Fixing the subprime mess

Firstly, I'm no expert on this subject, but here's something I've been thinking of as a possible solution to the crisis.

Make all mortgage payments of existing homeowners in the US to be 100% tax free for a period of say 5 years. This would make the net cost of payments lower for the end customer and hopefully reduce foreclosure rates. It would also provide an incentive to households to divert as much of their income as possible to mortgage payments (after all they get to own their houses as well as pay less tax to the government). This in turn may help housing prices to stabilize instead of going down, and all those potentially worthless mortgage backed securities may finally have some value.

(PS: This is just an idea that popped into my head - haven't quite done enough research on the financial crisis to verify if this will work)

Update:
Very interesting news item on the CNBC site on the increasing rate of foreclosures in the US.
McCain wants the government to actually buy out mortgages.
"The administration is not doing what I think they should do, and that's go in and buy out these bad mortgages, give people mortgages they can afford, stabilize home values and start them back up again," McCain said in a live interview with his vice presidential running mate, Sarah Palin.

It looks like McCain is approaching this problem from the right direction in so far as recognizing that a possible solution likes in 'bailing' out end customers which sets a virtuous cycle in motion, as opposed to just bailing out financial institutions.

Satirical video on the markets

All about the markets, investment banking and the sub-prime crisis.

Absence of 'Yuppie' centered entertainment

Aadisht has a very good categorization of the rich, and a good follow up post on the fact that there is no Yuppie programming on TV and very little in the movies. In brief, he proposes the existence 3 kinds of rich people:

Yuppies - the educated MBA types with EMIs to pay and a monthly pay check
Lalas - Owners of big family businesses
Hippies - Creative types like actors etc.

Using the categorization above, I developed a hypothesis for the absence of Yuppie content in the entertainment sphere.

Why Hindi movies/ soaps are centered around Lalas and Hippies:

1:

The first reason is that frankly Yuppies don't lend themselves to great stories of romance and adventure. For that you need Hippies or Lalas who don't have to worry about making a living. I mean two characters sending each other mails in Outlook can't quite hold an audience's attention (even if the audience is Yuppie).

2:
The hindi film industry is completely run by Lalas, Hippies, sons of Lalas (Karan Johar) and sons of hippies (Abhishek Bachchan). Now when a lala or a hippie writes a script it will inevitably be about Lalas and Hippies. For them Yuppies are some strange species that they see through the tinted windows of their E-Classes. You know, the strange species that drives red Maruti Swifts and follows traffic rules.

Soaps are also written and produced by rustic hippies and lalas respectively. So no hope there.

The only hope is when Yuppies crossover to become Hippies. Eg. Nagesh Kukunoor, Chetan Bhagat’s movie about the Call center etc.

My prediction is that pretty soon quite a few yuppies will make hippie transitions once they find out that corporate life is meaningless and/or pile up a truck load of cash in their savings accounts. Secondly the corporate film houses will realize that the lala/hippie fare doesn’t work too great with the multiplex crowd and will start funding small budget yuppie movies (Aamir, A Wednesday etc.)

So, there is hope.

Organization Culture as an Emergent Phenomenon

My latest column for The Hindu Business Line is entitled Organization Culture as an Emergent Phenomenon.

The full text follows:

Emergence is a phenomenon that has been studied in many disciplines and it refers to the way complex systems and patterns arise out of a multiplicity of relatively simple interactions with no central coordination. Emergence is seen in systems such as nature, stock markets, traffic patterns and organisations. For instance, an ant hill is an emergent structure created by hundreds of ants, each of which is engaged in a particular kind of activity without being aware of the re sultant structure. Similarly, complex flocking patterns amongst birds actually emerge out of simple behaviours on the part of individual birds (such as trying not to collide with other birds while still being part of the flock). In other words, the emergent structure is more than just the sum of the parts. In this article I propose two ideas — first, that organisational culture is an emergent phenomenon and second, that ‘values’ are the underlying ‘simple rules’ governing culture.

An emergent reality

It is possible to view organisational culture as an emergent outcome of the countless interactions that take place between the various constituents of an organisation. Each participant is not aware of his contribution to the overall emergent culture, and behaves in an independent manner in all situations based on his own personal beliefs.

If this is the case, it would appear that it is very hard to ‘control’ what kind of culture may emerge in a given organisation as the behaviour of individuals is hard to predict. How then does one go about creating a particular kind of culture? The answer may lie in our understanding of emergent systems as being an outcome of individual agents acting on the basis of simple rules. When these rules are executed by a large number of participants, an emergent structure presents itself. Extending this to an organisational scenario, if a few simple rules were to be set that governs all interactions of an organisation’s members, the emergent reality — in this case organisational culture — can be managed to produce favourable end states.

Role of values

Most organisations already have the building blocks for this simple set of interaction rules in the form of ‘company values’. The only problem though is that company values are not designed keeping in mind their potential to influence culture. Some values tend to be based on universal morals such as ‘integrity’, while others, like ‘passion’, have no links to day-to-day behaviour.

An organisational value should ideally have two characteristics — specificity or uniqueness and linkage to behaviour. Specificity means that a value should be unique and based on the specific organisation under consideration. Secondly, values must be behaviour linked; they must clearly imply what kind of actions someone would need to perform to adhere to them. Of course, all universal values continue to operate regardless of whether or not they are an ‘official’ value. MindTree is a good example of a company with both unique as well as behaviour-linked values. Caring, learning, achieving, sharing and social responsibility are the values of this company (many surveys have rated it among the best employers).

Values-Interactions-Culture

The resulting model would be as depicted in the accompanying figure. At the heart of the model are values — these are to be very carefully determined by the leadership of the organisation and periodically reassessed. These values form the basis of countless interactions between members themselves, and between members and other stakeholders such as customers.

The resultant emergent phenomenon would be the organisational culture. In order to foster a strong link between values and actual behaviour, reward systems must be aligned to incentivise demonstration of values.

Finally, it must be recognised that well ‘designed’ values help to actualise the ‘unique goodness’ of an organisation through the creation of an enabling culture, which in turn ensures that people who intend to contribute meaningfully are not hindered in any way from doing so.

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Older columns are as follows:

• Changing Time
• Wealth in Ideas and Relationships
  
• Unlocking Potential
• An evolutionary view of leadership
• Leaderless Groups - a case against hierarchy
• Free riding and social loafing
• Decision making in groups
• The networked marketplace
• The spiritual organization
• Interactive Brands
• The long tail opportunity

The new Microsoft campaign

I love the new Microsoft campaign ("I'm a PC"). It hits out beautifully at Apple's slightly elitist positioning of its products that sometimes suggests that if you are not an Apple user you aren't hip.