2×2 Matrix

The problem with 2×2 matrix is that it is static. It assumes that all constraints and enablers will remain the same over a period of time which is hardly true in real life… but then, it does add new perspective to rather trivial events… For example, I’ve been blogging much less lately and I tried to put that into a 2×2 :)

Y axis: volume of interesting events/thoughts in life to blog about
X axis: confidentiality of those events/thoughts.

Since I just signed a non-disclosure agreement for Vlerick’s in-company consulting project (I’ll begin the project on Monday)… I’d like to think I’m exclusively in the upper right hand quadrant. However, I have a niggling suspicion that I’m bordering on the lower right hand quadrant as well :)

Back home

It feels strange to be back at home in Leuven after just 10 days of vacation in Poland. I’m left here wishing that there was a park in front of my studio; a fountain in that park and kids playing in the fountain while I listen to music and read a book in the balcony just like it was in Poland. It has also gotten me thinking about how I’ll feel when I go back to my real home in Bangalore after 1 year in Belgium! Here’s how the first 24 hours will be – I think!

The post is extra ordinarily long that I posted it in a new page called THE FIRST 24 HOURS. The post is so long (4000 words) that the only rational explanation is that I probably went manic today from the long travel:) It turned out to be more of a short story rather than a mere post… well, sometimes, it is good to be creative.

Student City

Back from my vacation!

It’s interesting to see how attitude towards travelling changes over time.  The first I set foot in Europe (back in 2001), the excitement I felt was because of fresh cold breeze I felt like I had never felt before, greenery I saw like I had never seen before and travelling over 120 Kms on road which I had never done before. People were not needed for this excitement. After a while, the point of travelling became merely a pursuit of checklist, another country off the list, another place to talk about (read as show off) to friends and family. But that phase passed soon as well. Now, as I travel over 1000 Kms from Poland back to Belgium, it feels no different than travelling from Bangalore to Goa, because the geography of Europe is just as familiar, if not more, as in India. The cherished experiences from travel is now derived from the people I meet, not places I visit and I mean this for the Swiss Alps or New York too.

I was lucky to meet a wonderful family in Wroclaw on this trip. I visited my friend who let me stay in a wonderful apartment. The surprises though came from the family. For Easter, the father invited me to a speedway race, which he has been visiting for the past 5 decades! As I approach 30, often I wonder if I’ve gotten old too quickly,  But after the speedway race, I realise age has little to do with ageing, for I felt a lot older among speedway fans, many of whom were twice my age. They cheered louder than me, cursed just as loud and I must admit they were thrilled by the race a lot more than I was. My friend’s mom cooked great (Polish) food throughout the stay. I did not least miss home food during this week. Every dish was tasty and I think I put on weight within a week :) I was a wonderful experience and a new one too!

Here’s what I find intriguing about this trip. Wroclaw is a student city. Anybody who knows something about student cities in Central and Eastern Europe knows that the general culture borders on Hedonism (I agree its stereo typing, but has some truth in it). As an outsider, the only music one hears is techno, trance or R&B, there are more nightclubs in the city than good restaurants, the downtown is filled with drinking holes and party places and just as you move away from the downtown, there are innumerable parks to laze around or get a good sun tan, which a majority of people take advantage of. You can also see other ways in which the parks are taken advantage of by the number of beer cans left over at 5 AM in the morning. A majority of the population lives in the right now and right here. This attitude is understandable in most student cities or college campuses around the world, but I found that concept to be pushed to its limits in this part of the world. The philosophy of life is so simple and uncomplicated that it becomes seductive… after all, why not maximize pleasure and minimize pain every day when you know life is short! It’s like constantly living in a proxy Ibiza island. The objectives of life being get through the boring weekdays and then hit the dance floor from Thursday through Saturday, the only constraint being depth of pockets…

Come to think of it, this is the part of the world which has seen most violence in the past century even in comparison to Middle East and Africa! Clearly people have witnessed tremendous pain and I wonder if that is the reason that this Hedonistic culture among youngsters is tolerated by the older generations even though Poland is one of the most catholic countries in the world.

The business implication is interesting to. Imagine, managing a team in India and another in Poland and both teams are supposed to perform similar operations for different geographies. Given similar volumes, simple mathematical model would suggest the same headcount to be staffed in both locations. But given the difference in cultural environment, the Indian benchmark simply won’t be sufficient in Poland. It’s rare to find any employee staying in office beyond the 9th hour in Poland as opposed to having the entire team stay in office beyond the 12th hour in India :) We could go around blaming leadership, operating model, efficiency and other business buzz words… but all that it come down to is this: Irrespective of the pros and cons, few cultures have figured how to have fun each week, others count on their annual vacation for fun and this has an impact on how business should be conducted :)

Buy house!

While I’m on vacation, my mom called me up to let me know that she heard news about a house on sale in Bangalore. It’s rare that I hear such excitement in her voice. I could tell she was eager to hear me say “Let’s go for it!” because it has been her only material ambition for over 20 years – to own a house. My dad never really was interested in investing in a house and my mom kept seeing house prices soar from under INR 200,000 to more than INR 2,000,000. I can empathise with her for I have seen stock prices explode 30 times while I sat on the sidelines :)

I feel bad (even guilty at times) that while I go on to achieve all I want with education and career, I’m unable to offer her this satisfaction of owning a beautiful house. So, the emotion got the best out of me and I asked her “Mom, What price are they quoting?” She said “3,000,000 Rupees, its high, but lower than what was offered a year back. They are offering such a good price because they are in need of money urgently, so we need to get back to them as soon as possible!”… I began to wonder if this might be a good investment after all. I told my mom that I’ll call her back the next day and began to ponder over it. I must admit it gave me a sleepless night because it is something I really want to do for her.

But then, if I were not to back this up with some simple calculation, this entire year of MBA studies would be a waste, so I quickly crunched a few numbers…

The average expected rent for the house today is INR 6000 per month, which means INR 72,000 per annum. Assuming the average inflation rate over the next decade will be a whopping 10%, the rent would increase at the rate of 10% as well during that period. Assuming that I get really lucky and secure a housing loan for only 6%, I can use this rate as the cost of capital. If I were to discount the total cash flow for the next 10 years (72000+79200+87120+…..+186750) by 6%, the Net present value of the house is INR 900,000!!

Ok, let’s do a reality check. NPV is 900,000 for the cash flow of next 10 years assuming I get a housing loan at 6% and the current quote is 3,000,000… lol.

The actual PE ratio if we were to in fact buy the house at INR 3,000,000 is close to 26! I then begin to wonder when was the last time a company on BSE had a PE ratio of 26!! Long time back, I hope. Imagine, even if a stock like Infosys had a PE ratio of 26 because you expect it to grow 40% (not 10%) per annum and then you are asked to invest not only all your wealth but also leverage yourself 10 times or more (by borrowing) to invest in that single stock!!! I doubt any rational person would do that, even if he is greedy. Certainly not if he is enlightened by the CAPM model… 

Long story short… The next day I spoke to my mom and told her “Mom, it’s not a good idea”. She replied “Yeah, I’m not interested anymore either because the kitchen’s Vastu (Indian Feng Shui) is not right” :)

Freaky

 

Yesterday night, I had big fight with my friend (I tried my absolutely best to apply the Empathy – Positivism – Organizing, EPO formula. Absolutely did not work. Usually, the prerequisite for EPO to work is that the other party is not tunnel hearing… lol) It was frustrating and the mood spilled over to today when I woke up. I decided I must do something fun to get my mind off yesterday. I had little hope when I woke up that this day will be fun. But, I did do something different and it completely took my mind off yesterday… in fact, I am feeling pretty happy right now… That’s the good part.

The freaky part is what I did for fun. I read chapter three of “The modern firm” by John Roberts while listening to my iPod and sitting under a tree in a park next to the river with swans, pigeons and lots of people enjoying the sun and it was the book which did the trick!

The chapter answered the most basic question about why firms exist. It is the kind of chapter which questions the most basic assumptions and brings new perspective, the kind I love. As I read the book, it was interesting to begin wondering why people are here savouring sunshine instead of doing something more productive. What is their motivation and their pay off :)

Oh god, I hope this is not the sign of things to come… where I begin to see everything in world about why we sit, party, eat, love and do whatever we do from the POV of opportunity cost, equilibrium price, co-ordination and property rights. Takes the whole romance out of life…  lol.

So far, this is turning out to an interesting “vacation”.

Language Skills

Yesterday, for the first time, a large consulting company called to let me know they could not pursue my application further specifically because of language skills. Incidentally, one of the questions students ask frequently to all visiting companies is about whether language skills are important. It’s the same question I receive from prospective students as well. A simple yes or no answer is boring, so here’s an analysis.

For a moment, let’s consider MBA students as production factors which the companies acquire from labour market. The best production factors are those which add the best value to the customers, not the hiring company. Value is added through previous experience, knowledge gained in MBA, soft skills and most importantly, how these qualities are used during interaction with the customer! Interaction means communication with the customer. Let’s look at the customer base of the usual suspects (The big consulting firms based in US/UK). In Belgium, this customer base is made up of public utilities, energy, retail, financial services and telecommunication industry. Companies in all these sectors are large local players whose customers are local players as well. So, although the large consulting firms are based out of US, their customer base and their customers’ customers are very local. The entire value chain converses in French/Flemish, which means without language skills, its impossible to add significant value. After all, a large part of the consulting process is Q&A and surveys.

Is all hope lost? Of course not. This only means that most customer facing positions are out of scope for an international student without local language skills. But these are not the only career opportunities, there are other functions such as Finance and controlling, HR, IT, Treasury, partly supply chain and even general management whose customers are mostly internal to an organization. So, assuming that the MBA candidates seek opportunities within in Western Europe, the target would be for the corporate functions in companies whose internal communication is in English. Good news is that there are plenty of European HQs in Brussels; most of these companies conduct internal communication in English. Bad news is that here’s where the economic crisis comes into the equation. Most of the supporting functions are what we call “overhead”. Supporting functions are not are not direct expenses. In an environment in which credit is hard to come by, the last thing companies will want to do is increase their working capital requirements by increasing overhead costs. So, it’s difficult to find opportunities, but not impossible. After all, I’m sure large companies realise that heavy regulation is on its way (similar to SOX) as soon as the credit situation improves and they will surely need the “supporting staff”. The best time to find jobs is when all companies have lots of money and then the government creates additional work like during the Enron scandal :)

The other worry right now is the protectionist attitude in EU and US resulting directly from the heavy stimulus, which governments are pumping into the economy. For example, Bank of America took back its job offers to international MBA students in the US. I have not heard similar news from EU, but I’d be surprised if Fortis or GM will not receive “instructions” to create employment in local population in exchange of the capital they receive from Governments. So, is language skill important? Certainly! especially in today’s economic situation.

Finally, I hear and see many students attempt to shore up language skills during the year through extra sessions. This might help, but does not in any way provide a competitive advantage. Here’s an example. Last week, we had a talk by the VP of a large software company. She is currently in sabbatical and has been a full time student of Flemish language for the past one year. During the break she said that Flemish people think she is too direct while she thinks she is polite. The reason is not because of what she says; it’s because of her language skills. If my English was basic and I was asking somebody to reconsider a request, I’d probably say “Reconsider this request, please”, with better knowledge of English, I might choose to say “Could you kindly reconsider this request. I’d truly appreciate it”. The meaning is the same, but one is too direct and the other is too polite :)