The end of money!!!!

Are you happy with the current monetary system? Do you think, it needs improvements?

For instance, I have some pet peeves like:-

1) Why, do I have to worry about my survival if the stock market(to which I am not privy) crashes.

2) Why do some bankers in suits have control over my life?

3) Why can't I live on an island in Italy, in a castle, surrounded by servants who would do my every command and never have to work a day, while Vijay Mallya can...;)?

Well, my pet peeves aside there is a small but clear dissatisfaction growing in people of our generation regarding the status quo of today's economies.

• We all seem to have comfortable yet highly stressful lives.
• We don't have to worry about food and yet slave for longer than farmers in a village.
• We have higher life expectancies and yet we fall prey to a larger set of stress related disorders.
• We have umpteen free land and yet are forced to live in polluted, over-crowded cities in small "caves".

Of course, the problems above are for those who are relatively affluent. It is a wonder that in what we call an advanced world there is still poverty, malnutrition, hunger and frankly living conditions not suited for farm animals.

We have two outdated systems responsible for this:

1. Our monetary systems
2. Our political systems

In this post I shall talk of only the monetary systems.

Monetary Systems

The concept of "money" or monetary systems evolved as a means of distributing "limited" resources among people. The major two systems Capitalism and Communism follow different ways to do this.

Capitalism believes that resources should be distributed based on the laws of profit, supply and demand. Hence, if there is no profit there should be no resource distributed(even for high demand).

Communism follows the other way around, where a group of guys in ties decide who gets what.

Needless to say, both systems are flawed , though "regulated" capitalism or mixed economies have slowly gained precedence.

But there is a major flaw!!! Both, systems are based on the fact that there is a shortage of "resources". In fact Capitalism actually encourages this shortage of resources.

A good example is that of the diamond industry. Diamond, is one of the most abundant forms of mineral on the world and there is no shortage of it. (If diamond was rare, you would have diamond investment funds like gold bonds. Diamond prices are a product of a cartel and hence are not good investment instruments.) Yet, it is sold at exorbitant prices to consumers mainly through a slick marketing campaign.

This would have been ok, if it was meant to just satisfy the ego's of some star-studded bimbos and rich people. However, diamond mining and trade has lead to the largest human rights violations in Africa as we all know from the whole blood diamond thing. The sale of diamonds has directly financed the many revolutions in Africa causing the loss of millions of human life.

Abundance

To see if an alternative system of living is possible, we need to look at which resource is actually "scarce" in the current world. The basic stuff food, water, shelter are more or less abundantly available.

1) Energy- There are numerous abundant sources of natural energy. We have the technology to tap it!! Yet, oil conglomerates cannot allow this as it would break their hegemony.

2) Minerals- Our reliance on rare minerals is getting lower and lower. We have synthesized enough replacements for the rare ones and have techniques that can help easily re-use the rare ones.

3) Office Space in Nariman Point- Now this is clearly a man-made scarcity. By using modern communication methods, one does not need to keep his office at Nariman Point.

Ultimately, I believe that modern technology has given us the means to live life comfortably for all of the 6 Billion plus people on the planet, yet it's the very monetary and political systems that we have designed that don't allow the free flowing distribution of this "abundance".

The path ahead- Technologism

Any system comes to a breakdown point when enough people realize that it is not meeting it's objectives or the objectives themselves change.

Most people would agree on the following vision of an ideal society(details may be hotly debated):-

1) Everyone should have all the basic necessities of life which includes free medical care, shelter, education, food, ability to travel to exotic places, iPods, Latptops and whatever else their heart desires.

2) People should strive to work for a purpose other than simply money. All people, should do higher level things like advance Art, Science , Sports etc and stop having to do lower level jobs like farming, ticket collection , factory workers, management!!! which can be easily automated by robots.

In such a society above, money would not be an important thing.

Many, of you would be wondering, that this is just a pipe dream!!!. But, take a look at the following statistics:

1) The number of farmers in the world have declined from 90% of the population 300-400 years ago to around 33%. (This is also an inflated number. Many people are still farming because there is nothing else for them to do).

2) Automation has lead to job losses of millions world-wide.

The funny thing is that the affects above are due to "Capitalism" and the "Money System". In an effort to increase profits, corporations must cut costs by bringing in more automation. However, what the current systems have not yet addressed is what happens to people who are no more working!! In the current system, they die poor and jobless. Most, of them find other jobs or are protected by social safety nets.

But, what would happen when a tipping point is reached say when Robotics finally arrives and even the few manufacturing jobs available are lost. With no workers, to manage what would happen to the supervisors and the operational managers?

With a major part of the economic work-force unemployed and unable to purchase goods in a traditional system, what would happen to the "Upper Managers" and "Financial Analysts"?

In other words, the whole system would come falling down like a pack of cards to be replaced by a new system, one in which technology would decide the distribution of goods and a new social order is created.

But, what has all this got to do with me today?

Many of you reading the blog at this point may be thinking, yawn....this is just another psuedo-intellectual lecture. None of this is going to change in my life and when this happens good luck to the guys alive them. As for me, I am going to go to work tomorrow since I still have to pay home loans and it still costs money to watch movies......

However, the world needs you!! A system will always change when put under stress. But, the new system , the details, will depend on what ideas are generated years before.

Communist ideas came in the late 1800's, yet it was not until 1920's (Russia) that they could be put in practice. The ideas of many famous philosophers bore fruit years and years later.

We as today's generation have a moral responsibility to start "visioning" this future which we know is inevitable. We need to come out with great ideas for this future and bring about the small small changes that will ultimately lead to the tipping point of a better societal and economic structure.

Many organizations already do this. I strongly encourage people to see the ideas by http://www.thevenusproject.com/ who are trying to envision such societies.

If a system collapses suddenly(As the French found out during the French revolution), violence is usually a by-product and in our case if we do not evolve to a better society, we will regress into the dark ages as the religious zealots use the resentment generated by the current system to become anti-technologists and bring us into perpetual decline!!!

The choice is yours..........

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Money Money Money, must be funny in the rich man's world

How much does money, control our world? Our education, our lifestyle, our money, even the fact that I am blogging on blogger and not selling tea in a stall is because of the amount of money I earn and our economy. I have always been interested in what exactly is money and what is this great "engine" that we call an economy.

I have recently seen the movie Zeitgiest addendum and boy does the movie scare me. I will talk about two scary aspects of money not well known to people outside trained economists.

1) What is a 1$ note(or any other currency note) :- A 1 dollar note is a "loan" given from the Federal Reserve Bank of America to the Govt. and other banks. The FED expects the loan to be returned with "interest". Now, the questions is if every note that the FED(or indeed any other central bank) issues is a "loan" then to pay the "loan" one needs more money, hence more notes, but these are again "loans". Even a non programmer can see the infinite loop here?

Basically, the main job of a central bank is to "kick-start" the money supply by supplying loans to the govt. of a country.

2) Fractional Reserve Banking: This is the second aspect of the system and was what most astounded me.

Mummy asks Pappu:- "Pappu if a bank has 10$ of money with it and it lends that to a person, how much money does the bank have".

Pappu:- "Mummy 0".

Of course, Pappu has not done a course in economics and he has failed again!!!

When bank lends 10$, 10$ is magically created in the economy !!! So now the total money supply in the economy is actually 20$(Magic!!!). The funny thing is if this 10$ is loaned to some other bank who loans it further another 10$ is created..out of nowhere.

Well actually, the amount of money created reduces with every bank lending since "central banks" need a certain reserve amount be there in the bank deposit which is a fraction of the "loans" made out. This means that Bank A (who originally got the loan) can only lend 8$(if the Fractional Reserve Ratio is 20%) and Bank B can lend up-to 6$ and so on.

The chart[source: Wikipedia] shows how a 100$ deposit magically becomes 500$.

As an engineer the chart looks just like a chart of an engine. Of course, for a given Fractional Reserve Ration the amount of money supply in the system approaches a limit as shown above!!!

The conclusion of the two points above is "Money" is "Debt or Loans". All "Money" is "Debt", and hence all "Money" needs to be re-paid. That means the "Money" supply needs to continuously increase.

But where does all the Debt get paid from? Well from you and me, from start-ups and companies and all those who borrow. Further loans, are actually finances from deposits we make!!!

Anyone can recognize the fundamental problem here!! Someone will not be able to pay back his loans, someone will go bankrupt, it is the nature of the system , some bank will go insolvent

And this is the main reason for the boom-bust, depression and all economic cycles as for "inflation" and a steady price rice.

What happens if loans are not paid back to the bank and depositors start withdrawing money- You have a depression like the sub-prime crisis we faced.

Things become more complicated if you add a Stock Market Bubble to this!!! (That would be another post).

This enormously complicated engine is "tinkered" around by a "handful" of bankers around the world and it is there decisions that affect our lives!!! Make a policy mistake and viola, I could be flipping burgers at Mc Donalds or maybe writing a lot more blog posts, since unemployed people write more!!!!

Many believe that it's the bankers that are the cause of all depressions , wars , coups etc and are the real masters of the world. It is hard to refute such an argument.

The movie goes on the show how Money controls other things like Crime(with the exception of crimes of passion all serious crime has a direct or in-direct relation to money!!!).

All the above scares me and makes me believe that there should be a better way a better system. Can we have a world without money? No, not a communist egalitarian society but a world without money?

That will be the topic of my next entry!!.

Why managers in Indian IT never get laid-off

A few months ago the economic recession really began to be felt by IT companies in India. The meltdown had started months ago, but the only effect till March this year was less work for most people(including myself).

Then they started. Lay-Offs, Virtual Benches, call them what you may. There was fear in the ranks of developers, confusion and hurt!!!

Unlike the West, the Indian attitude to Jobs is still to look at them as part of their life and family. Hence, Indian IT 'HR' constantly tries to paint the "family" picture. This is especially true when a project's fortunes are going south. I am sure many of us have heard statements from managers in tough projects(or when a tough project gets over) that we are a family and we have to pull together only to be replaced by the words- "It is after all a business" during tough times.

During the hard time(I think they are finally getting over) many people asked me as to why only developers got the "can" and why most managers(incompetent as they may seem to the developers) did not. There were clearly a lot of management grade people whose salaries could have saved the jobs of 10-15 lower level developers.

The answer is really fundamentally in the nature of the business. Silicon Valley was started out in garages by "Geeks" , "School Drop-outs"; many of them wanting to make something cool and some succeeding.

Indian IT however, was started mostly by management graduates who took to programming services as a way of making quick money.

Indian IT was fundamentally started to not be "Cool" in a geek sense of the way. It needs to be predictable. They need to make "Average Software" with just enough quality for clients to accept them.

Indian IT companies are fundamentally about "Project Execution", "Client Management" etc. It is about delivering a service on time with just enough quality to keep the client happy. Frameworks and structures in most Indian Software organizations are geared to do exactly that. 6 Sigma, CMMI etc are all geared for predictable software project execution and by their very nature do not want or need innovation.

Hence, the "core" talent or cream of an Indian IT company is it's project management skills.

Does that mean developers and technical people in general are not important?

Developers are important, but only a select few who can guide a project(and they also to a certain extent) . Most companies are over-staffed with developers for two major reasons:

1) To take care of a sudden demand

2) To bill higher, especially in Time and Material Assignments.

Hence, when it comes time for a lay-off due to a business constriction it is the developers who need to go first.

Managers however get "Fired". Again, because they are the core team of a company they are not supposed to "mess up". Companies, rarely if ever "fire" a developer for incompetence during good times. They are usually transferred to another account where they do not need to be that competent.

A lot of Indian IT service companies are now turning to being "Product Based" or "Solution Driven" companies. However, they are stuck in this fundamental dichotomy. Their entire DNA, processes, structures and people are oriented around a project delivery based , service based framework. Now, they need to transition to a new "Innovation" based models where traditional thinking doesn't work.

The challenge is heightened by the fact that these companies are transitioning and hence have to maintain both a service focus and solution innovation.

Will Indian IT rise above services and become truly innovation driven, is still to be seen? My bet is on new start-ups rather than existing companies. I leave you with a funny dilbert:

Mahabharat Aaj Kal A.K.A Software and the rape of Draupadi

I am Time......

It's my role to be a silent spectator to the events of the world. I have often marvelled as to how history repeats itself in ways one cannot imagine. The mahabharata which has been an epic remembered for generations seems, to repeat in smaller ways again and again.

Today, I shall compare today's mahabharat with the one that happened eons ago......

Scene 1

Retro : The Swamyvar of Draupadi

1) The pandavas are in search for a good bride for Yudhistra.

2) They go to the kingdom of Drupad. He places an impossible task. To hit the eye of a fish watching a pond. Arjuna steps up to the task, and achieves it.

3) They take Draupadi home and tells mum Kunti:- "Look mum who we have bought".

Kunti says, whoever you bought share them amongst yourselfs.

So Draupadi marries all the Pandavas.

Modern : The hiring of the software developer

1) The project manager and lead need a developer. They hear about the famous 'D' developer. He is the best developer in the world. He is sought after by many companies.

2) He places impossible terms to join the company. He asks them to give him stock options, bonuses, business class travel. They agree.

3) They take him to HQ to show him to the VP and tell him :- "Look who we ordered to make the technical ESB system".

The Group Software Manager replies:- "There is no budget for anymore developers. Make him do all the modules".

So the developer gets assigned to all the modules.

Scene 2

Retro : The game of chausate(dice)

1) The pandavas are challenged to a game of "chausat".

2) They have to randomly pick a number and throw the dice.

3) If the dice matches the number they say, they win else they loose.

4) Yudhistra says to his brother- " I need 6. 6 sounds like a nice number."

The pandavas loose the game of dice.

Modern : Estimation and Execution

1) The Project Manager is challenged to an RFP by the client.

2) They have to give a number of days estimate and hope they achieve it.

3) If they execute the project in those days, they win else they loose.

5) One PM to another- " I think 6 days should be fine for this. 6 sounds like a good number"

The project does not get executed on time.......the delivery fails

Scene 3

Retro : The aftermath

1) The kauravas claim the entire kingdom of the pandavas.

2) They also claim Draupadi.

3) Draupadi is dragged into the court by her hair. There is an attempt by the Kauravas to strip her.

4) She prays to the god Vishnu to save her.

5) Vishnu saves her by making her Saari longer and longer till the Kauravas give up the attempt to strip her.

6) The "elders" appeal to good sense. Ultimately, the kingdom is given back to the Pandavas.

However, the pandavas have to spend 13 years in a jungle and 1 year "hidden". If they get caught, they have to repeat the punishment ad infinitum.

The pandavas go the jungle and start preparing for war.

Modern : The aftermath

1) The client fines the project company an enormous amount of money.

2) They ridicule the developer and condemn him to spend the next 1 year in office without holiday working 18 hours a day.

3) The developer prays to Vishnu to save him.

4) Alas!!! History does not repeat itself.(After all this is Kalyug!!!). No Krishna to save the developer.

5) There is a negotiation between "Directors". The client relents on the huge fine. The product must be developed in the next 6 months.

The last one month there should be no clarifications or communication with the client. If there is a clarification or communication, the client will change requirements and the product will take another 6 months of free development ad. infinitum.

The team goes back to the development center and starts preparing for the delivery.

Scene 4

Retro : The battle

1) The pandavas finish their punishment and go back to the Kauravas to claim their part of the kingdom.

2) The kauravas refuse to give them back their kingdom citing that they were caught during the hidden period and other technicalities.

3) The battle lines are drawn. The pandavas approach "Bhisma" and all elders for help. "Bhisma" declines to help the Pandavas saying he is duty bound to help the Kauravs and the current king of Hastinapur.

War follows shortly.......a war of trickery, deceit and blood shed.....................

Modern : The delivery

1) The delivery team finishes the delivery and goes to the client for acceptance testing.

2) The client refuses to accept the delivery citing technicalities and quality problems.

3) The UAT lines are drawn. The developers appeal to the VP for help. The VP refuses saying that it is their duty to give good customer service and must accept the changed requirements calmly.

The UAT follow shortly....a hot pressure cooker UAT with daily developer attrition and drama.....

Aftermath

UAT is not war, but sometimes feels like it. The mahabharat happened due to pure gambling by the Pandavas. Software Estimation sometimes feels like the same. If the estimates go wrong the developers well have the same fate as that of Draupadi......we should look at getting our estimates right, our delivery perfect and harmony with our clients............watch the video below and have fun

Will Mickey Mouse and Jerry bring down Indian IT?

I am increasingly frustrated by some of the policies that are followed in top-tier IT companies in India. One thing that really irks me is the inability to bring in small eatables or drinkables(biscuits, fritos, kurkure) or even a can of coke to eat on my desk while programming.
My dream when I was a college kid was to have a bottle of coke(or pepsi) on the side, loud music banging through my ears and line and line of beautiful, world changing code being written.
But most IT companies, do not allow food inside the premises, some going to the extent of banning tea and coffe on the desk. It was not until I spoke to a F&L manager recently, that I understood the reason for this seeming idiosyncracy.

The reason was RATS!!!! Apparently, rat infestations are common. He highlighted an incident in a company he worked with, where RATS invaded the server rooms and tore the main cabling crippling the network.

I was aghast!! Million dollar servers running million dollars worth of software which keeps an army of 4000 people busy working, all bought down by Rats? (Not viruses/not malware/not theft/not hackers but rats). A scene right out of the Tom and Jerry comics.

There is no mention of rats in any ISO code or any other standard which data center people are supposed to follow. The problem of rats is surprisingly hard to solve. A simple google, did not find me one good simple(read cheap) solution to fixing the problem, other than calling in exterminators and putting a lot of rat poison.

Ofcourse, a knee jerk reaction to this is that many IT companies(who claim they are fun places to work in etc etc) , stop you from taking even small eatables into the company premises!!!! I personally believe that this is a huge dent in productivity. For some people programming and eating go hand in hand. For others, it is a time saving opportunity lost.

I am more saddended by the fact that none of the big IT companies I know off seem to be doing anything other than the obvious, "do not allow food" inside tactic. Many of them cite the excuse that Indians by their very nature are "sloppy" and "undisciplined" and cannot be trusted to keep premises clean enough to ward of rodents.

I am even more aghast at the fact that our big IT companies which employ millions of our best brains have not come up with innovative solutions to tackle this issue. I wonder, what such technological innovative solutions can be.

Granted, pest control is not in the domain of the normal "IT Engineer", however innovative solutions are. I can think of a few:

1) Wireless Networks- Go wireless wherever possible people. Makes things a whole lot easier.
2) Secure Cables- There must be something(Steel covering) to put on cables that would prevent mice from chewing on them
3) Poison- Ofcourse poisioning would be the best way to have Pest Control.

I would love to see if there are any more innovative ideas(I admit the ones listed above are a little lame.) to solve this problem.

How to use the "Space"-"Time" continuum to achieve your dreams

Take a blank piece of paper and write down your goals. Do the top 5 look like the following below:

1. I want to be rich
2. I want to travel the world
3. I want to spend more time with family
4. I want to do what I like most (This varies from painting, dancing, cooking to..seeing all episodes of of House MD season after season back to back..)
5. I want to drive a Mercedes-Benz/Ferrari/Buggati Veyron

80-85% people in the world probably have these goals. Most have the same two-three excuses as to why they can't achieve these: "No Time", "Low Paying Job", " In debt due to house loans", "children's loans" etc.

In the 1990's, these excuses would still be valid. However, the advent of the internet and technology has bought forward solutions that can help achieve some if not all of these aims for an average person.

I am really impressed by the work of Tim Ferris as outlined in his book "The four hour work week". He surmises, that technology can be used to give you control of two things: "Time" and "Location" or space. These, two things when combined can be used to generate economic benefit far beyond what is imaginable.

While, Tim talks about how to make money automatically, I shall be the pragmatist and look at simple examples of how time and space can be used to save money.

The internet allows a knowledge worker to work from anywhere in the world. Telecommuting, work from home, outsourcing are sides to a similar phenomenon where talent does not have to be co-located with demand. However, all these have viewed the problem from the side of the "corporate". There is much more potential if the same thing is viewed from a "personal" front.

A small example, can demonstrate how technology can help you achieve all your dreams. Assume, you live like me in a city like "Mumbai". (It could be New York, Tokyo, Delhi or any other city here).

Say, you have to purchase a house.

A spartan 2 BHK flat in an upmarket area of Mumbai will cost you anywhere between 50-80 lakh rupees (1 lakh=100,000). Add to that the general cost of living , children's school fees etc and you will spend the better part of your life repaying loans to the bank and working your ass out. (No wonder, these "retirement plans" are becoming so popular). Add to this the long commutes, pollution, traffic jams and all the problems that come with living in a large city and it is no wonder that the number of suicides in cities have steadily been going up.

However, consider this scenario. What, if out of the 50-Lakh rupee loan you have taken, you buy a "Bunglow" in a Tier-II city like Nashik. It would probably cost you around 20-25 Lakh rupees.

You invest 1 Lakh for internet and network connectivity with your office in Mumbai. Say, you spend another 1-2 lakhs for a weekly commute to Mumbai(or bi-weekly).

Net-Net you end up saving 25 Lakh rupees which if well invested(and if those call-center people are to be believed) could make you very rich in a very short period of time.

Add to that all the advantages of living in a small town, easier education, lower cost of living , cleaner air and atmosphere etc.

By keeping the town near to the city (like Mumbai or Pune) you can be sure that you do not miss out any opportunities in those cities and yet spend a lot more time with your family and doing things you like at lot cheaper rates and keeping your job. !!!

Sounds, like a dream come true isn't it. !!!

At the core of it, it is simple economics. If one views himself as a business entity, providing services to his company and receiving a profit(his pay) in return, things become amply clear.

Every business entity must either increases his sales and revenue or cut costs to increase his profit. Since, increasing sales and revenue is much harder(especially during recessionary times), it follows that one must cut costs.

By, choosing when to work and from where to work a person can cut his personal costs much the save way the Americans cut the costs of IT Projects by out-sourcing to India.

I believe that this is a powerful idea, whose time has already come. I would explore the steps on how to make this possible in later posts, but would for now like to leave you with an image of you living in a beautiful hill-station enjoying the glorious beauty of nature and having the time of your life with people you love. (And when, you have had enough of that you do a little work as a side activity!!!).