Captain Trips to Wire Trips

War of wits on BP Exxon

2011-03-10T13:46:00.000-05:00

Reading this makes me wonder... On one side BP spins the Deepwater blowout disaster as an industry wide issue - it just happened to them. On the other side, Exxon Mobil spins it as a BP issue and not an industry-wide systemic matter. Time will tell. But odds state I believe there is some truth on both sides. I don't think it was all an industry matter- management oversight was an issue. But that it cannot happen to Exxon, is a stretch of faith that only the foolhardy can take.

Dynergy - waiting for a better deal?

2011-03-07T00:40:00.001-05:00

All the saga that has been going on with Dynegy (with Blackstone and Icahn) leaves me with one curious point. The deal did not go through with Blackstone is because Dynegy thought they can get a better deal. Alas, it is yet to come through. Wonder - if companies cannot get this correct, what about individuals. FT has an update

US Corporate Tax

2011-02-15T10:09:00.000-05:00

In this article, Martin Feldstein gives few key points of problems with higher US corporate taxes. Higher taxes causes
- a shift of capital to sectors such as, housing where there are tax benefits
- companies tend to raise capital more with debt than equity
- less foreign capital flowing into US for corporate investments

Even foreign income by US corporates are taxed in a manner that puts US companies at a disadvantage relative to other countries. Income is taxed at a rate equal to difference of US tax rate and foreign country rate. End result is - companies prefer not to bring in foreign income into US but use it in the foreign country itself.

This is quite interesting - come to think of it - in India, where I grew up, under the protectionist era - restrictive policies were used on foreign companies to prevent capital from flowing out. Seems like US tax policy is quite the reverse - or as they in DC - an "unintended consequence"

Frustrated with Office 2007

2010-06-16T21:52:00.002-04:00

Just got a new laptop with Windows 7 and Office 2007. I now believe Microsoft has gone over the tipping point now and heading for doom. Way over-designed, feature over-load, and just a hogger for time that is killing my productivity. I don't need the option of 20,000 fonts or 2000 options as features staring at me. This is a bread and butter software that has to lean and easy to soft through its use. It is like a store offering 60 cereals when I just buy one, at the most two. If you have to go smart with choices, I should have the option of dumming it down to what I am comfortable. How about a feature that makes my Word look like 2003. And for those folks who like the look and feel of anything new ... they are happy too. Hope someone in Redmond is listening.

BP's dividend policy

2010-06-10T00:06:00.002-04:00

Another day with the oil spill disaster. BP stated that they might not payout divdend. In response, are we supposed to look down on this company -- something as a really bad sign. Should shareholders view that something seripously has gone wrong. Well not quite... Public perception with dividend provides all kinds of such perception. Never mind. If I were BP, I wont touch the expected divident policy. After all -- dividends transfer value from firm to the shareholder -- so if BP does not payout dividend -- they are just keeping the value rather than paying out -- alternatively, shareholders can sell the shares -- but perception does not follow corporate finance theory all the time. BP should be knowing more than the grandpa down the street -- so go ahead and payout the dividend.

The Big Short by Michael Lewis

2010-03-20T17:57:00.002-04:00

Michael Lewis's new book "The big short" is already making some news. I have not read it, but I am tempted to pick up a copy to read it. Stephen Gandel has written in Time with Lewis about how Goldman's CDOs were not as bad in performance as people have made it out to be. There is some further light in this debate from Janet Tavakoli. Interesting read. I don't know enough to make an opinion yet. Will post more once I get to that point.

Obama to increase loan guarantees to $54 billion

2010-01-29T22:49:00.002-05:00

... from $18 billion. Here is a report from businessweek. Large reactor based nuclear plants are just too expensive for "sanity" to help build them. I was intrigued by one comment by Mr McKenna of MWR Strategies that demand for electricity in going down. These plants will take 5-6 years to come online. Can MWR predict that far and will demand still be lower... I doubt.

China factor...

2010-01-23T11:42:00.002-05:00

China had double digit growth last quarter. With large demand for raw materials - commodity prices have already shooting up. This includes Aluminum, Coking coal, iron ore... Many are saying it is panic buying. China has $2.4 trillion foreign reserves due to currency peg. Earlier this month, China increased the level of reserves banks were required to set aside, curbing their lending ability. Asian stock markets and commodity prices fell on the surprise move, which sellers feared could slow the country’s growth and its buying of raw materials. The shares of UK mining groups also tumbled...

I wonder....not so much as the tightening of banks or whether it is a panic issue. I wonder on how do we know that all this massive infrastructure spending on rails, power grids, highways, are going to pay off. On one side I am biased to view -- there cannot be anything wrong with building infrastructure... but on the other side... I pause for a moment.

Infrastructure is a platform on which other things in life run. It is where people and companies come and go. It can be market place where people enter and exit. It is a ncessary component for a society to function. The better it is the better adavantage we can take of it. But think for a moment -- if there is big gatekeeper who monitors everything that is entering and exiting this platform. There are rules that discrimintate against foreign and domestic -- against freedom and lack of it. What happens? Less use. People shy away. And the platform withers and tatters.

With recent issue with Google and the continuous sketchy treatment of many companies in China I wonder if the infrastructure will be under used or in worst case.... crumble. That's a real possiblity ... I hope doesn't happen.

Too big to fail problem needs to be put to bed

2010-01-23T11:00:00.002-05:00

Good point made in the WSJ article. Risk takers should be prepared to go bankrupt if bets don't play. It is important to see how this safety net is taken away.

Banks Bonuses ? for what...

2010-01-15T10:53:00.005-05:00

If banks are too big to fail and they were bailed out for common "public" good their compensation should be in lines with those who provide public utility and public service and not there to reap profits by flying over a saftey net. How about using the compensation that utilities pay their employees. Look at what water, electricity, and gas companies are paying... Look at what police officers and fire fighters get....It is high time something gets done to plug this hole a.k.a moral hazard

UK Offshore WInd Farm Announcement

2010-01-10T14:38:00.002-05:00

UK announced massive plans to develop offshore wind farms in the same lines as the North sea offshore development for oil and gas in 1970s. Ambitious plans - yes. Are we in a different world compared to 1970s that allowed the development of offshore oil/gas exploration/development - maybe. Are the business drivers to justify such a high expenditure similar? I doubt. Climate change and cost of carbon cannot be the sole driver to justify such massive investments. People would rather question the validity of man made climate change and look out for cheaper options. Back in the 70s oil crisis and looming uncertainty for middle east oil was hanging as a sword. Today, it is a lot murkier to come up with a slam dunk argument to justify such high costs in the name of climate change and global warming and carbon free world. I am hence skeptical. Wait and see what happens. It is an announcement after all.

The New Yorker on Chicago School of Economics

2010-01-05T10:00:00.001-05:00

John Cassidy, in his Jan 11 issue of The New Yorker has a detailed account on the Chicago School of Economics and how it has been the brunt of so much criticism for the credit crisis. Chicago school is associated with -- government intervention is bad except in monetary policy…markets should be allowed to work and left alone because they are self-correcting.

In his article, Cassidy takes on some of the iconic professors and drills down to the point where it appears that in many cases ideology blind-sights reality for many of them. Several professors in Chicago cling to the ideology and when current events don’t match – they will shoehorn any reasoning to sustain the Chicago party line. Cling to almost to the point of being ludicrous. Two examples, that clearly jumps out are that of Fama and Cochrane. While in every forum, lectures, and classes I have attended – I never came across the idea that any one claims that markets are efficient. In fact, that is something that could not be proved – and much of Fama’s work over almost four decades have gone back and forth to tear apart this issue to why we cannot prove markets are efficient. By definition, it is called efficient market hypothesis – not a law or theorem.

In a more general note, I believe the article is a good one. And here’s why:

(1) It talks about that some great ideas in the hands of the uninitiated may get stretched so far that with a combination of right communication headwinds may dilute the subtleties and nuances of the original idea. (Example of Heckman, Lucas is quite pertinent). I find an interesting parallel few years back when revisionist historians, (such as Meghnad Desai) believed that beliefs of Marx were lost in translation over the years to the extent Marx himself does not qualify as a Marxist.

(2) Taking an extreme position is easier than working with nuances and arguments. This is in line with what popular press can grab and run with easily. Nuances and subtleties and exceptions and ifs and buts take more space, discussion, and more importantly understanding. End result, extremes – such as, Chicago believes markets are efficient is what emerges. This is a recipe for formation of a cult where reasoning lapses or converges to support a party line. Whether the belief is in momentary beliefs, Chicago school, Keynesian, etc., does not matter. In this regard, I believe there are people on all sides and their mere existence and the noise they create does not and should not determine the actual beauty and essence of a theory.

(3) Visit to Univ. of Chicago today gives the right perspective what a true learning institution should be. (I say this albeit my own bias). As the article suggests, people as diverse as Fama and Thaler play golf together. Rajan and Posner think differently from Lucas and Cochrane. Posner’s co-blogger Becker openly acknowledges that markets are not efficient. But until we have a better alternative – what else do we have. In summary, what comes out are two key points: Chicago thrives in a constant dynamic of strong ideas. Debate and arguments are a constant part of Chicago and that is what is most respected. On a personal note, it was heartwarming for me to have Rajan as the commencement speaker. If Chicago was loomed into old ideology, I’d expect somebody else.

(4) Arguments have limitations. Fama’s argument soup of joint hypothesis problem which sort of says unless you know the fair value one cannot determine whether the price in incorrect and it presupposes market efficiency. Argument and logical structure has limitations and those limitations are in the language. Who knows the logical structure can break down if we discover another language. (Books on logical fallacy have been written)

(5) Becker’s comment is what comes close to what I personally agree as the most balanced. No one claims the market is efficient. But at the same time, that’s the best bet we have. Even recent examples of China and India prove that believing in market principles, incentives, and less of central planning and government run programs is the road to prosperity.

(6) Posner’s comment to retire Chicago school may be the most sensible thing to do. As a vested personal interest, however, I would rather be a associated with a school whose thinking shapes or forces people to think in a way rather than a proponent of so many things that it makes hardly an impact at an institutional level.

In the words of Booth School of Business Dean Ted Snyder, responding to a question at the “Future of Markets” on why there has not been a unified Chicago response for all the bashing the school is getting in the aftermath of credit crisis, he said, there is no one Chicago thought today. I agree this is what the truth is. In many ways, the term Chicago school has become more of an ideal – a philosophy that has pervaded the thought process not only across the department of economics all over the world, but in our own thinking. To try to find Chicago school within the physical boundaries of University of Chicago is almost like trying to find Marx in London.

Snow in DC

2009-12-19T11:40:00.000-05:00

... it is panic time!

Another lovely magazine bites the dust.

2009-12-10T08:26:00.002-05:00

National Geographic Adventure Magazine is folding up. Why? Obvious answer. Bad economy, poor circulation, people-no-longer-read... It is sad.

Europeon fund for energy, transport, and infrastructure

2009-12-09T18:30:00.002-05:00

New European fund for Energy, Transport, and Infrastructure.

Why don't we see more Googles?

2009-12-09T18:04:00.003-05:00

Interesting article on why.

Issues with "$700 billion man" does not end Kashkari

2009-12-07T23:52:00.005-05:00

Last Sunday, The Washington Post had an article on Kaskari, the $700 billion man. It took a stab at the world of Washington politics and how it can affect someone. Not a week went by, that it came to light that he is joining Pimco, the leading bond investment fund. Revolving door - certainly. But what are the possibilities? If someone's basic livelihood is based on a certain skills and knowledge base - where else can he go and what else can he do. Rather than focussing resentment on this fact, why not ponder how to make the system in Washington more effective by the influence of helpful special interest (if there is such a thing).

ECB's prelude to exit

2009-12-03T14:38:00.002-05:00

ECB today announced that signaled that there is an exit in the horizon. Why can't the Fed do the same. The answer is liquidity. Fed has its money locked in assets that are toxic and troubled assets of Bear, AIG, and MBS. When can Fed get rid of those? Don't know.

India buying 200 tons of gold - what I remember from 1991

2009-11-19T22:51:00.004-05:00

Earlier this month India bought 200 tons of gold from IMF. Read here. It was in 1991 that after a severe financial crisis, India had to sell gold, devalue the currency, and open up the markets for foreign investors to a larger extent. I was then on the verge of completing high school and the popular press - not to mention the communist party characterized the event as a "India pawning and selling out to western world." Fast forward 18 years, we view India very differently from that. Whether the present had to happen since the force of nature was aligned in India's favor, we don't know. But to a large extent, opening up the economy has helped. I wish the old communists who try to pull back any constructive idea with their half baked theory of Marx and Lenin finally wake up. Turning things around like buying the gold takes time. But it happens. Free markets, competition, and openness of opportunity brings a better life compared to protectionism of the mediocre.

Steven Pinkler on Gladwell...

2009-11-14T21:31:00.003-05:00

Steven Pinker's review of Gladwell's work (more specifically his latest book "What the dog saw") is definitely worth reading. His points are right on the money. I am a big admirer of Gladwell's writing and have enjoyed almost every bit of it. However, it has to be taken for what its worth. Which is - an entertaining read. As Pinkler points out, in many cases Gladwell gets the science or statistics plain wrong. One of the areas I was looking for Pinkler to point out was the area of intuition and decision making, as well as, the role of practice in the making of a genius. For the real substance, I believe Herb Simon needs some credit from Gladwell -- for what Gladwell says sounds very much what Herb Simon figured out over years of research of people especially chess players. I have to admit that reading Herb Simon is not close to as entertaining as Gladwell. In fact, I credit Prof Shraeger who during my days in Chicago Booth introduced me to Simon's work and its relevance to decision making. But again, we have to caution ourselves. Just as reading a good science reporter does not mean that the reporter is as knowledgeable as the nobel prize winning scientist -- nor does a popular writer like Gladwell expected to teach us "Igon" value problems. Goes back to an old Einstein adage - make things simple but not simpler. That's why specialists are required. Advanced studies are required. And popular reading is not always the best source for intellectual enrichment. In all fairness, Gladwell's review is well balanced. And Gladwell will be a writer I will seek out -- it is always worth reading the stuff he writes.

Losing the Bear Sterns Fraud Case

2009-11-12T08:04:00.002-05:00

Disappointing. NYT op-ed criticses how poorly the prosecution handled the case. I agree with what a juror said - that - you cannot blame the crisis on two people. Well, sounds like the old adage - if you kill one person, you are a murderer - if you kill several hundreds you are a conqueror.

Is the stimulus creating jobs?

2009-11-02T22:37:00.002-05:00

This is an interesting website. I am not sure if we can say yet - whether the stimulus is creating as many jobs that it was supposed to create.

Real barrier facing new development of power plants

2009-09-05T15:25:00.011-04:00

Last week I found this article in the WSJ quite interesting. The NIMBY mindset that has impaired building large conventional power plants in US and in many parts of UK has crossed over to the renewables. Yes - we are talking about "green energy" and saving the environment. But not in my backyard. This is a real problem and a barrier to building anything new to address the energy needs. How do we get by this barrier?

Back in the days, when coal and nuclear were built, the big challenges were closing a set of contracts with a bunch of agencies and then arranging financing for the project. With time, the paper work and permit processes increased in volume and slowly projects were not realized because the contracts and commercials did not work out. Structural limitations throttled and abated many technically and economically viable projects. It is at this point where we find so many academic pundits and the "realists" diverge. The realists say structural barriers in contracting throws the economics out of the window while the academicians seem to be still under the belief that the economics work.

In the recent past we have entered a different era --one where NIMBY mindsets, environmentalists, and other special interest groups have been remarkably successful in stopping projects from happening. In most cases, more than the substance of the arguments - the protests are caused by narrowminded local interests providing a fertile ground for local politicians to grab a low hanging fruit to make their political careers.

This is nothing new in the way politicians behave. What is troublesome is that development gets stalled. Over and over again. Narrow selfish interests of a group of individuals overrides national interests. But what bothers me is in recent times the success in getting local interest trump national and general societal interest is quite high. This leads to -- how do we deal with this?

The NIMBY mindset is quite natural but also hard to understand. On one side we are a country of responsible people who send our kids to the war for a national interest. How is it that we can not tolerate a visual change in the middle of nowhere. Is this a mindset created out of perception or are we are ready to do some sacrifices and not something else. Either way, expecting something like green electricity will take some sacrifices just like anything else that came from someone else's blood and sweat -- whether it is the Brooklyn bridge or interstate system -- all of which we take so much for granted. We need to revive that mindset. Question is how. I will keep pondering on that.

VC survey

2009-08-18T01:26:00.001-04:00

Here

Extraterrestrial lights as a sign for development

2009-08-11T19:46:00.002-04:00

It was interesting to view Paul Romer using lights on earth viewed from space as an indicator for development of that area (country if you will). Even The Economist has an article on measuring growth using these light. Well, it is another way of using electricity as an indicator of development. How valid is this? I'll keep thinking about it.

Efficient Market Hypothesis Now

2009-08-09T00:23:00.003-04:00

There has been a series of articles, discussions, and debates on the validity of the efficient market hypothesis in light of the financial crisis. The following pieces are quite interesting.

Link1 and Link2

Problem with the current climate change bill

2009-08-08T20:49:00.002-04:00

Prof. Mankiw's article in NYT underscores the fundamental shortcoming of the climate change bill. It gives permits for free which undermines policy being able to creating enough incentives to control negative externalities like dumping CO2 in the atmosphere.

Q&A with Austan Goolsbee

2009-07-11T02:29:00.001-04:00

Here

Thaler has a new column

2009-07-07T23:39:00.001-04:00

Prof. Richard Thaler has a new column in New York Times. Here is the first one.

Independence Day

2009-07-05T01:05:00.005-04:00

This amazing feat was a part of Belarus' Independence day celebration on July 3.

Cricket and America

2009-07-04T18:06:00.002-04:00

Just a tangential post on a game I am a big fan of. Nice to see this post from an American viewpoint. Enjoy!

Link from CFR on economic crisis

2009-07-04T16:40:00.000-04:00

Here

Jobs report - Obama's plan working or not working?

2009-07-02T22:07:00.004-04:00

Prof Mankiw's post is scary. One can give the benefit of doubt to the policy makers saying the baseline was overly optimistic (as Mankiw suggests). But either way -- looks like things are worse than what the government presumed. If that's the case, where are we headed? Japanese style recession as Krugman suggests. (In short, Japanese style recession is when there is a slowdown in economy including slow bust of housing prices. Even if production increases a bit but not enough to keep unemployment from increasing or the machines from staying idle)

Thinking about systemic risks

2009-07-02T01:46:00.003-04:00

After spending few years in engineering safety systems for nuclear power plants and the transmission grid - I can say I have a deep sense of appreciation for complex systems. To me, they are as close as to the proverbial butterfly that flaps its wings in the Amazon causing a storm in Japan. One of the key design criteria in the nuclear power plant is that it has to be able to shutdown safely if an adverse event occurs. Thinking for banks, I believe the same can apply. In case of a major macroeconomic (or other) shock, the bank has to design ways to safely "shutdown" and wind-up without causing a cascading set of reactions resulting in a financial "meltdown" or "blackout". Anil Kashyap in his FT piece talks something in those lines.

Debt as a palliative?

2009-07-01T23:21:00.004-04:00

In this piece, Ben Funnell asserts that debt has been used to assuage the pain that was caused to the lower income groups as their incomes decreased and while they witnessed the higher income groups becoming richer. This thought is in line with what Rajan spoke in Chicago Booth's convocation address. BTW, just free wheeling -- Is it the same reason why student activism has vanished from colleges? Is it because even before students graduate they are sunk in student loans. Are student loans a good thing then? Or, there is a better way for public policy to stimulate higher education but not take away the freedom to stand up against poor governance and be passionate for a cause and take the role of activist to bring in change.

Economics and Pirates

2009-07-01T21:34:00.002-04:00

While strolling in World Bank's info shop, I picked up The Invisible Hook. Boston Globe has got a good review mentioning Austrian economists - Hayek and Ludwig von Misses. Looking forward to reading this over the next few days.

Not a lack of Regulation but a lack of imagination

2009-06-30T00:36:00.003-04:00

Regulation is as good as to what extent people can imagine within the context that particular regulation. In his op-ed, Samuelson drives this point. This is important and in a way it lends itself to the belief that there has to be a shift in culture from reckless risk taking to a more responsible one -- treating OPM (other people's money) as if it were your own. Such a culture should reward self-reporting of potential risks and give incentives who bring forth systemic interconnects that can bring down the house. To build such a culture may well require a radical event. Imagination like anything else will not have in a vacuum. Carrots and sticks are necessary to drive this. And that's not what I see is happening. I keep my fingers crossed.

Kevin Murphy

2009-06-29T16:46:00.004-04:00

I did not take Kevin Murphy's famed "Turbo economics" (Adv Micro) class when I was in Chicago but I became a fan in the few talks and lectures I was able to attend. He is one of the very few people who can take complex subjects and break it up, distill, and articulate in a conversation format. He is sharp, witty, and very insightful. Here's a recent interview.

Regulation .... contd.

2009-06-28T01:59:00.002-04:00

Justin Fox's article on regulation is an interesting read. To put FDR on the cover of Time and comparing him with Obama is also a clever take. Well, one way to check how close they match is to see how mad the Wall Street bankers are following the measures both these Presidents have taken. This article from NY Time makes it clear so far - these lines in particular.

"Wall Street hated the reforms, of course, but Roosevelt didn’t care. Wall Street and the financial industry had engaged in practices they shouldn’t have, and had helped lead the country into the Great Depression. Those practices had to be stopped. To the president, that’s all that mattered."

......"In terms of the sheer number of proposals, outlined in an 88-page document the administration released on Tuesday, that is undoubtedly true. But in terms of the scope and breadth of the Obama plan — and more important, in terms of its overall effect on Wall Street’s modus operandi — it’s not even close to what Roosevelt accomplished during the Great Depression."

In all seriousness, I am hoping to see more from our President.

Regulation - What kind?

2009-06-28T01:26:00.002-04:00

The word "regulation" tends to make me feel uneasy most of the time. However, over the last week - with the new regulatory measures that was under works by the Obama camp was something I was eagerly waiting for. The fact that there needed to be more regulation in the financial sector is no longer a debatable point. Very few disagree. The question is - as they say the devil lies in the details - and in this case what they are. As we got some details I am not convinced that the administration is doing enough. In that sense I echo many others not to mention the editorial in NYTimes . The big question boils down to the Over-the-counter derivatives and how we regulate those. They are customized bilateral contracts and except for interest rate swaps and few others that follow ISDA Master agreement -- are customized. As such pricing and valuing and enough hedge is set by mutual consent of two parties. The real question comes in what happens in the world of absolutely customized contracts. It is hard to write a code for them so that they can regulated and standardized. Also, what is a fair value for a one of a kind contract? It is like pricing a painting that I am selling to an art dealer. As econs would call - it is a classic case of "bilateral bargaining problem" in which one cannot set a fair market value price. Now say we somehow manage to strike a deal - if one of the counterparties defaults, it is hard to set up an auction in the lines of Markit and Creditex since how do we set a price for a one of a kind contract. If the instrument is in scarcity or bad news has already reached the market, the price will already include the information and we will not get a fair value. In sum, regulating these contracts is a pipe dream if not plain "nuts". Of course, if OTC is banned with all customizable options taken off, standardization can happen but why go back.

A better solution in my mind is to take a leaf out of the page of other regulation. For instance, systemic failures are not uncommon in complex nuclear power plants or electric grid. To avoid those, the regulators ask utilities to identify systems, assets, and functional components that are critical to avoid systemic failures. Why can't we do the same with banks? Ask the banks to self report on the contracts that have embedded systemic risks. And then back up with a program to closely monitor and control these puppies and in tandem build a strategy to isolate and island problems and issues to a small local area or department much before they cascade into causing a meltdown of the financial market itself.

Surface temperature over the years

2009-06-27T14:58:00.003-04:00

Via Krugman's post: I landed on this page - any denials that the temperature has gone up over the years. Now the question is - is human lifestyle a cause for this? That I don't know.

Buffet losing his edge?

2009-06-27T12:24:00.003-04:00

If markets price goods correctly, then is Mr Buffet losing his rating. Lunch with him is cheaper by 20%. Read here.

Cap and Trade bill just passed

2009-06-26T22:13:00.002-04:00

Now it will be interesting to see what happens. I find the bill to be inadequate and has lost its punch. But again, I am on the side of those who are saying that good is better than perfect - it is a good start. Lets see.

Small nuclear reactors - still a distant dream

2009-06-26T21:53:00.002-04:00

Bob Metcalfe in his op-ed mentions how small nuclear reactors are technically feasible and should be promoted to meet the growing energy and environmental needs. I agree in principle - but the reality (as Metcalfe identifies) is that the regulatory process is way more expensive that there is no way to make the economics work. Well, in many ways I do not completely disagree that the regulations are way overdone - not always on purpose but just because of practical limitations. The question is whether the dangers of a bad thing happening from these reactors is covered. Or, we need big brother to watch over the practices. It goes back to what is the total social cost and how we price it. Ignoring it or as the econ would say externalizing it is no solution. I am not totally convinced and would like to hear more. It is noteworthy that it was a generation back that Ronald Coase in his landmark paper argued about social cost. With so much discussion on cap and trade lately, and in the context of this op-ed, this is a nice read. Moving from the world of networking and internet to energy and nuclear reactors does have some economic components that we simply can't ignore. Once we have the total social cost we can start arguing whether regulation is expensive or not.

Learning decision making from doctors

2009-06-22T21:50:00.003-04:00

Atul Gawande has been writing about how doctors make decisions. His book "Better" is a great read. In the light of health care reforms heating up, this piece is quite interesting. Especially, when he writes,

"It turned out that differences in decision-making emerged in only some kinds of cases. In situations in which the right thing to do was well established—for example, whether to recommend a mammogram for a fifty-year-old woman (the answer is yes)—physicians in high- and low-cost cities made the same decisions. But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from."......"But when it came to measures of less certain value—and higher cost—the differences were considerable. More than seventy per cent of physicians in high-cost cities referred the patient to a gastroenterologist, ordered an upper endoscopy, or both, while half as many in low-cost cities did. Physicians from high-cost cities typically recommended that patients with well-controlled hypertension see them in the office every one to three months, while those from low-cost cities recommended visits twice yearly. In case after uncertain case, more was not necessarily better. But physicians from the most expensive cities did the most expensive things."

Fraud Cap and Trade credits

2009-06-22T21:34:00.001-04:00

Interesting post on how a market clearly out of regulation and government paper can be falsified.

Is lashing the MBA education fair?

2009-06-08T17:46:00.002-04:00

Ever since the credit crisis hit the streets, there has been several quarters where the archetypal US MBA has taken a beating. The latest in the series is this FT article. This article seems to have fallen just short of directly drawing causality - something like "MBAs caused the crisis". Well, there may be a correlation between MBAs and CEOs of busted banks - just because most of the senior executives in US finance industry have an MBA from one of the top schools. That by no means provide any evidence that MBA education should be tarnished in this manner. It is almost like saying if there are too many sick people in the hospitals - the field of medical science should be lashed. But in fairness, one can argue there are some "holes" in the education process that does not prepare MBAs as "managers" (in line with Mintzberg's book). I can at least say - no one in the right mind in my class ever nor the professors have ever claimed that a freshly minted MBA has all the expertise that can run a big I-Bank or corporation. So I really don't understand why this confusion. I think there is lot of emotion (mostly anger) thrown at a degree that people have gotten maybe 20-30 years back in their careers. Mintzberg says that most of the management discipline is to be learned on the job. I dont disagree. And for that reason why not delve into the practices of specific industries and organizations and see how they have groomed and professionally developed people. We then go into how banks, corporates, retailers, government, and consumers all behave in the mix in their respective organizations that eventually contributes to one's professional and managerial development. If we go through that then we put our hand where the mouth is. It was a failure of multiple entities or organizations starting from the average household that saw cheap credit and went beyond the means. Cheap credit that was set up by low interest rates by the Fed along with generous housing plans through Freddie and Fannie. Creditors and banks jumped on to park the huge inflow of capital from China and other countries in areas that had higher yields. With almost no regulation on leverage for Investment Banks, securities were made out without much attention on what was the underlying asset and how that was prices. After all housing sector was returning 15-17% compared to 1.5% Fed rate. And then when the whole house of cards fell - we began the blame game. As if all of this possible was engineered by greedy Wall Street fat cats who are taught these lessons in their MBA. As a counter argument, I would reckon that one of the primary reasons for higher productivity, lower unemployment, and sustained innovation and growth in US is due to better management and B-schools have their fair share of contribution in that - whether through churning out MBAs or through research. And most lately - countering the myths that circle around in political circles - like executive compensation, free-market recklessness, short-term thinking versus long term, etc.

Citigroup and FDIC

2009-06-05T01:35:00.002-04:00

I am not sure where the Governement wants to go. This looks like that the management is the target before anything else. Is this a good approach? I doubt it. I wish Citi was asked to chop its balance sheet and let creditors and shareholders bearing the brunt. Looks like too many people are getting involved and focussing on the not the most important things. The last thing one wants to do to clear up the ensuing problems is fidget with the management and bring someone new.

GM Bankruptcy

2009-06-01T02:53:00.004-04:00

I will wake up tomorrow to GM's bankruptcy. Amidst speculation that kept a good friend of mine busy trading GM options for the last several days - this news is almost final. I was running some quick calcs to figure out how much the tab will be. With $30 bn in additional finding, I won't be surprised if the total tab is in the range of $100 bn. This is a large amount that is bothersome. The bigger issue is thought - can the government restructure better than the private sector. Under what circumstance and where is the evidence that supports the proposal on the table. I see $100 mm going down the tubes. Why do so? Economics is about reallocation of resources to more efficient activities, firms, or goods. And moves such as GM's come in the way of these self-correcting mechanism. This is exactly the danger when some icons of certain beliefs are treated otherwise and worse resulting in inefficiencies and hits innovation. I do not support what is being done to GM. What is good for GM is not good for America in the long run.

Europe and Antitrust

2009-05-31T03:48:00.004-04:00

I have been grossly holding this rather simplistic view that Europe and America has a fundamental difference in which each country approaches anti-trust. Europe goes after "the big" or "bad" company (Microsoft in many cases) to hold interests of other companies -- in a way clip the feathers of the bird that is flying too high so competitors can participate in the market. US on the other hand has historically looked at antitrust to ensure that there is no dominant player with extraordinary market power. One stifles competition, the other protects customers or end-users. This week Economist cites the paper. It brings up a couple of good points such as -- with less stringent anti trust laws are more likely to be implemented. The article mentions that n US there is some sentiment expressed to move towards the eastern way of managing antitrust which is to go after big companies. This bothers me. The fact that we got a Microsoft and Apple and Intel in US and not in Europe is for a reason. Many reasons, in fact. And antitrust is one component of how things played out. I wish the policy makers understand that. If there is one Europeon model that interests me - although I admit I don't know much about it is Swiss model. It seems lately it has gone through some review/changes/considerations. I need to do some more digging to find that out.

Derivatives - transparency?

2009-05-16T00:59:00.002-04:00

Lot of talk and ink is generated in innumerable proposals to make Warren Buffet's "weapons" of mass financial destruction more transparent. They are in the center of the credit crisis storm. One of the most proposed solution is to have a clearing house for derivatives - including most of the OTC stuff. I am not sure how this will be done from a practical matter. That's one of frustrations I have reading articles even by as distinguished people like them. How will this get done?

Market for illegal goods

2009-05-16T00:49:00.002-04:00

One of the interesting experiences during early days in University of Chicago was going through Kevin Murphy and Gary Becker's paper in Micro class which very elegantly explains how and why prohibition in the supply side of drugs -- with the goal of reducing quantity creates exactly the right incentives for people like drug suppliers to risk jail to produce more drugs. Such prohibition creates exactly the opposite results you would want. Here's another finding (see this post) to the argument that potency of drugs have increased -- meaning innovation is implicitly incentivized to get more bag for the buck.

Waxman-Markey to take us to 1875?

2009-05-13T00:32:00.005-04:00

I can understand positions being taken on matters are debatable as climate change. However, this post was a bit skewed. To equate that people aspiring for a reduced GHG world is going back to the world described below is non-sensical for lack of better word.

"What, the old DeLorean is up on cinder blocks in the front yard again? In that case you can test drive Waxman-Markey by sailing down to Haiti, because current CO2 emissions are where Waxman-Markey wants America's to be in 2050. Radical environmentalists think such a CO2 level will be heaven on Earth, but the place that has actually achieved it is a nation swimming in bacterial and protozoal diarrhea, hepatitis A and E, typhoid fever, dengue fever and malaria, with 47 percent illiteracy and a life expectancy of 49 years. So excuse me if I remain unconvinced."

I dont know how in world has anyone made a claim that reduction of GHG is going to create a heaven in literal sense. But the point is interesting in a different way. The article goes on to claim how bizarre things would be and how our pockets will be run. My questions is -- Will the costs of electricity increase? It appears thats what is expected. If the costs of reducing emissions undertaken by the utility is passed on to the rate payers then what is the incentive for customers to ask the utility to reduce emissions other than pushing legislation through the local congressman. We know how effective and brisk that process is. What if the costs are not passed on and it is borne by the holding company similar to how energy trading is handle where a big loss in the wrong trading bet is not passed on to rate payers. Of course, the utility has a point that higher electricity prices will force customers to make a choice whether to continue their NIMBY mindsets for nuclear plants or pay a higher price because the utility has to buy "carbon credits". Lets see how this unfolds.

Links from Barrons on Energy Investing

2009-05-10T11:26:00.004-04:00

Follow what happens in Nuclear:

Market Vectors Nuclear Energy ETF; Barclays iShares S&P Global Nuclear Energy

Nuclear Street, Idaho Samizdat, Atomic Insights, NEI Nuclear blog and Fuel Cycle

EIA;

Companies to follow: Upstream: Cameco, BHP Billinton, Rio Tinto, Us Energy

Construction: USEC, Jacobs Engineering, Fluor, Areva, The Shaw Group,Entergy

On Stimulus

2009-02-06T16:02:00.001-05:00

Benn Steil has an interesting commentary in FT. Here it is.

Infrastructure spending

2009-01-21T15:11:00.002-05:00

Seems like there are quite a few skeptics of infrastructure spending to improve the economy. Prof. Zingales and Prof Cochrane's articles are here

http://online.wsj.com/article/SB123249646698200289.html.

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/fiscal2.htm

Electric Grid for Vehicles

2008-11-21T02:34:00.002-05:00

When oil is falling below $50 a barrel - it is interesting to read this story. Will be quite interesting to see how this idea scales up.

Breaking the hiatus

2008-09-10T01:11:00.006-04:00

It's been such a long time since I wrote here. While it hardly matters why I didn't, what matters is why back again. With the current financial crises going on and unfolding in ways much unexpected, it is stimulating my curiosity. I am trying to learn and understand the direct as well as spill over impacts of the all the ongoing events and activities taken in this long chain of cause and effect. Writing here helps me do that as it has in the past.

Wirec Revisited

2008-03-10T21:51:00.004-04:00

I am still trying to digest all that I witnessed and heard at Wirec 2008. Here are few posts that I found quite interesting. There are two quite opposing points that were buzzing in the conference. BP had a pretty big presence. But all their show including sponsoring the tuesday reception were supplemented with the comment from CEO Tony Hayward that -

"Even though clean tech is growing fast, we all need to be honest," he said during a ministerial plenary session. "The scale that the industry is working at today is not going to have much impact."

I don't necessarily disagree with him. Conventional wisdom is consistent with this statement. But - well there was the counterpoint - Vinod Khosla who insisted that the costs have to come down. He presented at the ministerial panel (which I did not attend) - and highlighted how forecasts have been wrong in the past in predicting technology. In other words, if there are enough network externalities, the snowball effect of adoption of new tech generates the critical mass to lower costs of new tech and suddenly breaks all limits that analysts had predicted before.

His presentations are here. Great stuff!

So in a nutshell, my heart is with Khosla while my head still cannot argue against the BP chief.

@Wirec 2008

2008-03-05T22:25:00.007-05:00

I spent the last couple of days in Wirec 2008. Personally, it is heartwarming to see so many people so enthused about energy all conglomerated under one roof. I went around attending few conferences - most notable was hearing GM speak about Chevy Volt. One of main mantras I heard over and over again was to release ourselves from traditional dependence on oil, plug-in vehicles have to come in as a mainstream commodity replacing cars that drive in gasoline. There is a bunch of statistics to prove that. This poses tremendous technical and commercial challenges in interfacing the cars with the grid. For the utility to treat the car as another appliance will not be a trivial matter. But this is indeed fascinating. Imagine automobiles becoming like your washing machine. Of course, unlike washing machine a car is mobile. This means that you will need easy availability of plug in to the grid from any meaningful place. Also, important will be how fast it can charge up. So, coming back to the grid - there will be a need for a new infrastructure. A new platform. A new marketplace. People should be able to come in and go out. How do we allow people to enter this marketplace? How do we gear the technology to support that? How do we make money? Do we create technical restrictions like - you have to have a certain kind of interface to plug in Texas as opposed to New York - or say other kinds of restrictions - electric Mercs or BMWs allowed only. These issues will take a lot of effort and lot of ink to resolve. Regardless, these are fascinating times. One message I take away - the big challenges are known, everyone agrees that something has to be done about it, and that we don't have a lot of time. I will keep probing these fascinating topics. I am excited that these days energy and grid are becoming sexy topics in cocktail parties again!

Ted and Bil

2008-03-02T19:25:00.003-05:00

Following the popularity of TED talks, another conference called Bil has emerged. It states that it "loves" TED and wants to be like TED MINUS the $6000 tab that TED charges. It is an "open source" version. Will be interesting to see if this really can match TED.

"Optionality" in Private Equity Deals

2008-03-02T07:52:00.003-05:00

This posts highlights how two recent private equity deals - Getty Images and CHC Helicopter are using reverse termination fee structures in their contracts. In other words, if the private equity sponsor refuses to complete the transaction the only recourse of either seller is to collect the reverse termination fee. This is a shift in practice from deals in the past when there was more "certainty" in the deal through specific enforcement on the buyer to actually execute the contract. With credit markets almost dead and financial markets in general having a tough time, raising capital has not been easy and in some sense this shift in PE practice in no doubt a direct fallout. What matters is are these firms valuing the optionality of the contract and if so, how much is that impacting the value of the company being acquired.

Likelihood of Carbon Trading Increasing

2008-02-26T23:25:00.004-05:00

If you believe in - where the big boys of Wall Street invest is an indicator as to what the expectation of future growth is - then the likelihood of Carbon Trading has got another yeah. Goldman Sachs announced $14 million investment in APX, a Silicon Valley company that certifies carbon and emissions offset certificates. Read here. It seems like APX will act as middleman which may grow into a NYMEX or another futures type trading market as the emissions trading takes off. It has also got funding from Bechtel Enterprises Holdings, Kinetic Ventures, ONSET Ventures, Technology Partners and Woodside Fund. The space is very small as it is still in infancy. But when cap and trade takes off, there seems to be immense opportunity.

Virgin flight on Biofuel

2008-02-25T22:38:00.002-05:00

Virgin Atlantic's flight from London Heathrow to Schipol is a fascinating story. Watch the video here. Now how much coconut or corn or babassu oil do we need? Looks like we would have to hope for a green revolution or pay record prices for our bread in future.

Tax structure in India

2008-02-24T22:18:00.001-05:00

1) Qus. : What are you doing?
Ans. : Business.
Tax : PAY PROFESSIONAL TAX!

2) Qus. : What are you doing in Business?
Ans. : Selling the Goods.
Tax : PAY SALES TAX!!

3) Qus. : >From where are you getting Goods?
Ans. : From other State/Abroad
Tax : PAY CENTRAL SALES TAX, CUSTOM DUTY & OCTROI!

4) Qus. : What are you getting in Selling Goods?
Ans. : Profit.
Tax : PAY INCOME TAX!

Qus. : How do you distribute profit ?
Ans : By way of dividend
Tax : Pay dividend distribution Tax

5) Qus. : Where you Manufacturing the Goods?
Ans. : Factory.
Tax : PAY EXCISE DUTY!

6) Qus. : Do you have Office / Warehouse/ Factory?
Ans. : Yes
Tax : PAY MUNICIPAL & FIRE TAX!

7) Qus. : Do you have Staff?
Ans. : Yes
Tax : PAY STAFF PROFESSIONAL TAX!

8) Qus. : Doing business in Millions?
Ans. : Yes
Tax : PAY TURNOVER TAX!
Ans : No
Tax : Then pay Minimum Alternate Tax

9) Qus. : Are you taking out over 25,000 Cash from Bank?
Ans. : Yes, for Salary.
Tax : PAY CASH HANDLING TAX!

10) Qus.: Where are you taking your client for Lunch & Dinner?
Ans. : Hotel
Tax : PAY FOOD & ENTERTAINMENT TAX!

11) Qus.: Are you going Out of Station for Business?
Ans. : Yes
Tax : PAY FRINGE BENEFIT TAX!

12) Qus.: Have you taken or given any Service/s?
Ans. : Yes
Tax : PAY SERVICE TAX!

13) Qus.: How come you got such a Big Amount?
Ans. : Gift on birthday.
Tax : PAY GIFT TAX!

14) Qus.: Do you have any Wealth?
Ans. : Yes
Tax : PAY WEALTH TAX!

15) Qus.: To reduce Tension, for entertainment, where are you going?
Ans. : Cinema or Resort.
Tax : PAY ENTERTAINMENT TAX!

16) Qus.: Have you purchased House?
Ans. : Yes
Tax : PAY STAMP DUTY & REGISTRATION FEE !

17) Qus.: How you Travel?
Ans. : Bus
Tax : PAY SURCHARGE!

18) Qus.: Any Additional Tax?
Ans. : Yes
Tax : PAY EDUCATIONAL, ADDITIONAL EDUCATIONAL & SURCHARGE ON ALL THE CENTRAL GOVT.'s TAX !!!

19) Qus.: Delayed any time Paying Any Tax?
Ans. : Yes
Tax : PAY INTEREST & PENALTY!

20) INDIAN :: can i die now??
Ans :: wait we are about to launch the funeral tax!!!

(Courtesy - Mohit Jain)

Investing in energy stocks

2008-02-24T12:21:00.001-05:00

caminoenergy.com tracks energy stocks. It uses some interesting indices - check it out.

Market Reforms in China and India

2008-02-23T23:47:00.003-05:00

Much of the growth stories of China and India are attributed to free-market reforms by many. To get a different perspective, here's an interesting article by Prof Bardhan. If you wonder that my Chicago influence will automatically indicate where I stand, then that would be as flippant as reading with the understanding that the author is from UC Berkeley. But jokes apart, some very important issues have been brought forth which are typically lost in popular disourse. Talking about China, he says -

"...socialist control and regulations undoubtedly inhibited initiative and enterprise in both countries, the positive legacy of reforms undertaken in the ‘70s and ‘80s cannot be denied, particularly in China’s recent pattern of state-controlled capitalist growth. China’s earlier socialist period arguably provided a good launching pad for market reform. That foundation provided wide access to education and health care; highly egalitarian land redistribution that created a rural safety net and thus eased the process of market reform, with all its wrenching disruptions and dislocations; increased female labor participation and education that enhanced women’s contribution to economic growth; and a system of regional economic decentralization"

India fares poorly in China's comparison - in equality in land owership, education, and health care. Prof Bardhan attributes this to - "... Chinese are better capitalists now because they were better socialists then!"

Interesting read overall.

Lessig for Congress?

2008-02-20T01:52:00.003-05:00

Larry Lessig is considering running for Congress. Is this the best way to propel the change in corruption that he is fighting for.? Would be quite interesting what he finally decides and does. See his video at lessig08.org.

Cancelled Coal Power Plants

2008-02-17T16:21:00.005-05:00

The list of cancelled (or on hold) coal power plants is quite a long one. Let's take the plants in Kansas that were cancelled in Q4 2007 and then recently efforts to resurrect the plants are facing tough times. Evidently, most people welcome such a development. The surge in public awareness against CO2 has made the permitting process extremely difficult for plant developers to develop coal plants. Usually, permits are being denied or sent back asking for specific measures to sequester CO2 rather than dumping into the atmosphere.

This is an interesting argument. While I agree with the general swing that greenhouse gases need to be controlled which means better ways to contain CO2, what I am not convinced is the way this ideology is being enforced. People in the industry would say that carbon capture technology which will not allow CO2 to be released in the atmosphere but rather hold it like the way NOx and SOx are being captured are available but expensive. Also, once we capture, what do we do with that. There are some ideas on using it in some mines or oil wells, but not necessarily there is oil well near a power plant which means there is a transfer cost. Add all of that and where do the economics go. The business case simply fails.

Look at any of these bulk options - coal, gas, nuclear - the story finally unfolds to arrive at this point. There are some negative aspects which we had considered as an externality over the last 100 years of electric power industry. Now we want to attach a value and want it to be addressed. But are we willing to pay for it? Paying for a cooler earth for our children is like giving up our own temptation of buying a new car or going for that exotic vacation and building up the inheritance for our children. Are we ready to do so?

One thing is certain - we need electricity. Renewables cannot meet our demands. The only options that are available are coal, gas, and nuclear. How far do we go in giving up today's needs? Are we prepared to face periodic power shortages? Are we aligned for rate increases when utilities go for their next rate case filing? Are we ready to pay that extra cost when cap and trade comes into effect. Or, a possible carbon tax passed onto us. We have to wait and see - how much of the arguments placed forth in these cancellations are knee-jerk rhetoric and how much is real change in societal perception.

Microsoft's Bid on Yahoo

2008-02-03T13:06:00.000-05:00

I have been having very interesting conversations with friends and colleagues over the last few days on Microsoft’s unsolicited takeover bid on Yahoo. Many among us believe that this was not a surprise at all – just a matter of when. We all know the cat is out of the bag. The 62% premium bid has been announced. Others argue that it smells a la Time Warner – AOL – does not make business sense and doomed for failure.

I believe it makes good business sense. And my reasoning is pretty much what Microsoft has laid it out – nothing ordinary. It is about time that they did something disruptive to compete with Google. Without a shade of doubt Google has been dominating the $8 billion paid search advertising space which is supposed to grow at 28% to $11 billion. That’s too big a pie for even the “blue monster” to ignore. Other internet players like Yahoo have so far been unsuccessful in challenging Google. Yahoo repeatedly missed opportunities that Google has grabbed. Whether it is with decent ad space monetizing models or with key acquisitions like Doubleclick. There seems to be another strategic element to why Microsoft is concerned. Google has been quite successful in expanding its application scope to create many more avenues to pump in advertisements. Take for example, Google aps. Not very popular as yet, and miles away from the power and sophistication of Microsoft Office functionalities, yet going forward, the fact that it is free and is accessible from anywhere (need internet connectivity) might attract people using these aps. Once it creeps into people’s usage, Microsoft will find it difficult to get users switch back to Microsoft products like Office. Who knows more than Microsoft on how easy it is to get people switch applications. Simply put – Microsoft may just quite end up on the wrong side of the table this time. It is prudent to think about an alternative business model and how to capture internet dollars.

So what are the key uncertainties or challenges that Microsoft should be looking at provided merger with go through. Here’s what I think.

Merging two very different organizations. 14,000 employees in Yahoo will be a part of the 80,000 existing Microsoft force. I am told by friends that the incentive structures are different, day to qay work culture is different. Yahoo, many believe, has a flavor of a startup while Microsoft is a large bureaucratic (in many ways). Will people like it? Well, right now – people are skeptical. Microsoft has to handle this carefully.
Cannibalizing its own business. If Microsoft uses the internet as an alternative platform for all the good things that it has been doing on top of Windows, it would be interesting to see to what extent and how soon they cannibalize their own businesses and cash cows and venturing into new technology before someone else starts doing so. (Skeptic econ friends of mine are smelling sunk cost fallacy here)
Getting more eye balls. As any e-business guru would say, “It is all about eye balls.” More eye balls translate to more ad revenues. So will Microsoft/Yahoo combine shift be able to divert people from using Google? Remains to be seen.

An aside: Nicholas Carr's article on Google in Strategy + Business is worth reading

Institutional Reforms

2008-01-05T09:13:00.001-05:00

I recently returned from India after a 3 week vacation. Visiting Calcutta where I grew up and spending time in my parents place 25 miles outside the city gave me two starking contrasts of how things have changed there over the last 5 years. Yes, I was visiting India after 5 years. My views on what I saw, understood, and failed to understand (for which probing will continue!) will appear in subsequent posts. I begin with the overarching observation that the biggest barrier to economic development (more so) in city outskirts is lack of pace of institutional reforms. More specifically, the enforcement of contracts leading to the culture that builds the right perspective on property rights and doing the right thing is yet to mature and develop.

In my early years, we lived in a company estate in the suburbs of Calcutta. Almost every week, we would make trips to Calcutta for doing anything meaningful. Shopping in New Market, browsing used books in College Street or Free School Street, to eating-out in Park Street. The drive to the city was a nightmare. There were two alternate routes and our driver would switch between the two choosing the one that was less broken. Come monsoons, the roads would be completely destroyed with tar and mud lumped into sizable blobs that solidified into rocks - hard enough to damage the car. But those days are now happy memories. Those bumpy rides that were enjoyed as a vicarious experience of riding on a camel's back are gone. Now - expressways have been built and the ride is as smooth as one can imagine. But this has resulted in a different problem. In the world of slow, the chance of a fatal accident was very low. In my 3 weeks, sadly enough, I had to witness two fatal accidents of people getting run over. Why? Because people are driving as fast as their cars can go. No traffic rules. Traffic is going in all directions. No cops. No tickets. No law enforcement. It did not take much to conclude - yes economic development in form of much infrastructure has come in, but without law enforcement the full benefit will not be leveraged. And for that, if Douglas North was right, it would take a while. Interestingly, in quite contrast, I came across Dani Rodrik's post where he argues that formal institutional reform is not a binding constraint for economic development. I hope this is true. Btw, the two videos that he uses as illustrations are quite amusing. Here and Here.

Free speech in India

2007-12-06T01:08:00.000-05:00

Amit Varma's India Uncut has a very thoughtful article. As I gear up for my visit to India in 5 years - there are several things I will get present to. Not the least of which I am sure will be the incidents of Nandigram - which keeps me reminding - that behind the veil of Tom Friedman's India there is the core that most of us have known over the years - growing up. Like it or not, that India is changing at a very slow pace.

Perils of solo-sailing

2007-12-02T10:32:00.001-05:00

I am not a sailor. Nor am I comfortable challenging myself against nature. And that's probably why I am so intrigued and awed by those who do so. Why do people risk their lives? What are they accomplishing? Especially, those who have meaningful jobs and loads of accomplishments in much more sane "real" world.

Take for example, Jim Gray. Turing award winner (considered the Nobel prize in Computer Science) gone missing earlier this year.

I recently watched Deep Water. A fascinating documentary/movie on the perils of solo-sailing and how the indifferent sea can impact the human mind in solitude. Though I will never fathom what draws people like Jim to such adventures, but I did get some insights through this movie. Highly recommended.

Trusted Advisor

2007-11-07T21:22:00.000-05:00

I have still not figured out a way to kinda balance all the things that are in my plate and so blogging has not seeped its way into my laundry list of activities. So amidst traveling between Charlotte and Chicago and DC in between - classes, seminars, homeworks - not to mention happy hours and Diwali parties all seem to fight for its due place in my calendar. So, I am still iterating different possibilities to find the right mix - my version of the "golden mean". There are so many thoughts racing my mind and so many topics to write about in a way has been acting more as deterrent by jamming my head rather than providing food to pen. So one thing at a time.

Last weekend I had the good fortune of attending Prof Hitendra Wadwa's strategy consulting bootcamp which was a memorable experience. As I have been consulting for a while and encounter different people with varied views on what consulting is and consulting should be, it was quite refreshing to find what he had to say especially in the area of buying in the support of the client and key stake holders. The role of trust as being the paramount force in getting your advice heard and accepted by the client. In this regard, I learned about David Maister's book "The trusted advisor". I have gone through the first pass of the book and it is quite an interesting read the changing nature of consulting (for that matter any high-end professional service). How one moves from a mere service provider to a trusted advisor. The central idea being the role of trust and relationship with the client in building long term business proposition. In a way going back to "conversation", "relationship", and within that relationship enact a business transaction. The book really throws light into what distinguishes subject matter consultants from general management/strategy consultants.

The book is an enjoyable read. As with any soft skill - developing and mastering it is not easy and quantifiable. But what distinct ordinary consultants from extraordinary is the mastery in the art of relationship building, bonding, and intimacy with the client. David Maister's blog is here. I will explore more into this area. As David points out at every step - as with personal life , in professional life to offer advice and to see that the advice is realized, one has to earn the right to offer advice first. And just because the client is paying you does not automatically give that right to you. Like a personal relationship, connection at an emotional level is necessary.

Back to writing

2007-10-22T00:30:00.000-04:00

For the last couple of months - several changes have been taking away my attention. And somehow I realized how in installments my entire day is getting consumed. Well, one aspect of my life that has become really interesting is my back-to-school venture. I joined U of Chicago GSB for my MBA and so far has been quite an interesting experience. In vein of Chicago GSB and me writing this blog again, I cant help myself from linking to neat article on I,Pencil, a very well-written essay on free markets. Check this here.

Buy vs Build vs Opensource in confusedofcalcutta.com

2007-08-06T23:48:00.000-04:00

JP makes some interesting points (as always) in his post in confusedofcalcutta.com while discussing when to build vs. buy vs. Opensource software. He goes on to say the staff in an IT department should devote their time in accordance with the problem they are solving. And then, the part that set me thinking was -

“You see, the primary reason why “proprietary” companies get upset with things like opensource is because they’re fighting a losing battle. They want us to pay a premium for the solutions to our common problems, because that’s their business model.”

I couldn’t agree with him more. But I also think that we cannot entirely presuppose that it is because of a favorable already-in-place business model that’s causing them to be leery and in many ways upset with the thought of Opensource. A major part of the problem is defining the problem itself and having a better understanding of what we are trying to solve. In other words, does the internal IT department and the vendors understand whether it is a common problem, rare problem, or a unique problem in the first place? Is the solution going to be generic and can be applied to others in the industry? Is it applicable across industry? And so on. To answer these questions folks in the IT departments need not only internal awareness and understanding of their own problem but also need to know what’s going on outside their organization in other places. Sharing of information through industry networks and participation in such communities (including Opensource as JP mentioned) becomes very important to obtain and get educated in this information. It requires management commitment and incentives for the staff to participate in these forums. In my work life, over the last few years, I have found there is a gradual decrease of participants from utility companies (including IT department) in industry conferences, workgroups, and even in the standardization processes for a variety of reasons – most common of those are motivated by cost cutting and evaporation of an incentive program for staff to engage in these activities. Most of the participants these days represent vendors or consulting companies. It is interesting to see that this lack of information and external awareness is correlated to loss of power with vendors in seeking solutions or even buying systems and services. By the same token, a few leading utilities leverage tremendous buying power with vendors driving the vendors to innovate and incorporate features and even not paying any premium simply because they could justify that the problems are not unique as being claimed by the vendor. So while it is important to focus on the nature of our solutions, it is equally important to understand the problem. And the role of industry communities, knowledge groups, sharing of information, relationships, and conversations are vitally important at the problem side of the equation as well.

My down time

2007-07-26T19:53:00.000-04:00

I have been taking a break from writing this blog. I will be back in the first week of August. Apart from my day job, I am enjoying summer in DC. Beach, aimless reading, and photography. And of course hanging out with all my friends. I will be back here soon.

Bengalis and Fish

2007-07-03T16:33:00.000-04:00

Being a Bengali, I cannot culturally separate myself from fish and rice. Today, Salon has an interesting article that resonates with my chords. Here it is.

Today's news

2007-06-29T18:45:00.000-04:00

iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone London Police Defuse Explosive, Thwarting Possible Terror Attack. iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iRaq iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone iPhone

From Life gives you lemons.

BTW, I love Apple. I think iPhone is cool. But, when I had to buy a new cell phone last week, I bought the Nokia N75. Had too many open ifs and buts with the iPhone.

Google Street View

2007-06-29T08:38:00.000-04:00

I just tried out the new Google Streetview feature. I was awed. Sometime back while giving directions to a group of friends I was struggling through explaning all the detours because of all the construction work that is going around. It became quite obvious that the plan view of street maps had its limitiations. After all we don't drive using the plan view. I was wondering - how nice if we had an elevation view in road maps - which showed buldings and landmarks - just the view we get while we drive. I thought about going around taking pictures from the nearest subway stop to my apartment which will be a good half a dozen pics for a 5 minute walk. I cannot imagine that Google has actually ventured to implement this. It is available for some cities now. But to step out in that direction is all about thinking huge and considering it is all in the art of the possible. Remarkable!

Voyerism and Blogosphere

2007-06-27T09:48:00.000-04:00

Tom Friedman writes (subscription required) about how persistence of information makes our life open to rest of the world. Google my name and you will get a sense of what I have done. My real life is out there for people and yeah, if I screw up - it's written in stone forever. Well, what Friedman writes about is an ongoing discussion which some people have come to understand faster than the others. Others will come upto speed - eventually. For some, unfortunately, it will come rather painfully. The kicker is - that "learning from your own mistakes" this time may prove very costly - since getting a second chance once your reputation is tarnished and stored in the internet can be impossible to be undone. So - as some people do - get smart. Learn from other's mistakes and to kick up a notch learn to pre-emept possible problems and prevent such situations. It is critical that as individuals, as groups, as companies, as communities - we run ourselves - as we are being watched, taped, and tapped. While I was growing up, my mom used to say the "eyes of the invisble" (you may call it God) sees everything, knows everything. As time and age drove me to pursue questions of life, existence, and Woody Allen movies - I got sucked into philosophical explorations of voyerism. Well, movies opened this question for the first time. But now, with the pervasive availability of such information - the reality is omnipresent. My past is my present (as Friedman says). The power of the invisible is real. Deal with the voyerism - or perish. We can't hide ourselves anymore.

China's Universal Cellphone Charger and Regulation

2007-06-24T23:06:00.000-04:00

I bought a new cellphone last week. After some shopping around, I finally decided on Nokia N75. After one week, I must admit I am liking it a lot. But the most annyoing aspect is that I have to carry one more charger with me. When I travel, I have my blackberry, a laptop, an iPod, and my cell phone. Each has its own charger and so often do I stumble and freak out - just to keep track of each one. How many times have I wondered how nice it would be if there were one universal charger. No more becoming paranoid whether I have forgetten it in my hotel rooms or forgotten to bring them along.

The Chinese government has definitely heard from people like me and have come up with this regulation. Universal cell phone charger. How cool is that? When will US follow suit? How come Chinese ministry can think of such regulation. One possible reason may be that Information minister has a background in engineering. It is quite impressivee to see how many top leaders in Chinese government have engineering degrees. Who knows! May be that's the key to getting a universal charger. User convenience precedes over user captivity.

Facebook?

2007-06-23T08:44:00.000-04:00

There is quite a buzz around Facebook and I was not quite getting the long and short of it. Why? Well, this post from Marc Andreessen explains quite a bit.

Seth's Drivers

2007-06-21T15:50:00.000-04:00

Seth Godin writes about different kinds of drivers in organizations. Read it here.

Energy and Happiness

2007-06-21T15:22:00.000-04:00

Several years back, the King of Bhutan coined the term Gross National Happiness. Here's an interesting take on how energy consumption relates to happiness. Read it here.

Enforceable NERC standards

2007-06-21T09:58:00.000-04:00

Finally, the NERC standards for reliability have become enforceable. This will translate to dollars being spent in conformance programs and will involve IT spending. While different stakeholders will surely have different opinions and views on how to deal with this requirement, there is no doubt that this is some work that needs to be done. It will be interesting how it unfolds. here's another article. Also, the FERC reliability site has important info.

For full disclosure - I consult utilities in the area of regulatory compliance.

Internet still not there...

2007-06-20T23:32:00.000-04:00

Stephen Lewis has an interesting point that only a small stock of knowledge and information resides in the internet and that too it is not well stocked. A visit to my local public library proves this point. Taking his view a bit tangentially, many a writer or a journalist kids himself that wheeling through the internet will substitute the dusty wheels and heat of travelling through the Sahara to cover a story. Well, the good ones don't, and the good ones will not do so in near future. It will take a while for the internet to get there...

Failure as an option

2007-06-20T22:22:00.000-04:00

Hugh has this nice post. Failure stinks but I can't deny that I have learned much more - whether it is about software, people, projects, or relationships from failures than from anything else. When others say such stuff - I sometimes feel it is an overused cliche'. But when I look into my life and see it closely - I agree it is true. Rock on Hugh...

HBSWK cites greater need for general managers in energy

2007-06-11T22:39:00.000-04:00

HBS working knowledge highlights the importance of general managers in energy who are able to appreciate the different cross-connects between various disciplines. Those who can cut across entire value chain of generation to distribution. And across diverse generation methods, environmental challenges, and financial requirements. Read it here.

Sopranos ending...

2007-06-11T18:16:00.000-04:00

[spoiler ahead]

I had to wait a good 4 hours until I confirmed it was not my TV or cable that crashed right at the end. By the time I got back something, acknowlegments were on. Anyway, such an ending was way out of my imagination. Seems like David Chase did something similar to what Michale Haneke did with Cache'. The idea being - it is not director's job to settle all plots and answer everything. It is upto the audience to keep thinking. Although, the ending baffled me for several hours, the more I think about it - the more I like it. No moral statements, no judgment calls, non-pedantic, and quite intense. Simply remarkable!

Info Aggregation

2007-06-06T17:23:00.000-04:00

I am considering buying a property and have been using zillow (I don't think we can say zillowing as yet) quite a bit. A very good example of information aggregation where I can check a particular location, check real estate prices, whether they are up for sale, prospective real estate agents, and so on. Some of the places are quite old and I have been wondering how about electric utilities and also water supply companies allowing us to access what the typical utility bills are. If they are listening, listen to what Dr. Weinberger has to say "If you love your information set it free"

Fermat's last theorem

2007-06-06T02:12:00.000-04:00

Here's a great documentary:

Fairfax increases wind energy purchase

2007-05-30T07:07:00.000-04:00

Earlier this month, my home county announced some significant steps to be eco-friendly. Can't help wondering - if things are difficult to do in Washington, you can do it in Fairfax or Arlington or Montgomery.

In lighter vein

2007-05-29T18:27:00.002-04:00

Bumped across this Monty Python skit in Youtube. Below is an excerpt of what the commentator say. I like the remark on Marx. Brilliant!

Nietzsche receives a yellow card after claiming that "Confucius has no free will"; "Name go in book" says Confucius. The Germans dispute the call; "Hegel is arguing that the reality is merely an a priori adjunct of non-naturalistic ethics, Kant via the categorical imperative is holding that ontologically it exists only in the imagination, and Marx is claiming it was offside." When viewing the replay it is clear that goal was offside and Marx was correct in his dissent.

Update: There is an entry in the wikipedia

Conversations on Electric Power

2007-05-24T21:00:00.000-04:00

The British government released the Energy White Paper after some hiccups. The highlights are government’s strategy in the area of nuclear energy which almost echoes the discussion that’s pervading in US. Nuclear energy has its plate full of challenges, some of which I have attempted to capture in this blog. It is noteworthy why the white paper was delayed. It was because Greenpeace managed to force the government through court action into a “forced consultation” and public participation in such an important process. It is interesting that the courts have to mediate in such matters and remind governments whom exactly they are serving.

One of the statements that stuck out - “The government wants to boost energy efficiency and change lifestyles, to cut rising energy demand and carbon emissions.” Change lifestyles? I ask how? While change seems inevitable, we cannot think about change without considering the pain that comes along with it. And when change is forced upon by the governmental people react in two ways in a democracy. Either people support or they resist. In matters relating to how we will use electricity in future, in spite of all our best intentions, change is not easy. Whether it is getting used to living near a nuclear power plant or worrying about when it will be cheaper to switch on our dishwashers or do our laundry. Given the harshness of the truth that whatever we do we will disturb the general public, governments are treading on sensitive waters here and is evident that most governments are not daring to catch the bull by its horns to avoid a political suicide. The responsibility of changing our lives to align with the challenges of climate change is thus being vested on lone rangers and independent spirits who are doing it on their own. Ironically, while the British government was working on the white paper, BP canceled its green project citing delays in government commitments for financial incentives for green power.

It is not just about UK government. It is not in any one entity's capacity to bring in behavioral, cutural, or institutional changes without engaging the public. Just to digress a little bit here - everyone talks about how internet has changed our lives. I ask - do we realize how this was possible.

If Internet is a computing grid, it is similar in concept to the power grid. However, it is interesting to note why the power grid is an epitome of centralized power while the internet is free – as in no one person exercises ownership, everyone can plug an play, and add stuff to make it richer, better, and more useful. And the more I think about it I am reminded of the Cluetrain Manifesto. Internet brought in a cultural change because it was a free platform for amorphous development of ideas, rapid execution, and permission-less mindset all combined to propell this chaotic but phenomenal change.

The power grid has been just the opposite. Regulated utilities that have tried to control power, authority, and information as much as possible. As a consumer, I don’t have choices of services, forget service providers. I don’t even know how I am getting charged, so on and so forth. Working within a utility – there is a pervasive lets-not-do-anything mindset that shuns from rocking the boat. Status quo is the mantra as opposed to playing out new ideas. Human beings need stuff to play with and it is from playing and exploring that cool things come out. Cost effective green energy, realistic nuclear waste disposal programs, or innovative power project financing schemes have better chances of cropping up in an environment where more “consultation” and “trial and error” mindset is promoted. Then there are secondary effects. Platforms that provide intellectual freedom tend to attract smarter people and better human talent. Given the falling enrollment rates of students in power programs in Universities this may be another benefit serious enough not to overlook.

Let’s not lose sight of the ball here. While Hollywood stars are driving Priuses to the Oscar night, Tom Friedman is writing incessantly about going green in The New York Times, teenagers and college kids IMing each other about saving the planet with solar and wind, it is equally important that we allow honest conversations leading to actual implementation of these ideas in energy sector. Rather than throwing mud on government efforts, spin doctoring scientific assertions as established truths or work of fiction, and making a living by stalling every new idea in the name of “regulation” or “security” – we need to stop people-stereotyping that destroys honest debate. I would like to see more debates on nuclear waste. What should the number of years that we should plan for in Yucca mountain? 100 years, 10,000, or 1 million years. Should customers pay more for electricity? Is it artificially priced? Is it low or high? What are all the negative externalities? How do we price them? Should we allow decentralized power as alternatives to central generation? We need better arguments better rebuttals. I don’t want to see those “going green” being characterized as ultra-liberal tree-hugging hippies. Or, those people in suits championing nuclear or talking in favor of utilities or oil companies as self-absorbed money making machines; or, a cross between Wall Street and Washington conservative who don’t care about poor people. Or, snub one who seems to be all set to cause nuclear accidents, or plummet property prices of areas if I choose to live near a nuclear plant or oil refinery. At the end - the media needs to stop pretending that the next report or next solution that comes from a government or corporate release will solve all problems. And then beat the hell out of some words that were written or spoken.

Let’s go and do something meanigful. If it fails let's agree we will do something else. Let the collective process work and figure out. Who knows what the next magic bullet is. Nuclear or solar or tide or clean coal – or something completely different that we as individuals cannot comprehend now. Let an honest conversation begin.

Australia: Water shortages leading to higher electricity prices

2007-05-19T10:55:00.000-04:00

The water crises in Australia is now affecting the electricity prices. Futures are up to the extent that prices of electricity are tipped to double in South Australia. See here.

Jonathan Coulton, an outcome of Web 2.0

2007-05-18T01:17:00.000-04:00

Last Sunday, The New York Times Magazine ran an article about Jonathan Coulton. Coulton quit his day job as a programmer and now is a full-time singer/artist. Read the article how he has used the internet - myspace and blogs to create a community to launch his new career. The NYT writer poses:

"Will the internet change the type of person who becomes a musician or writer? It’s possible to see these online trends as Darwinian pressures that will inevitably produce a new breed — call it an Artist 2.0 — and mark the end of the artist as a sensitive, bohemian soul who shuns the spotlight. In “The Catcher in the Rye,” J. D. Salinger wrote about how reading a good book makes you want to call up the author and chat with him, which neatly predicted the modern online urge..."

Well, there is no doubt where things are heading. We are just scratching the surface of two-way communication and realization of collaborative creation and development. What does this mean for businesses? What does this mean for individuals with a record or a book plot in mind? Is this a trend and a sustainable template for similar success or just a fleeting fad? Do the old rules still apply - that some people will just be lucky? One thing that open sourcing from community to create music, art, or software keeps telling me is: there are generous people out there and they are willing to gift their time and talent to see others realize their success. Call it Maslow's self-actualization or anything, sourcing that side of human nature certainly reaps benefits beyond conventional belief. And internet is making it more possible each day.

Oh, I find his CodeMonkey pretty cool. Here.

Comment on confusedofcalcutta Uploading Text

2007-05-16T23:11:00.000-04:00

I wrote a comment to JP’s post to which Stephen weighed in and expanded. As the web progresses this will be an ongoing conversation. Security vs. freedom. The embrace of new technology has a particular characteristic. It has been tied to the ease of its use - even when the technology is not perfect. The choice of Windows operating system over Unix is a good example. Ten years ago, I began my career porting power plant control software from Unix platforms to Windows. Why? A simple reason. Windows based system was easy to learn and use for power plant operators. This decision was a tough decision that most of us did not like. Another example is what David Weinberger in Everything is Miscellaneous talks about how Tim Berners-Lee’s brilliant decision to keep things simple with HTML catapulted internet’s growth to where it is now in just a few years. When we are in this riding tide of progress and development, we don’t want to see a red stop sign. We don’t want lawyers and security experts or for that matter anybody to caution us or forbid us. We hate security. Then comes some jerk who invents a computer virus, a freak who breaks in to a sensitive system, or a sociopath who post nasty messages and causes harm. We are alarmed. We start locking our doors and windows by creating accounts and passwords and installing anti-viruses. We start encrypting our data packets and suddenly the network that was running so fast now slows down as it spends more time encrypting and decrypting, thus carrying less real information than it used to do before during that given time. Stephen mentions about how creation of Department of Homeland Security is retrograde from our movement from Dept. of War to Dept. of Defense. Take for instance the long queues in airport security after 9/11. Many business travelers like me still hate it but I have gotten used to it. If you ask a random grandma in the airport, who does not run against a tight schedule, she’d probably tell that she is happy because she feels safer. I cant deny that in some corner of my mind I feel the same way. I think as in real life, in internet too, we will always confront diverse opinions on how much security and how much openness will be allowed. In Web 2.0, world views about what sort of conversations are harmful and needed to be restricted for “security” reasons. There will always be people who will differ in their positions. Conversations surrounding issues like change in military policy will take place for a while and settle to an equilibrium point like the way a page in wikipedia stops from changes until the point when something happens and disturbs the equilibrium. It is too farfetched (and utopian) to think that our real world will replicate the possibilities of Web 2.0 world entirely, albeit all of its good intentions. Nor will the Web 2.0 world squeeze and morph into another reflection of the real world. Both will change and are changing as we keep swinging from one to the other. Eventually we will find the temporary mean position. Needless to say, I am looking forward to this exciting journey.

Black Swan re-visited

2007-05-15T21:27:00.000-04:00

Few days ago, I mentioned about reading Nassim Taleb 's Black Swan. I began with the hope that it would be exciting. While it was worth reading once, I was hoping for a bit more. The 400 pages were a bit too long for the thesis of the book. For someone who has grown up with some exposure to oriental philosophy the importance of "luck" in life and the fact that one cannot predict future based on past are moot. To refresh the importance of luck in life (assuming it encopasses business life) I would rather watch Woody Allen's Crimes and Misdemeanors and Match Point.

Auditing Grid Performance Not Enough

2007-05-13T16:26:00.000-04:00

Come summer and people in the utilities start panicking of power shortages and potential blackouts. Media begin to get energized around reports such as the one here. Old transformers, stressed grid, and the list goes on. One always hear diverse viewpoints - not the least of them is the assurance that things are not as bad they sound. Like it or not, a seemingly technical problem always sees its resolution through a PR gymnastic contest. The mantra is: As long as something bad does not happen, it is fine. I would like to pause here and ponder on this for a moment. What are we saying here? Isn't is almost like waking up in the morning and telling that as long as I am alive when I go bed, I am happy. Maybe in a philosophical or mystical sense, it is acceptable, but in real world, when we as engineers start looking at the world with these glasses, then we literally kiss goodbye to creativity, innovation, and ways to make our lives richer and better. How did we get such a mindset? More importantly, when have we made "not-as-bad-as-could-be" become equal to "as-good-as-it-can-get" in our utilities. One of the reasons this happens is when we choose mediocrity over excellence. It happens when we prefer status-quo over change. It happens when we don't do anything because no one else is doing. It happens when more people tell us what to do and control our destiny rather than giving us the choice and freedom to think and implement new ideas. And it happens when we forget who we are serving and why we are in the business. And I believe this is the crux of the problem. Some say utilities are being overly regulated and their performance measured in ways that are bordering ridiculous. Regulators believe if utilities do not handle themselves causing societal problems like the 2003 blackout, public policy makers have to intervene. Both have substance in the argument. Take the audits as an example. When there are too many people wearing the proverbial holsters and cop hat to dictate what they should be doing, the entire effort shifts to find ways to avoid them. Utilities do just enough to satisfy the regulators. This is plain and simple human nature. And more often than not, the ensuing list to keep regulators happy becomes long enough to be the "be-all" and "end-all" of all the projects that utilities can afford.

Result: Le's do just enough to satisfy the regulatory audits (NRC audits, NERC audits). By some "glue" let's make sure the grid does not fall apart in my watch.

If we could move away from the audit culture and engage is ways to engage in conversations that promote open distribution and sharing of information to continually serve to the customer's best interests; if utilities develop a price structure that puts the customer before shareholders, it is possible to work under a more powerful context of innovation and improvement. Utility industry has had its quirks. From big barons like Samuel Insull to Enron, we have gotten our regulators excited in a variety of ways. The truth of the matter is somewhere along the way the conversation within the utilities has shifted way too far from serving the customer to serving the shareholders without angering the regulators. Or may be, the conversation of serving the customer was never powerfully constituted as the inelastic demand behavior of consumers was a favorable field to fulfill the goals of corporate greed for a few. As is known, with the regulators, you don't get much credit from doing more than what's required - just like no one credits you if you are driving below the speed limit, but fines you if you are over. Simply measuring the cholesterol levels do not ensure a healthy heart. Similarly, periodic auditing is just the minimum. If it becomes burdensome, as is the case with smaller utilities, there will be hardly any resources left for the grids to improve. In such cases, government needs to let the market decide to fix the prices - an exhorbitantly high price of electricity will signal market condition and initiate a correction. Looking at the "because effect" of electricity, the consequences are too large to live with a grid that barely survives. While some may keep finding ways to prove that everything is fine, I wish it is possible for the rest to begin by addressing the perception (allowing those who believe - all is fine to be true). The perception is: grid infrastructure is old and needs to be made better. And it cannot be done by paying with the proverbial "minimum wage" mindset laid down by regulators. For as the PR pundit will tell, changing perceptions do change reality.

Bonus: JP's post hits right on this point.)