Ten interesting things we read this week
At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week.
Here are the ten most interesting pieces that we read this week, ended July 01, 2016.
1. For the rich, India is as good as a tax haven [Source: Livemint]
This piece captures the increasing inequality in India and the ‘subsidies’ enjoyed by the rich class. Commenting on the low taxes on the rich, as highlighted in the Indian Government’s income tax data, the article says, “Not only is India the country with the lowest tax-to-GDP ratio among countries with a similar per capita income on a purchasing power parity basis, but is also the country with the lowest expenditure-to-GDP ratio”. The articles further emphasizes on the point that the subsidies to the rich are hurting the capacity of the Government to spend more on essential sectors such as health and nutrition and education. Surprisingly, during the period when the economy expanded at a rate of more than 8% per annum, our tax-to-GDP ratio remained almost stagnant. The current tax-to-GDP ratio of around 16.8% is roughly the same as it was at the beginning of economic reforms in 1991!
2. Why garbage men should earn more than bankers [Source: evonomics.com]
An interesting piece that takes a dig at the increasing inequality in our system with wealth accumulating in the hands of people contributing little to overall value creation. The author of the piece believes that the modern marketplace is uninterested in usefulness, quality, and innovation. All that really matters is profit. He also laments about the fact that we’ve missed out on so much progress because thousands of bright minds have frittered away their time dreaming up hypercomplex financial products rather than thinking about the next best technological innovation that can improve the living standards of the society as a whole.
3. What’s not so cool about India’s start-ups [Source: LiveMint]
This excellent piece describes how in spite of their modern and chic image, start-ups are no different from our ancestral workplaces where inherent sexism in words, tone and body language was commonplace. According to this article, “In this male dominated ecosystem, an ambitious woman thrives not by asking if the glass is half full or half empty, but by sipping on leftovers of male privilege”. Some stats presented in the article to prove this point - among the top 100 Indian start-ups based on growth, revenue and funding, not a single woman figured as a founder in the top 10 start-ups. In the next 10, one woman’s name makes an appearance at the 18th position. Only 68 of 307 start-ups that raised funding in the first quarter of 2016 had a female co-founder. Of these, only 9 had a sole female founder.
4. How a bogus business became an online sensation [Source: Financial Times]
An insightful piece that brings to our attention how reputation can be bought easily in the world of influencer marketing, in which advertisers pay individuals with large followings on social media to promote their products. The case presented is that of Social Bites, a Sydney-based catering company, that had collected hundreds of positive reviews on numerous websites and one of those sites had granted the company a customer service award. But there was a snag: Social Bites had no customers because it did not exist!
5. Robots may cut off the path to prosperity in the developing world [Source: Financial Times]
Amidst the doom and gloom associated with increasing automation, this article presents an interesting take on the way the relationship between globalisation and automation is evolving. After a long period of outsourcing manufacturing to cheaper hubs in Asia, rich countries are beginning to see factories return to their shores. The developing economies are faced with dire prospects as a result of “radical insourcing” where developed countries no longer need to outsource production to countries where wages are low. As a result developing countries are displaying signs of what Harvard professor Dani Rodrik calls “premature deindustrialisation”. While manufacturing jobs peaked at about 25% of the US workforce and 40% of Germany's, they already seem to have peaked in Brazil, India and China at less than 15%. A world of “radical insourcing” would accelerate this trend, cutting off one well-worn path to development for such countries.
6. Industrial robot sales hit record [Source: Financial Times ]
This piece brings to our attention how even in the developing world, automation is increasingly threatening the job prospects for the youth. According to research by the International Federation of Robotics, 248,000 units of industrial robots were sold last year, an increase of 12%, with more than one in every four of those going to China. Once the manual labour “workshop of the world”, the country is today the largest buyer of industrial robots. The article also says that globally, the greatest demand for robots last year came from the automotive industry, accounting for more than one-third of sales, followed by electrical and electronics producers.
7. Empty houses and jobless maids: Indonesia's expat exodus gathers pace [Source: Reuters]
As per this piece, foreign workers are leaving Indonesia at an increasing rate due to the slump in commodity prices. The number of temporary residential permits issued to foreigners, including renewals, has fallen for the past few years to 171,944 in 2015 from 194,162 in 2013. As a result, rents on upmarket homes in Jakarta have plummeted and enrolment at international schools has fallen. The outflow is also likely to dent higher-end consumption and drive up unemployment as big-spending expats tend to hire multiple workers ranging from housemaids and drivers to gardeners and bodyguards.
8. Why the Remain Campaign’s Persuasion Strategy Backfired [Source: HBR]
This piece from HBR captures the interview with Steve Martin, director at Influence at Work in London and best-selling author of several books on persuasion about the ways in which the Remain advocates’ message failed to get through, or even backfired. According to him, the result was an outcome of something called ‘focusing effect’. The Leave side made sure that immigration became a focus. Not only a focus but the focus. And once that’s a focus it’s hard to get other messages through. Citing Danny Kahneman, he said that it becomes the principle of ‘what we see is all there is’. We can only pay attention to a limited number of things and if we see that immigration story every day, that’s what affects us more than a rational argument that predicts what would happen if we left. He also added that excessive efforts to try and persuade people can backfire as when people become conscious you’re trying to persuade them, that can raise resistance, and resistance is a killer when it comes to persuasion - it creates a mental barrier that will stonewall and kill an idea.
9. I think it’s time to bet on guys with 21st century rockets [Source: arstechnica.co.uk]
Describing the changes currently going through in the aerospace world, this article talks about how rocket company Blue Origin’s recent launch affirmed a singular, increasingly inescapable fact about the future of spaceflight: reusable rockets represent the future of the aerospace industry. While SpaceX proved that it can safely return large orbital rockets to Earth, both on land and at sea, with the 19th June flight, Blue Origin has definitively taken the next step- turning a rocket around and flying it again. Four times. It is also dirt cheap to fly, costing in the “low thousands” of dollars to refurbish between flights. Every bit of it is reusable, except for the inexpensive liquid hydrogen and oxygen propellants.
10. How playing poker can make you a better CEO [Source: Inc.com]
This piece uncovers similarities between managing a start-up and playing a significant-stakes poker video game on a green baize-protected desk. Running a company and playing poker both equally require you to assess possibility, review your competitiveness, be intense, control your feelings, and know when to keep and when to fold. Business people who are poker aficionados say playing poker has helped them run their businesses far more proficiently. According to some of them, poker is an overly “simplified” video game model of managing a start-up. Almost everything you have is uncertain, and you want self-assurance in what you know and what your property is.
- Saurabh Mukherjea is CEO (Institutional Equities) and Prashant Mittal is Analyst (Strategy and Derivatives), Ambit Capital Pvt Ltd. Views expressed are personal.
