India and Global Financial Crisis

A year ago, people were questioning if the subprime crisis that began in the summer of 2007 in the United States would spread to India. It was pointed out that India has not been a major investor in U.S. subprime mortgages, and that the institutions of subprime lending, of piggy-back mortgages, of no-doc mortgages and of securitisation of mortgages are not prominent in India.

Moreover, the Reserve Bank of India did not follow the policy of the Federal Reserve in the U.S. of cutting interest rates to near zero levels at the height of a real estate boom.

In the U.S., the Federal Reserve kept policy so loose that short-term real (that is, inflation-corrected) interest rates were in negative territory for roughly three years, from late 2002 to well into 2005, the very height of the real estate boom in the U.S. In India, the Reserve Bank did no such thing, and Indian real three-month rates generally stayed in the (positive) 1% to 4% range for almost all of the period since 2002.

So, it might well seem that the situation in India is completely different. There have been many optimists who have questioned whether India would have any serious fallout from the economic explosion in the U.S.

Now, a year later, after a September 2008 which showed massive financial collapse in the U.S., we know India has been hit by the crisis. But it has not, so far, been a serious disruption. The seemingly inexorable rise in the Indian stock market has been clipped. The sensex rose about eight-fold from 2003 to the beginning of 2008, but now has had a correction, is down about 40% from its peak. It is only about 10% below what it was in the summer of 2007 though.

The markets for homes in major cities, which were booming in the summer of 2006, are now clearly in distress. The real estate markets in India have slowed and many home prices are falling sharply.

Even though the commonly-identified “causes” of the crisis in the U.S., the subprime mortgage revolution and the extremely loose monetary policy, were not in evidence in India, India is still seeing some of the same outcomes.

Should we be surprised? Actually, the similarity of market behaviour across countries is evidence that something else, deeper than the causes that are usually given for the subprime crisis in the U.S., is at work.

The most fundamental problem is found in the swings of overconfidence that was seen in many countries since the 1990s, overconfidence shared by millions, billions, of people. And this confidence has been very strong until recently.

In the U.S., consumer confidence rose to near-record levels at the time of the peak in the stock market around 2000. This high level of confidence, shared in many other countries as well, was related to the booming markets and booming economy of that time. The booming markets and economy were in turn substantially buoyed by the high confidence, in a feedback loop.

Recently, confidence has been fading. In the U.S., confidence has fallen sharply since 2006, now below the lowest levels reached in the 2001 recession. This decline in confidence is seen in other countries as well.

But economic confidence, the true state of mind that affects asset markets and the economy, is difficult to measure by any survey. The seizing up of credit markets, amidst the reports of a financial spectacle that is going on in the U.S. that is reminiscent of the Great Depression, certainly changes people’s thinking all over the world.

When people expect good performance from their investment assets, they tend to bid up their prices. That is what was happening in many places around the world in the years leading up to the current crisis, until markets collapsed.

The subprime crisis in the U.S. is only a symptom of this fundamental problem. The deterioration in mortgage lending standards in the U.S. since the 1990s is not an exogenous cause of the crisis. It is, in substantial measure, a consequence of the overconfidence that is the real cause. Mortgage lending standards deteriorated because people thought that home prices can only go up, and so they thought there is little risk in writing mortgages with few protections.

Even the loose Fed monetary policy in the U.S. is, in a way, derived from the overconfidence. The Fed was willing to have such loose monetary policy because, under Alan Greenspan, it was so unaware of the bubble in home prices, thought it was just another sign of spectacular economic growth, and so felt no concern about it.

We have to consider the epoch the world economy is in. It is a time of the unleashing of free market economics around the world as it has never been before, and it is creating spectacular economic growth, particularly in emerging countries like India and China.

That is a good thing. But people all over the world have noticed this, and it has led to some sometimes exaggerated expectations for investments.

Until the peak in the stock market in countries over much of the world in the year 2000, there was a growing belief in stocks as the “best investment” that outperforms all other investments. India saw a peak in their stock market at this time too, which, though now eclipsed by even more dramatic Indian stock market performance, was something of a sensation. The lacklustre performance since 2000 of the stock market in many countries (and in India this year) has tarnished this belief.

A strange idea that has grown dramatically after 2000 and is a sign of our recent times in much of the world today has been that investing in homes should yield spectacular capital gains on into the indefinite future. The idea that home prices can only go up became firmly entrenched in the early 2000s, and has influenced the great masses of small investors all over the world.

I have been expressing doubts about the inevitability of home price increases to people in various countries for some time. People in India will say, “Then explain why my neighbour got Rs 30 lakh last week for a house she bought for Rs 2 lakh 30 years back!” They did not seem to realise that consumer prices in India have risen ten-fold in the last 30 years, so most of this is just inflation, and much of the remainder might be explained by a bubble in home prices.

Now, with home prices falling in many places, the idea that homes are always a great investment is starting to be doubted. The most important single factor that has driven so many economies around the world over the last decade or more has been the changes in confidence in the economy and investments, including stocks, real estate, as well as energy and agricultural.

India is part of world culture and is not invulnerable to changing patterns of thinking about investment. Much of what happens in speculative markets in India is just the same as in other countries. But India must rank as among the most vulnerable in the world to speculative turbulence, since she appears to be undergoing such a dramatic economic revolution, a revolution that, along with China’s, is the talk of the world, and that allows imaginations to run wild and confuses traditional and sober thinking.

So, India appears not at all invulnerable to the current crisis. She urgently needs to take many of the same actions that are called for in other countries. Some serious work needs to be done to improve the quality of the financial markets, both expanding regulation and consumer protection, but also expanding the scope integrity of the markets and their retail products.

Work needs to be done now to democratise finance, to make enlightened risk management available to everyone, by subsidising financial advice and education.

The author is the Arthur M Okun professor of economics and professor of finance at Yale University.

Tony Blair’s Speech in Yale

So: after over 100 years of Class Days, finally you get a British speaker.

What took you so long? Did that little disagreement of 1776 really rankle so much? And why now? Is it because British election campaigns only last four weeks?

For whatever reason, it is an honour to be here and to say to the Yale College Class of 2008: you did it; you came through; from all of us to you: congratulations.

The invitation to a former British Prime Minister to address a college which boasts five former Presidents, many former Vice Presidents and Senators too numerous to mention, is either to give me an exaggerated sense of my own importance or you a reduced sense of yours.

It was Churchill or Oscar Wilde – and there is a difference – who called us two nations divided by a common language and so we are.

Here I am at Yale and set to come back for the fall semester. My old Oxford tutor was, I’m afraid, horrified to hear I had been taken on by Yale. His worries were all for Yale I may say. He said: “I only hope for their sake you are going there to learn rather than teach.”

Now I know you Yale guys are smart. So what can I tell you that you don’t already think you know?

I can tell you something of the world as I see it. Three days ago, in my role as Middle East envoy, I stood in the heart of Bethlehem. On one side of me, lay the concrete barrier which now separates Israel and Palestine. On the other, the historic birthplace of Jesus and the land of Palestine beyond.

A few days before that, I was in Jericho. If you look up from the town centre, to the left is the Mount of Temptation, where Jesus stayed 40 days and nights. To the right, you can see Mount Nebo where Moses looked down on the Promised Land. And right in front of you is the Valley of Jordan.
My guide, a Muslim, turned to me and said: “Moses, Jesus, Mohammed – why in God’s name did they all have to come here?”

But in God’s name they came and for centuries their followers have waged war in the name of prophets whose life’s work was in pursuit of peace.

Today, though the land that encompasses Israel and Palestine is small, the conflict symbolises the wider prospects of the entire vast region of the Middle East and beyond. There, the forces of modernisation and moderation battle with those of reaction and extremism. The shadow of Iran looms large.

What is at stake is immense. Will those who believe in peaceful co-existence triumph, matching the growing economic power and wealth with a politics and culture at ease with the 21st Century? Or will the victors be those that seek to use that economic wealth to create a politics and culture more relevant to the feudal Middle Ages?

Thousands of miles from here, this struggle is being played out in the suburbs of Baghdad and Beirut and the Gaza strip. But the impact of its outcome on our security and way of life will register in the core of our well-being.

In fact, if I had to sum up my view of the world, I would say to you: turn your thoughts to the East. Not just to the Middle East. But to the Far East.

For the first time in many centuries, power is moving East. China and India each have populations roughly double those of America and Europe combined.

In the next two decades, these two countries together will undergo industrialisation four times the size of the USA’s and at five times the speed.

We must be mindful that as these ancient civilisations become somehow younger and more vibrant, our young civilisation does not grow old. Most of all we should know that in this new world, we must clear a path to partnership, not stand off against each other, competing for power.

The world in which you, in time to come, will take the reins, cannot afford a return to 20th century struggles for hegemony.

The characteristic of this modern world is the pace, scope and scale of change. Globalisation is driving it and people are driving globalisation.

The consequence is that the world opens up; its boundaries diminish; we are pushed closer together.

The conclusion is that we make it work together or not at all.

The issues you must wrestle with – the threat of climate change, food scarcity, and population growth, worldwide terror based on religion, the interdependence of the world economy – my student generation would barely recognise. But the difference today is they are all essentially global in nature.

You understand this. Yale has become a melting pot of culture, language and civilisation. You are the global generation. So be global citizens.

Each new generation finds the world they enter. But they fashion the world they leave. So: what do you inherit and what do you pass on?

The history of humankind is marked by great events but written by great people.

People like you.

Given Yale’s record of achievement, perhaps by you.

So to you as individuals, what wisdom, if any, have I learnt?

First, in fact, keep learning. Always be alive to the possibilities of the next experience, of thinking, doing and being.

When Buddha was asked, near the end of his life, to describe his secret, he answered bluntly: “I’m awake”.

So be awake.

Understand conventional wisdom, but be prepared to change it.

Feel as well as analyse; use your instinct alongside your reason. Calculate too much and you will miscalculate.

Be prepared to fail as well as to succeed, and realise it is failure not success that defines character.

I spent years trying to be a politician failing at every attempt and nearly gave up. I know you’re thinking: I should have.

Sir Paul McCartney reminded me that the first record company the Beatles approached rejected them as a band no-one would want to listen to.

Be good to people on your way up because you never know if you will meet them again on your way down.

Judge someone by how they treat those below them not those above them.

Be a firm friend not a fair-weather friend. It is your friendships, including those friends you made here at Yale, at this time, that sustain and enrich the human spirit.

A good test of a person is who turns up at their funeral and with what sincerity. Try not to sit the test too early, of course.

Recently, I attended a funeral and the speaker said he would like to begin by reading a list of all those whose funerals he would rather have been attending, but the list was too long. It was a sweet compliment to our friend.

Alternatively there was Spike Milligan, the quintessential English comic who when he was asked what he would like as the epitaph on his tombstone, replied: “They should write: I told you I was ill.”

There was a colleague of mine in the British Parliament who once asked another: “Why do people take such an instant dislike to me?” and got the reply: “Because it saves time.”

So, when others think of you, let them think not with their lips but their hearts of a good friend and a gracious acquaintance.

Above all, however, have a purpose in life. Life is not about living but about striving. When you get up, get up motivated. Live with a perpetual sense of urgency. And make at least part of that purpose about something bigger than you.

There are great careers. There are also great causes.

At least let some of them into your lives. Giving lifts the heart in a way that getting never can. Maybe it really was Oscar Wilde who said: “No one ever died, saying if only I had one more day at the office.”

One small but shocking sentence: each year three million children die in Africa from preventable disease or conflict.

The key word? Preventable.

When all is said and done, there is usually more said than done.

Be a doer not a commentator. Seek responsibility rather than shirk it. People often ask me about leadership, I say: leadership is about wanting the responsibility to be on your shoulders, not ignoring its weight but knowing someone has to carry it and, reaching out for that person to be you. Leaders are heat-seekers not heat-deflectors.

And luck?

You have all the luck you need. You are here, at Yale, and what – apart from the hats – could be better?

You have something else: your parents.

When you are your age, you can never imagine being our age. But believe me, when you’re our age we remember clearly being your age. That’s why I am so careful about young men and my daughter, “Don’t tell me what you’re thinking. I know what you’re thinking.”

But as a parent let me tell you something about parents. Despite all rational impulses, despite all evidence to the contrary, despite what we think you do to us and what you think we do to you – and yes, it is often hell on both sides – the plain, unvarnished truth is we love you. Simply, profoundly, utterly.

I remember, back in the mists of time, my Dad greeting me off the train at Durham railway station. I was a student at Oxford. Oxford and Cambridge are for Britain kind of like Yale and Harvard, only more so. It was a big deal. I had been away for my first year and was coming home.

I stepped off the train. My hair was roughly the length of Rumpelstiltskin’s and unwashed. I had no shoes and no shirt. My jeans were torn – and this was in the days before this became a fashion item. Worst of all, we had just moved house. Mum had thrown out the sitting room drapes. I had retrieved them and made a sleeveless long coat with them.

My Dad greeted me. There were all his friends at the station. Beside me, their kids looked paragons of respectability.

He saw the drapes, and visibly winced. They did kind of stand out. I took pity on him.

“Dad”, I said. “There is good news. I don’t do drugs.”

He looked me in the eye and said: “Son, the bad news is if you’re looking like this and you’re not doing drugs we’ve got a real problem.”

Your parents look at you today with love. They know how hard it is to make the grade and they respect you for making it.

And tomorrow as I know, as a parent of one of this class, as you receive your graduation, their hearts will beat with the natural rhythm of pride. Pride in what you have achieved. Pride in who you are.

They will be nervous for you, as you stand on the threshold of a new adventure for they know the many obstacles that lie ahead.

But they will be confident that you can surmount them, for they know also the strength of character and of spirit that has taken you thus far.

To my fellow parents: I say, let us rejoice and be glad together.

To the Yale College Class of 2008, I say: well done; and may blessings and good fortune be yours in the years to come.

Ends

Tony Blair speech to Class Day 2008, Yale University, New Haven, 25 May 2008

Values First

At 53, N.R. Narayana Murthy, chairman and CEO, Infosys Technologies (1998-99 sales: Rs 513 crore), heads India’s most successful Silicon Valley style start-up. Established in 1981 by seven professionals who pooled in their savings of Rs 10,000 (borrowed from their wives), Infosys has set all kinds of records. It was the first company to institute a company wide, performance based Employee Stock Option Plan that cut right across the hierarchy. This year, it was the first India-registered company to list on an American stock exchange (Nasdaq). On measures of transparency and corporate governance, Infosys is the epitome of the upright corporate citizen.

To Murthy goes the credit for first having the vision to see the opportunity in software, pick the right team and more significantly keep it together. The Infosys success is striking since all of its founders come from middle class backgrounds, had no backing of any business house but simply leveraged their brainpower and sweat equity. This is a model for the new generation of Indian enterprises in the coming millennium.

The fifth born of eight children, Murthy’s father was a modest school teacher in Mysore who could not afford to send his son to iit. Today, his 7.7% stake in Infosys makes Murthy a very wealthy man, with an estimated networth of Rs 2,500 crore. Yet he continues to cling to his roots, staying in a house in the middle class area of Jayanagar in Bangalore with his engineer wife Sudha and their two children, Akshata and Rohan. He was interviewed by Naazneen Karmali in Bangalore.

 

What made you initially choose engineering as a career?

My uncle was a civil servant and my father was very keen that I take that up as a career but somehow it didn’t appeal to me. Those were the days when engineering was considered the in thing along with medicine. People didn’t think that being an economist or a social scientist could be a productive career.

I had got admission to the iit by passing the entrance exam with a fairly high rank and a scholarship. But the scholarship was to be disbursed at the end of the year. I remember talking to my father who said that there was no way he could afford to pay since he was earning Rs 250 per month. He said: If you’re smart you can go to any college and be able to do something worthwhile. So I joined the local engineering college.

Did you have any role models who inspired you in your career?

Those days our role models were our teachers, both in school and university. They taught us to be inquisitive and articulate. You have to imagine a lower middle class family in a district headquarters in the ’60s. My father used to tell us about the importance of putting public good before private good; mother would talk about sacrifice and truth. Beyond the basic values of life they didn’t discuss too much about our careers.

My dream was to become a junior engineer in a hydroelectric power plant, Nehru’s temples of modern India. What appealed to me was that they were non-polluting and set in pristine surroundings. Also, being an electrical engineer, there was this macho thing about building a big generator. But as a top-ranking student, people advised me to do my masters. It was not easy for people like us from a certain section of society that was considered already advantaged to get a job in Karnataka because of the reservation system and so I postponed the career decision for two years by doing my masters.

So you finally made it to IIT; what was that experience like?

IIT Kanpur was in its halcyon days. We had so many young professors who had done their Ph.Ds in the US and had come back to India. They were all in their 20s and 30s and full of energy and optimism. Also, under the Kanpur Indo-American programme, iit had links with eight American universities like MIT, Berkeley, Purdue. What that meant was that when MIT got an IBM computer they sent one to Kanpur. We were introduced to computers – that wonder machine – and I was hooked.

What prompted you to opt for the unconventional job offer from IIM?

The phase I enjoyed the most was my time at iim Ahmedabad where I took up a job as chief systems programmer. In those days there were few computer science graduates so we got five job offers each. I had offers from hmt, ecil, Telco, Air India. The salary in those places was much higher than at the iim. But Prof. Krishnayya of iim who came to iit Kanpur talked to me for an hour about this great, modern mini- computer that he was going to install and that iim would be the third business school in the world to install a time-sharing system after Harvard and Stanford. He also said that the atmosphere was collegial, we’d work 20 hours a day and learn a lot. Taking this job at a salary of Rs 800 a month was the best decision of my life.

I learnt so many things from Krishnayya. He is probably the person who influenced me the most. He taught us how important it is to aspire. We used to work 20 hours a day; go home at 3 a.m. sometimes and be back at 7 a.m. There was so much opportunity to learn. We designed and implemented a basic interpreter for ecil. I learnt what it is to be an engineer. It isn’t theory but application of the theory to solve problems and make a difference to society.

You worked overseas early in your career. What did you learn from your stint abroad?

My years in Paris were the most influential years of my life. I observed how in a western country even the socialists understood that wealth has to be first created before it can be distributed. That there could only be a few leaders to create wealth. And that it’s the job of the government to create an environment where it’s possible for people to create wealth. I realised that all this talk of socialism as practised in India was not meaningful. Our country treated communism as an ism that was completely disassociated from the reality of the context. You cannot distribute poverty.

My father always told us that India had a lot to learn from the West. Also, he was a great fan of classical music. On Sundays, air used to play music for an hour. One day I asked him: why should I listen to this alien music? He said: What appeals to me is that in a symphony there are over 100 people, each of whom is a maestro, but they come together as a team to play according to a script under this conductor and produce something divine. They prove that one plus one can be more than two. It’s a great example of teamwork.

What prompted your change of heart from being a staunch leftist?

After my Paris stay, I donated my earnings and with $450 in my pocket decided to return home overland. I came to Nis, a border town between the then Yugoslavia and Bulgaria to take the Sofia Express. I struck up conversation with a girl in the compartment. After about 45 minutes the train stopped, the police took the girl away, ransacked my backpack, and put me in a room that had no mattress and a window 10 ft high. They kept me there for 60 hours after which they freed me saying that since I was from a friendly country they were letting me go. I felt that if this system treats friends this way then I did not want anything to do with it. This experience really shook me.

So the socialist in you became a committed capitalist?

I am a 100% free marketeer but I call myself a compassionate capitalist. While I’m very conservative in economic matters I’m very liberal about social matters. But I have no illusions about socialism. In a country like India, when we have to make capitalism an attractive alternative to people, it is extremely important for us to show tremendous compassion to the less fortunate. That doesn’t mean that you should give jobs to people who don’t deserve them or that you should make less profits but wherever you can show compassion you should.

What was the initial business plan of Infosys based on?

We were very clear that we wanted to be in India. There were many opportunities to settle outside but we wanted to create an institution in India. We knew there was hardly a market here, so we had to look at the export market from day one. At that time we had no idea how far it would go but our satisfaction comes mainly from working with bright, smart and hard-working young men and women.

Our first contract was from Databasics in New York. We had worked with them at Patni Computer Systems but they wanted to set up on their own software group in India. We convinced them that we could do as good a job. My colleagues left for the US to work on-site on the project. I stayed back to set up the infrastructure. We decided to import a computer so that we could add value from India.

How easy or difficult was it in those days to get a business like yours off the ground?

In those days it would take anywhere between 15 to 24 months to get a computer. We started in 1981 but our first computer was installed only in February 1984. Getting a loan was very difficult. We had worked out a time-sharing deal with mico on the basis of which anz did a project report. But anz refused to give us the loan. Several other banks also turned us down. It was just by chance on a flight that I happened to be sitting next to K.S.N. Murthy of the Karnataka State Industrial Investment and Development Corporation, and we got our break. They redid the entire project report over 14 hours a day for a week and got it sanctioned in 15 days.

Right from day one our idea was to add value from India. To do that we needed certain factor conditions – computers, telephone lines. It took us a year to get a phone in Bangalaore. There was a rule then that higher priority was to be given to retired government servants than businesses. We had a contract for $3,50,000; in addition we would get an ibm compatible machine on loan from our customer. All that they insisted was that we have a telephone so that they could contact us. The customer said: Look I understand that you are a group of competent people, but if you want to do it from India you must convince us that you can establish a line of communication. So, much against our desire, we had to ship the team out.

One has to go through all these experiences because it makes you understand your own frailties and also helps you develop respect for God. I’ve been extraordinarily lucky in life. I’ve received much more from society than I’ve given. I have many friends who are much smarter, much more accomplished, but somehow life has dealt me so many good cards that I can’t ascribe it to anything other than God’s grace.

Did you ever at any point feel like giving up?

There came a time in 1990 when we were floundering. We had offers to buy us out which my colleagues thought we should consider since we weren’t making too much headway. We had a 4-5 hour discussion and I could feel the sense of despondency. So I pulled a fast one. I said guys don’t worry, I’ll buy you out. I know it’s going to be tough in this country but I have no doubt that we’ll see light. In minutes, they all said that we’re with you. From now onwards we will never discuss the issue of closing down, getting tired or giving up. This marathon will be restarted.

Leadership is about making what seems impossible, possible; about changing the perception of what reality is. The reality in India is dirty roads, pollution, bad traffic, etc. Reality is what we make it; it is for us to change. If you give confidence to people they can achieve tremendous things. We have run this company as professionally as any other corporation in the world in terms of the principles of corporate governance, in not using corporate resources for personal conveniences, with respect for the professional.

What was the turning point for Infosys?

Chance favours the prepared mind. Just as we got determined to run the marathon with much greater gusto, liberalisation happened. If there is one company that symbolises all the good that came out of liberalisation, it is Infosys. It did four things for us: It enhanced the velocity of decision-making in government. It used to take 8 to 12 months to get a computer and the decision depended on the babu in Delhi. After 1991, it wasn’t necessary to go to Delhi for approvals. We could walk across to the Software Technology Park here and get licenses in half a day for $1 million.

Second, equity became a viable financing option. Abolishing the Controller of Capital Issues had a multiplier effect on Indian enterprises. Prior to 1991, an officer was charged with the authority to decide at what premium a company went public and generally he always looked at the past. But capital markets are about the future. With low premiums, new entrepreneurs were reluctant to approach the capital markets. Once the company and lead manager were allowed to decide the premium, that set us free.

The government also liberalised the rbi rules for current account transactions. This meant that it was easy to travel abroad, establish offices and get consultants. Prior to 1991, we had to make an application to rbi which could take 5 to 10 days. Today I can travel in the next 6 hours. So it’s a big change.

The most important thing is that government reversed the policy of foreign investment and allowed 100% ownership for mncs. This is the main reason why Infosys came up. At the time many hi-tech companies came in and that created competition, not in the marketplace but for our human resources. People told me that Murthy your game is up, all your people will leave.

We could react in three ways: that this is our karma. We’ll grow but not much – the Hindu philosophy. The second alternative was to lobby the government not to permit 100% ownership by mncs. As president of Nasscom, I could have kept all these guys out. But that was against my fundamental philosophy. The third was to find out why our youngsters would want to leave us and see if we could create those conditions in Infosys.

A successful corporation is one that introspects about internal transformation first before blaming the context, competition or external circumstances. Everyone bought into this philosophy and how we could bring about a fundamental transformation. We increased our salaries, we introduced a stock option plan so that our people would have much more money than any other Indian mnc. We also decided to make it a fun place to work because our assets walk out of the door every evening mentally and physically tired. We must make sure that they come back with a zest to work.

I am a firm believer that this country has a lot to learn from the West. We have to be open-minded, learn all the good things from them, and become stronger. For me a democracy is one where people put public good before private good; where responsibilities come before the rights.

What has kept the Infosys team together through all these years?

How do we stay together? We have unwritten rules. Everybody knows that if we want to work as a team we have to be transaction based. We start every transaction on a zero base. It is perfectly feasible for us to disagree on a transaction but we start the next transaction without any bias. Only an argument that has merit wins; it has nothing to do with hierarchy. Disagreeing is in the nature of things. When you bring a set of people who have respect for each others’ competence in certain areas and you’re transaction-oriented then it can work as it has in our case.

Our value system was like the British Constitution – it was all unwritten but extremely well practiced. If I were to have another opportunity to found another company, I would never ask for anyone else – these are truly remarkable people. Our value system is the true strength of Infosys. Besides, we have complementary skills. For example, I have an eye for detail and am comfortable with balance sheets and numbers. Then I can also get into the big picture. Nandan has a great ability to communicate and get himself connected to networks; his thinking is very strategic. Raghavan is a good people manager. Gopal is the best among us in technology. Shibulal and Dinesh are great on projects – so there’s a complementarity of skills

What do you think was your best business decision?

Well, I think the best business decision was to introspect. We will press on the pedal. We will compete with the best of the multinationals in terms of retaining people, in terms of creating a brand equity. I think if you ask me what distinguishes Infosys from many other companies, it is the following: We have a very strong value system. In fact, when I address new hires the main thing I talk to them about is the value system. I tell them that even in the most fierce competitive situation they must never talk ill of customers. For heaven’s sake don’t short change anybody. Never ever violate any law of the land. It is better to lose a billion dollars than a good night’s sleep. It is a true meritocracy. Raghavan’s two children are engineers but they did not come here to ask for a job. They worked elsewhere before they went to the US to do their mba. It is our responsibility to maintain the dignity of professionals here.

The second thing that’s unique about Infosys is that we have accepted that speed and imagination are the only two context-invariant and time-invariant parameters for success. We don’t think that we have any extraordinary legacy/strength that will carry us through the years. If we continue to innovate and to adapt then we will survive or else we’ll disappear like dew on a summer morning. So there’s a sense of paranoia and a certain fear that tomorrow we may not get food on the table if we don’t satisfy our customers. We don’t think anything is given to us. We’re as good as our last quarterly result. If we don’t do well in the next quarter, we’ll be wiped out.

So far Infosys has grown organically. Are you looking at acquisitions as a future growth strategy?

Indeed. Adding 50% to $500 million is so much more difficult than adding 50% to $100 million. We are looking at acquisitions though we haven’t identified any company yet. We want to look at a group/company that will add to the top line immediately but will also add to the bottomline in the medium term. Ideally it should be a small company, so that the cross-cultural issues can be handled more easily. Third, it must have an intellectual property right, either in the form of a methodology or a tool or processes which can be scaled up across Infosys for improving productivity in an emerging area like e-commerce, crm etc. Finally, it could also be an aged technology product which has fallen on bad days but one that has a captive customer base. We can take that and enhance it technologically because we have the strength here to do that. And because there’s a captive customer base it’s much easier to sell. In any product, selling to the first 20 customers is the hardest.

Many feel that software companies are riding the boom in demand for y2k remedial work. What will be Infosys’ life after y2k?

We will continue be a software services company because as technology changes rapidly, companies will want to leverage the internet for gaining competitive advantage. There will be tremendous opportunities for companies like Infosys to re-engineer existing systems, enhance functionality. But the fundamental strength will have to be learnability of experience. That is, how quickly you understand a new paradigm, a new technology and apply it to bring business benefit to customers. As long as learnability is alive and kicking at Infosys, we will have no problems about our future.

What are the big challenges facing you?

We have to put in systems, processes and tools to leverage technology to enhance the quality and productivity of our people. If today we take 100 hours to do something, then next year we should take 95 hours. Second, we must learn to manage growth. Inspite of recruiting larger numbers we should operate as a small, close knit, nimble company. That’s the task of this management.

My vision is to make Infosys a globally respected software corporation, delivering best of breed solutions employing best in class professionals. That’s different from an mnc which generally has subsidiaries in different countries, manufactures and sells there. As a corollary to that, I want it to be a place where people of different nationalities, religions and races will come together and compete in an environment of harmony and meritocracy. We believe that the local people are the best people in a given environment.

What are the challenges that the software sector faces in the new millennium?

One, we have to create corporate brand equity and product/services brand equity outside India. Indian industry’s record of doing this has been pathetic. We have to become multicultural as local people are most effective in a local environment. And we have to learn to operate in a multicultural environment. We have few examples of Indian companies successfully doing so.

The most difficult challenge is recruiting, enabling, empowering and retaining the best and brightest talent. Enhancing per capita revenue productivity and moving up the value chain is the next big challenge because our costs are going up in India. Unless we do this, our success won’t survive in the long run.

Will Infosys move up the value chain to become a pro-duct company in the future?

Our profitability and margins are the best in the services industry. Compare us with anybody on Nasdaq. The net income margin of Infosys is as good as any product company with the exception of Microsoft. It’s not necessary to transform ourselves into a product company. In fact, in the Net economy it is services companies like Amazon.com, Priceline, eBay that have been growing. I’m not worried about traditional thinking that one must have a product. Infosys has enhanced its per capita productivity at least 10% in last five years. We are positioned to continue to be profitable.

Does government have a role to play in the it sector? One view is that it has grown because the government has been hands-off and now that an it ministry has been set up it could pose a roadblock. What is your view?

The government has a role in creating a context for Indian entrepreneurs to succeed. They should concentrate on a policy regime and not a case-by-case syndrome. If decisions of corporations are not taken in boardrooms but in some government office then we won’t go anywhere. Our company has been at the leading edge in pushing the policy regime. When we got listed on Nasdaq we required a policy regime. We need the cooperation of government as we move forward.

What opportunity does the growing power of the Internet pose for your company?

Internet is a great phenomenon particularly for a country like India because it has meant the death of distance. It has brought the anywhere, anytime paradigm. In a large resource scarce country like India, it is going to play a crucial role in ensuring that both business to business and business to customer benefits accrue much faster to both industry and consumers.

Thanks to the emergence of companies like Amazon, the traditional companies have realised that they have to shape up or ship out. So there’s a tremendous emphasis on leveraging the power of the internet. We understand online transaction processing very well – we have done it for 18 years. E-commerce requires the ability to mount a robust and secure an online transaction processing engine, a certain application layer. The only difference is that you have to create a user-friendly web front end which skill we’ve developed in the last 2-3 years. We have a big advantage of over new e-commerce companies because the design and implementation of a high performance engine is something we’ve been doing for years. US corporations are in a hurry to get on to the e-comerce bandwagon and this is a clear opportunity for us.

The stockmarket seems to have discovered the worth of it and infotech stocks are seeing ever rising valuations. How do you react to this?

I tell my colleagues not to look at the stockmarket. What we should worry about day after day is to provide quality products on time, within budget to our customers. We must show transparency to investors, not violate any law of the land, and be in harmony with society. That’s our main charter and we should stick to it. The stockmarket may or may not reward us even if we do that. This is ephemeral. We should not be too ecstatic about it today or get despondent if it falls tomorrow.

People say that the intellectual elite of India is now in Silicon Valley. What is your view?

Twenty years ago if someone had asked me whether Indians should go abroad, I would have said No. Today I have a completely different view. The need of the country today is to create a good brand equity of the country. That will be created by high quality Indians in some numbers establishing themselves abroad. I don’t feel bad about it. If some people go we should cheer them, applaud them, make them feel welcome, and give them emotional support. Because they are doing a great job of enhancing the equity of India.

It’s very easy to sit in India and say Mera Bharat Mahaan. Economic power is the only thing that counts in today’s word. We have to create an image in the minds of foreigners that Indians can do it. In fact, that has already happened in the Valley. If an Indian is involved in a venture, then the venture capitalist will look positively at it. We have to convert this country so that we not only retain people here but also attract some of them back.

 

What advice would you give to the next generation of entrepreneurs?

Early to bed and early to rise and work like hell. Those people who have entrepreneurial strengths need to get a marketable idea and understand the window of opportunity for it. They have to bring together a team that has mutually exclusive, but collectively exhaustive skills and work out a value system. Entrepreneurship is about running a marathon, not a 100 metre dash.

What does money mean to you?

Beyond a certain level of comfort I think one’s wealth should be seen as an opportunity to make a difference to society. My colleagues think so too. The power of money is the power to give. Obviously it will have to be done in a gradual manner over the years, but there’s no doubt that a majority of what we have will be given to public causes.

What drives you then if not money?

There’s a saying in America that the reward for winning a pinball game is to get a chance to play the next one. In most situations, the pleasure comes from the journey, not the destination.

A Tamil Greeting to all Tamilians [Language:Tamil]

வணக்கம்

என் வலைபூ [ப்லோக்] தளத்தை தேர்ந்தெடுத்தமைக்கு நன்றி…

உங்களுடைய இணையவலைப்பயணம் சிறக்க என் வாழ்த்துக்கள்…

உலகெங்கும் உள்ள தமிழர்கள் இணையதளத்தை வளைய வரும்போது நீங்கள் என் வலைபூ பக்கத்தை சிறிது நேரம் ஒதுக்கி பார்த்தமைக்காக என் மனமார்ந்த நன்றியையும் வாழ்த்துக்களையும் இந்தத் தமிழன் உங்களக்கு சமர்ப்பணம் செய்கிறான்…

உங்களுடைய மேலான கருத்துக்களை என்னுடன் பரிமாற்ற ஒரு இணைப்பாய் இந்த வலைப்பூ இருக்கட்டும்…

JF Kennedy’s Speech on Martin Luther King’s Death

Ladies and Gentlemen,

I’m only going to talk to you just for a minute or so this evening, because I have some — some very sad news for all of you — Could you lower those signs, please? — I have some very sad news for all of you, and, I think, sad news for all of our fellow citizens, and people who love peace all over the world; and that is that Martin Luther King was shot and was killed tonight in Memphis, Tennessee.

Martin Luther King dedicated his life to love and to justice between fellow human beings. He died in the cause of that effort. In this difficult day, in this difficult time for the United States, it’s perhaps well to ask what kind of a nation we are and what direction we want to move in. For those of you who are black — considering the evidence evidently is that there were white people who were responsible — you can be filled with bitterness, and with hatred, and a desire for revenge.

We can move in that direction as a country, in greater polarization — black people amongst blacks, and white amongst whites, filled with hatred toward one another. Or we can make an effort, as Martin Luther King did, to understand, and to comprehend, and replace that violence, that stain of bloodshed that has spread across our land, with an effort to understand, compassion, and love.

For those of you who are black and are tempted to fill with — be filled with hatred and mistrust of the injustice of such an act, against all white people, I would only say that I can also feel in my own heart the same kind of feeling. I had a member of my family killed, but he was killed by a white man.

But we have to make an effort in the United States. We have to make an effort to understand, to get beyond, or go beyond these rather difficult times.

My favorite poem, my – my favorite poet was Aeschylus. And he once wrote:

Even in our sleep, pain which cannot forget
falls drop by drop upon the heart,
until, in our own despair,
against our will,
comes wisdom
through the awful grace of God.

What we need in the United States is not division; what we need in the United States is not hatred; what we need in the United States is not violence and lawlessness, but is love, and wisdom, and compassion toward one another, and a feeling of justice toward those who still suffer within our country, whether they be white or whether they be black.

So I ask you tonight to return home, to say a prayer for the family of Martin Luther King — yeah, it’s true — but more importantly to say a prayer for our own country, which all of us love — a prayer for understanding and that compassion of which I spoke.

We can do well in this country. We will have difficult times. We’ve had difficult times in the past, but we — and we will have difficult times in the future. It is not the end of violence; it is not the end of lawlessness; and it’s not the end of disorder.

But the vast majority of white people and the vast majority of black people in this country want to live together, want to improve the quality of our life, and want justice for all human beings that abide in our land.

And let’s dedicate ourselves to what the Greeks wrote so many years ago: to tame the savageness of man and make gentle the life of this world. Let us dedicate ourselves to that, and say a prayer for our country and for our people.

Thank you very much.

Ronald Reagan’s Speech on Challenger Disaster

Ladies and Gentlemen, I’d planned to speak to you tonight to report on the state of the Union, but the events of earlier today have led me to change those plans. Today is a day for mourning and remembering. Nancy and I are pained to the core by the tragedy of the shuttle Challenger. We know we share this pain with all of the people of our country. This is truly a national loss.

Nineteen years ago, almost to the day, we lost three astronauts in a terrible accident on the ground. But, we’ve never lost an astronaut in flight; we’ve never had a tragedy like this. And perhaps we’ve forgotten the courage it took for the crew of the shuttle; but they, the Challenger Seven, were aware of the dangers, but overcame them and did their jobs brilliantly. We mourn seven heroes: Michael Smith, Dick Scobee, Judith Resnik, Ronald McNair, Ellison Onizuka, Gregory Jarvis, and Christa McAuliffe. We mourn their loss as a nation together.

For the families of the seven, we cannot bear, as you do, the full impact of this tragedy. But we feel the loss, and we’re thinking about you so very much. Your loved ones were daring and brave, and they had that special grace, that special spirit that says, ‘Give me a challenge and I’ll meet it with joy.’ They had a hunger to explore the universe and discover its truths. They wished to serve, and they did. They served all of us.

We’ve grown used to wonders in this century. It’s hard to dazzle us. But for twenty-five years the United States space program has been doing just that. We’ve grown used to the idea of space, and perhaps we forget that we’ve only just begun. We’re still pioneers. They, the members of the Challenger crew, were pioneers.

And I want to say something to the schoolchildren of America who were watching the live coverage of the shuttle’s takeoff. I know it is hard to understand, but sometimes painful things like this happen. It’s all part of the process of exploration and discovery. It’s all part of taking a chance and expanding man’s horizons. The future doesn’t belong to the fainthearted; it belongs to the brave. The Challenger crew was pulling us into the future, and we’ll continue to follow them.

I’ve always had great faith in and respect for our space program, and what happened today does nothing to diminish it. We don’t hide our space program. We don’t keep secrets and cover things up. We do it all up front and in public. That’s the way freedom is, and we wouldn’t change it for a minute. We’ll continue our quest in space. There will be more shuttle flights and more shuttle crews and, yes, more volunteers, more civilians, more teachers in space. Nothing ends here; our hopes and our journeys continue. I want to add that I wish I could talk to every man and woman who works for NASA or who worked on this mission and tell them: “Your dedication and professionalism have moved and impressed us for decades. And we know of your anguish. We share it.”

There’s a coincidence today. On this day 390 years ago, the great explorer Sir Francis Drake died aboard ship off the coast of Panama. In his lifetime the great frontiers were the oceans, and a historian later said, ‘He lived by the sea, died on it, and was buried in it.’ Well, today we can say of the Challenger crew: Their dedication was, like Drake’s, complete.

The crew of the space shuttle Challenger honoured us by the manner in which they lived their lives. We will never forget them, nor the last time we saw them, this morning, as they prepared for the journey and waved goodbye and ’slipped the surly bonds of earth’ to ‘touch the face of God.’

Thank you.