Thursday, June 14, 2007

It is tough to be fair and square in business

When I quit my job to start a business, people who knew me warned me that I wouldn't be able to do a business as it would be 'impossible to do business honestly'. Additionally I was warned that, even if I stick to my policy of doing honest business legally there would be more than enough people in the government establishment who would ensure that I wouldn't be able to get things done without bribing. Another prevalent conception among the people who advised me was that to do business one will at some point or other have to bend rules, side-step regulations and/or exploit(cheat) customers

However with my utmost faith in our legal system and in democracy I shoo shooed away the soothsayers and set out to start the business. I haven't had to interact with the government authorities except to apply for permissions, register for licenses, submit tax returns and to apply for renewals. Wherever it was possible and wherever there were corrupt officials involved they tried to get me to bribe them. But having not done any thing illegal I stuck adamantly to my stand and the officials involved couldn't get me to budge. The stand has been validated up till now.

People bribe officers when,

  1. They have not done something they should have done
  2. They have done something they should not have done
  3. They wish to do something they should not be doing
  4. They wish to not do something they should be doing
Officers demand bribes when,
  1. The person involved has done or plans to do any of the above
  2. The person involved is not aware of his rights and the officer's responsibilities
  3. The person involved does not know the rules and regulations
From the above conditions we can see that it is pretty straightforward to avoid situations where you have to bribe or where the officer demands bribe. You have to
  1. Be aware of the rules and regulations involved
  2. Be aware of your rights and the officers responsibilities
  3. Do and plan to do only those things that are perfectly legal

I have not found it very difficult to follow the simple guidelines given above and have been successfully following it till now. For example it is very easy to decide to not evade tax - tax is not my money, it is the governments fees for allowing me to run my business. Since it is not my money I don't even have the slightest qualms about giving tax, on the contrary it makes me proud to contribute towards nation building. Businesses normally try to evade tax because that alone could double or triple their normal profits. Since it is illegal I don't even look at it as a possibility.

The distinction between legal and illegal is very clear as we have laws laid out very clearly in all areas of running a business. If you decide to not do anything illegal your options would become very much simplified and it would be a straightforward issue to run your business accordingly. Now there is one aspect of business that my advisors never warned me about - the grey areas between fair and unfair. You wouldn't come across such situations if you are not running a business and this was probably the reason they missed it. I will discuss a few example to illustrate the point.

Consider the scenario where a customer comes to you with false impressions about the price and/or quality of a product. Do you as a businessman tell the customer that the prices are lower than what he thinks or that the quality of the product is lower than what he thinks? If you do that you risk lowering your profits and if you don't you could end up having a happy customer as well as good profits.

You have tied up with a company to arrange loans for the customers and the company advertizes a 0% financing scheme where there is hidden 3.5% flat service charge on the complete loan amount including the initial down-payment. Do you tell the customer that the service charge is just another name for interest and that the actual interest rate would be around 20% or just tell that it is 0% and is very cheap? If you do he might decide against buying it or could walk out and fall prey to another dealing putting the deal across to him with another perspective.

A device that came in for service gets damaged because of some accidental mistake on your part and you have a customer who would believe that the device was faulty when it was brought in. Do you tell the customer that the device got damaged because of your mistake and that you would replace it for free or do you just tell him that he will have to buy a new device? If you do then you would loose the cost of the device plus the service charges but if you don't you would not only get your service charges but also an additional sale.

These are examples of some situations where you have to make a fair decision and there is no assistance from any set of black and white rules to help you make your decision. Additionally nobody is going to point fingers at you if you make an unfair decision. And under such scenarios is the true test of fairness of a businessman. It is very easy to be fair, clean and legal under public scrutiny but would you do the same under such conditions. Almost all such cases where a fair decision is taken involves a seeming financial loss for the businessman. It is possible to take such decisions but it is tough.

I have been trying my best to be fair and square in all my dealings. This is my experiments with my business. I think it is possible to do business fair and square. It is a helluva lot tougher than the shorter and crooked path. You have to forgo financial gains that are taken for granted by other businesses and sometimes you would have to make decisions that might not make business sense at all. But it is possible. I cannot convincingly claim it now, because I haven't been in business long enough to consider it a successful experiment, but, hopefully I should, in due course of time.

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Tuesday, June 12, 2007

Get out of the box

I have been telling a friend of mine to start blogging. He used to write very well in school and then he used to send these mails that were really well written and entertaining to read. He recently got around to starting a blog but has not been regularly updating it. I distinctly remember a few others from my high school who used to write well and none of these people blog.

This is the era of Web 2.0 - of people-generated content. There are loads of people who blog and some of them have even successfully taken blogging up as a viable career option. I feel that whoever believes that he/she is good at writing or could become good at writing should try a hand at writing blogs. Other than writing - another soft skill people could try out is photography. There is not too much of investment to be made and there is not too much of effort involved nor would it require too much of changes to existing schedules.

The point I am making is not about blogging or photography - it is about peoples' innate capabilities and talents. People study very hard (those who do) and once that is done they try hard to get a job. After that it is all about marrying, having kids and then settling down. Life is not just about getting a job, marrying, having kids, falling into a routine and settling down (as in particulate suspensions settling down). It could be a lot more. It could be those fanciful ideas you expressed when your english teacher asked you about your career aspirations when you were in kindergarten. It could be your dreams of doing something which the orthodox systems prevented you from doing - like going on a world tour, volunteering for charity for a couple of years, trying out a wild business idea and what not. It could be about following your passion. Identifying things you would like to do and then doing it.

You could possibly excel and enjoy using any of those skills that you possess and that does not directly play any role in your job. It is probably just a matter of trying out those skills and building them up (and even giving it a try as a true career option if you are confident enough). However our system and our society wants all of you to take safe bets and choose career options that will enable you to have a regular job with regular assured income. I am not saying that people should wildly follow their fancies. They should not douse the flames within them - that is all. Make safe choices, get good jobs - but always keep your options open.

The ultimate challenge is to turn back and walk against the crowd instead of following it. It is a great feeling. Believe me. Those of you who are bold enough should try it out before it is too late in your lives. Even if you don't succeed you would at least be able to say with satisfaction that you tried. Those who succeeded in doing that were the people who took the world to where it is now. If people had just followed routines we would still be digging grubs and roots with our hands. Be forewarned - not everybody is going to succeed - and that could include me too.

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Tuesday, June 5, 2007

Reservation - A helping hand for the under-privileged

Recently I saw a post in a forum, in which I am a member of, questioning the need for reservation policies and even the original need for reservation. I was not very much surprised about the discussion for I too used to think in similar lines when I was much younger.

When I was growing up my family had to go through troubled times when my father's chances of promotions were almost jeopardized because of some reservation policies. He was a rank holder in the PSC list and had every academic right to get to the top of his organization. He did get to the top ultimately though. I grew up among people, some of whom with reservation and some without. Financially there was not too much differences between the reserved and the non-reserved. In Kerala, or atleast in the schools where I studied, there was seemingly no factual evidence for proving the requirement for reservation. So the logical conclusion was that reservation is biased against quality and hence it would reduce the system quality in the long run.

But we cannot just look at the educated, empowered, urban population of India and claim that there is no requirement for reservation. Around 1/3 of the country still earns less than 50 rupees per day on an average. See the World Research Institute survey on people living on $1 a day. The highly educated and empowered section of the population would be less than 10% of the total population.

Until we have equitable distribution of education, health and employment opportunities - reservation IS THE ONLY WAY to have an all-round development of the society. Reservation is not a punishing rod for the privileged but rather it is a helping hand for the under-privileged. The only point that has to be noted is that the current policy of reservation based on caste or tribe is not delivering what the creators of the system intended it to deliver. This system is being promoted by politicians with vested interests for electoral gains. However the honorable supreme court has been trying to point the legislature in the right direction in excluding the creamy layer from the reserved categories.

The set of all people in the set of reserved categories would be a very good approximation for the set of the under-privileged people of India. The educated and empowered comprise only a very small percentage of the Indian population. Of this, the set of people who complain about reservation again comprises a much smaller percentage and their whines are based on their experiences with people of reserved categories who really should not have had any reservation based on economic criteria or possibly because of a lack of necessary skill sets required for their corresponding job positions. But this biased judgment would be based on a highly non-random sample from a very small set of the population.

Yes there is an argument against reservation in that it would reduce the total quality of the system. On an average a random person from the reserved categories should have similar capabilities as an average person from non-reserved categories. That is how statistics work. There is no reason to believe that the distribution of capabilities is not a normal distribution. However because of their different upbringing and educational opportunities they would have differences in the way they express their capabilities.

I am not claiming that reservation does not reduce the total quality of the system. It might, in the short term. This would be a small price we would be paying for the greater good of the people and an overall development of India. Additionally if we move the reservation policy based on an economic criteria we will be able to phase out the complete policy in about 50 years.

So the verdict is - Yes we need reservation, but probably on the basis of financial backgrounds.

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