced the first digital camera under $1,000. Between 1985 and 1994, Kodak invested some $5 billion into digital research & development. As a result of its massive investments, Kodak holds more than a thousand patents related to digital photography. Kodak recently received, in patent-suit settlements, $550 million from Samsung and more than $400 million from LG Electronics.”
Despite being a pioneer in digital photography, the focus at Kodak was always on trying to sell ‘more’ photo-films. And that finally led to bankruptcy in the end.
The new face of digital photography is Instagram, a company which was bought by Facebook in 2012 for a billion dollars. Computer scientist and philosopher Jaron Lanier makes a very interesting point comparing Kodak and Instagram in his new book 
Who Owns the Future? 
As he writes “Kodak employed more than 140,000 people and was worth $28 billion. They even invented the digital camera. But today Kodak is bankrupt. And the new face of digital photography has become Instagram. When it was sold to Facebook for a billion dollars in 2012, Instagram employed only thirteen people. Where did all those jobs disappear to? And what happened to all the wealth that those middle-class jobs created?”
So what makes Instagram so valuable, asks Lanier? “Instagram isn’t worth a billion dollars just because those thirteen employees are extraordinary. Instead, its value comes from the millions of users who contribute to their network without being paid for it. Networks need a great number of people to participate in them to generate significant value. But when they do, only a small number of people get paid. That has the net effect of centralizing wealth and limiting overall economic growth.”
And this is true not only for Instagram. Take the case of Google. It might be a great search engine but ultimately it’s the people (and not its employees) who are generating the content that Google helps throw up. What would Facebook be without the ‘time’ that people choose to spend on it? The same stands true for Twitter as well.
It is people like you and me who make these networks so valuable. As Lanier writes “An amazing number of people offer an amazing amount of value over networks. But the lion’s share of wealth now flows to those who aggregate and route those offerings, rather those who provide the ‘raw materials’…We want free online experiences so badly that we are happy to not be paid for information that comes from us now or never. That sensibility also implies that the more dominant information becomes in our economy, the less most of us will be worth.”
This concentration of wealth is one of the negative effects of the digital revolution. “The clamour for online attention only turns into money for a token minority of people, but there is another new, tiny class of people who always benefit. Those who keep the new ledgers, the giant computing devices that model you, spy on you, and predict your actions, turn your life activities into the greatest fortunes in history. Those are concrete fortunes made of money,” writes Lanier.
All that I have discussed till now stands true for music industry as well. It used to be a big industry until things started to go digital. “At one time, a factory stamped out musical discs and trucks delivered them to retail stores where salespeople sold them…There used to be a substantial middle class population supported by the recording industry, but no more. The principal beneficiaries of the digital music business are the operators of network services that mostly give away music in exchange for gathering data to improve those dossiers and software models of each person,” writes Lanier.
If all this wasn’t enough, the Moore’s law is still at work leading to negative consequences. As Lanier points out “The law states that chips get better at an accelerating rate…The technology seems to always get twice as good every two years or so…This means that after forty years of improvements, microprocessors have become 
millions of times better…As information technology becomes millions of times more powerful, any particular use of it becomes correspondingly cheaper…Moore’s law means that more things can be done practically for free, if only if weren’t for those people who want to be paid. People are the flies in the Moore’s law ointment. When machines get incredibly cheap to run, people seem correspondingly expensive.”
Lanier gives the example of printing presses and newspapers. “It used to be that printing presses were expensive, so paying newspaper reporters seemed like a natural expense to fill the pages. When the news became free, that anyone would want to be paid at all started to seem unreasonable. Moore’s Law can make salaries – and social safety nets – seem like unjustifiable luxuries,” writes Lanier.
The internet essentially destroys jobs, even though it ‘seems’ to make things more efficient.

The article originally appeared on www.firstpost.com on August 10,2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

‘How we organise our digital inheritance will be a major concern in the future’

With more and more of our lives moving online in the days to come we will have to figure out who to leave that legacy to. “How do we organise our digital inheritance will be a major concern in the future. To whom do you want to transfer all your digital life is a question that will need to be answered,” says Ferdinando Pennarolla, an associate professor at the department of management and technology, Bocconi University in Milan, Italy. He was in India teaching the first batch of students at the Mumbai International School of Business, an initiative of the SDA Bocconi School of Management. In this interview he speaks to Vivek Kaul.
I wanted to start by talking a little bit about our digital lives. More and more of your lives are moving online. So how private are our lives?
There are two pitfalls of this story. One is the pitfall of the consumer and the other one is the pitfall of the agencies and the authorities that have to set rules about the privacy for the future. The consumers are not asking themselves to what extent their digital lives are there forever. When you write something on the internet it is written on the stone. It is forever. It is very difficult to erase things on the internet. Once you get Googlised it is very difficult to cancel or erase your news. There many stories of people who want to remove themselves from Facebook and Twitter. But there are many other stories where people cannot erase their contribution to things like community groups and forums. How do we organise our digital inheritance will be a  major concern in the future. To whom do you want to transfer all your digital life is a question that will need to be answered.
Could you discuss this in detail?
Our digital lives are characterised by services to which we have subscribed, say newsletters, social networks, e-commerce websites, free email accounts, blogs, and any other sort of profiling registration we do on the web to access to services and make our online purchases. Since we are not yet in the (eventually) forecoming era of the “digital identity” with an hopeful single sign-on technology that gives the pass to all we need on the web, the issue that remains open today is what happens to all this digital heritage when we will pass away. Who will have access to all of this? Will these accounts just be cancelled because they will remain unutilised? Will the vendors still keep on bombarding our mailboxes with news and advertising? I think there is a need of an integrated service that in the future will take care of all our digital and networked life, and pass it to our loves, according to our will.
What are the pitfalls at the agency level? 
The pitfall of the agencies and the regulatory people who have to work on privacy are the following. I think we have to reformulate drastically what we mean by privacy. Let me quote a story which I was not mistaken happened two years ago and turned into a major scandal. It was found that there was a log file in the Apple iPhone available only when the user was synchronizing the iPhone with iTunes and this file was sent to Apple. It contained all the log information about the GPS presence of the user. And it was a big scandal. People started saying things like Apple is investigating about our lives. Apple knows where I am walking with whom I am talking. Apple knows whether I am travelling not travelling. Is this fair? Is this against private? It was a big debate.
And what happened?
I went onto the internet and I saw many of the blogs talking about it as well. And do you know what was the most common response? Who cares! I am not a criminal. I am not a government representative. Whether I am walking in Mumbai or I am walking elsewhere, who cares that they know. So there are people who have no problem in disseminating their information. The problem is that in many cases we think privacy is being violated but everyone else may not be thinking on similar lines.
That’s a very interesting point you make…
Let me elaborate on this a little more. I don’t wish that this happens to anybody, but do you know what is the very first thing you will do, if you are diagnosed with a cancer? You will go on the internet. Yes. You will go on the internet. You will start grabbing information about your case and similar cases. And do you know what is going to be next step? You will be sharing your story with other people. There are zillions of websites with cancer patients sharing their super private lives with everybody and pharmaceutical companies don’t know what to do with it. So there are some circumstances in life, where the traditional old fashioned notion of privacy is definitely in dire straits. Zuckerberg and his friends, they made an IPO with our privacy. They built a huge company with pictures and facts that I share with my circle of friends.
How are companies using this information that we leave online?
I think there is a big room for business on this. Let me make a case. Yesterday it rained very heavily in Mumbai (the interview was taken on an earlier date). I just talked to the head of the academic activities at my school and it took her four hours to get home and she only reached around midnight. Is that sane? It’s insane. Now routing traffic on the basis that people want to share their local information would be fantastic. It would mean exploiting the possibility of returning services to citizens based on the data they produce and the data they want to share. Google has started this in some cities. But they are still in the test phase. So we will have to wait and see to what extent this will become a popular service. I like to say that it is much less expensive to move bytes instead of moving atoms. Moving atoms should be the ultimate solution.
Any other examples?
Then there is the case for the health care businesses. And I would say that we are at a very early stage. I have been working with the giants of the industry and if you get into the Facebook pages of the pharmaceutical companies or look into the social network strategies of these companies, you will discover that some of these companies are trying to listen what is happening on the web. They are trying to understand how consumers are talking about their products and their therapies. That I think is a start and then eventually these companies will use this kind of data for returning services to the end consumer.
But you are talking from a positive point of view…
Yes. You know it is a of trade off. Let me put a case. Every time something dramatic happens in my country like a kidnapping, shooting, or a major accident, what happens is that police gets into a desperate search of webcams that eventually had the fortunate possibility to shoot the situation. These cameras could be something like private cameras for security purposes at a hotel. Now if you spread out cameras all over the city definitely you are invading the private life of your citizens and that they are being filmed at every single step of their lives in the city. But the returning action is that you can defeat criminals, who are a major problem in any country. Nothing is safe because in the end we are talking about human beings. But I do believe in policies and practices and I do believe in their enforcement.
Do companies like Google benefit because they have an access to a major part of our digital lives?
There is the famous quote from the Google founders “don’t be evil”. They know that they run the risk of being perceived as the evil of the world sitting on an incredible amount of data on processing information about users. I think Google is sitting on a pile of data which is very difficult to process and analyse. In fact, they are very cautious in turning this data into further initiatives. It is very difficult to trace behaviours when you move in different areas of the world,  when you have different IP numbers and when you have different devices. So it is very difficult to then a have an interpreting model of the user behaviour. So once again it’s not easy to trace what you are actually doing. Can I say that, that’s the not the solution that we have to talk about.
Then what should we talk about?
The Google people made the brilliant contribution of re-inventing the way we do searches and making a business about that. Searches will be the most important engine of mankind in the years to come. But because of all the information that will be there, the difficulty will be in catching the information that you are looking for. So we need different engines. I predict the Google story will come to an end or they themselves may re-formulate their engine view and get into different type of searches. People get a little bit dissatisfied when they do traditional searches on the web. They get lots of popular stuff that they are not looking for. When you are under pressure when you have to make a fast decision you don’t want that to happen. You want to have exactly what you are looking for. This will have to change.
What kind of specialised things do you see them getting into?
The answer is semantic search engines which have the ability to interpret what you are looking for. But these are still in their early stages because semantic engines are very expensive to build and they need a lot of self learning. This database of semantic searches is the future that I see. In a recent blog you wrote “customer service operations today are similar to the organisation of the early mills and factories of 100 years ago. There is a long long way to improve in customer service, anywhere in the world. Neither the best admired companies are immune from this.” What made you say that? 
Deploying a service with a face to face encounter in many businesses is no longer rewarding. Think of type of services like insurance or giving support to the customer once the product supplies have been done. They don’t have any reason to keep on opening local offices and having customers visiting those local branches. So more and more customers are logging onto the web or making a phone conversation to get their problems resolved. But there is a problem with the way customer service operations and call centres are organised. These jobs are of the highly repetitive kind where you do and do the same thing over and over again. You are bombarded by mails and phone conversations and then at the end of the day you are exhausted because you are working hard eight hours a day managing hundreds of complaints from customers.
Yes, I guess that’s true….
If you visit these organisations, I am sorry to say, they look like chicken gates, where people are organised in small cubicles. Sometimes the environment is very noisy as well and at the same time the people who work in these call centres are trying to understand what the customers are saying on the phone. I would say that this is insane. This is really like old industrialised assembly lines of 150 years ago. The other kind of organisations have been evolving their orgnisational modes towards much more up to date and more humanised, productive and motivation oriented environments. I am not surprised in many of the customer service operations, also in India, experience high turnover rates. So there is a major challenge for customer service managers to reinvest these organisations in such a way that I enter the customer service operation as a junior manager and I leave at the retirement age, let me provocatively say.
Do you see that happening?
No. It is not happening with the exception of a few cases. In 2003, there was a scientific research in the Academy of Management Journal which is one of the leading publications in my field. The research demonstrated for the first time ever that in customer service operations there is a positive correlation between customer churn rate and employee churn rate. This is very interesting and which means that if you want your customers happy, you have to make sure that your employees are happy. As opposite, if your customers are unhappy it is very likely that one of the reasons is that your employees are unhappy. But are customers happy with customer service operations? I fight on a daily basis to be served on the phone. And the quality of the service is lousy. It is very poor. Sometimes you have to remake the connection or re-explain the things with several agents over and over before getting a problem solved. This is happening in insurance, banking, travel, transportation and even in telecommunications.
Just to be frank and open, it is very difficult to find the right solutions and the right processes working in the back-office without any face to face interaction with the customer.
Another interesting blog of yours was on the growing number of digital subscribers of the New York Times newspaper. That raises a few questions. Do you see newspapers being a viable business model in the days to come? Or will the biggest newspapers of the world largely move online?
We are at a turning point and the turning point is the following. Definitely the news business is becoming more and more free. Everybody has news. The earthquake followed by the tsunami in Japan was communicated across the planet, faster than anything else. And it started with basically a few people shouting about it on Twitter. All this is fantastic news for mankind. We want to be informed and we spread out the news all over the planet. But the point is that   we have to make a balance between the crowd-sourcing of news and the authoritative production of news.
Could you elaborate on that?
I would not want to stop the crowd-sourcing of news from people who become journalists simply because they are eye witnessing something that is very important. At the same time we need editorials. We need people who can interpret news. I value this a lot. I am still on old fashioned customer. I still purchase newspapers. Of course I purchase the digital version. But I still pay for the news that I get. But at the same time I am a very well informed citizen. I am always connected to the internet. I have my news websites open. And I grab the news instantly as soon as it comes. But still a day after I love to get into editorials to get an understanding of what is happening. I think the publishing industry has to find a solution. Is a solution readily available now? No.  They are still in between.
The interview originally appeared in the Daily News and Analysis on October 1, 2012. http://www.dnaindia.com/money/interview_how-we-organise-our-digital-inheritance-will-be-a-major-concern-in-future_1747236
(Interviewer Kaul is a writer and he can be reached at [email protected])