Business, Economics, Economy, India, Macroeconomy, Thoughts

More inequality or more convergence (tricks of your particular worldview)

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The average Joe in Spain is now living worse off than in boom times. Anyone can tell you that. While some, many, citizens, scape the crisis altogether. Apart from the platitude as obvioulsy societies live better in Boom times than in Recession times, anyone can warn you of growing inequalities, and he will be right.

The same feeling you may have if you look at the landscape in Mumbai, India. As skycrapers grow in number and height and slums grow and invade previously green spaces, you may have the feeling of growing inequality, and you may be right.

Same feeling you may have in China, when you compare Shangai with some backward province. They would have the biggest slum on Earth if people had the chance to build it. But since they don’t, you cannot see it. But as cities expand, inequality is growing. Signs of danger in forthcoming times.

But if you think of great times, regardless of your point of view, you can think of the Mughal Empire, the Roman Empire, or even of Chairman Mao’s China, and think that the good times are behind.

But don’t make a mistake. In those glorious times, 99% of the population were at the limit of starving. Marie Antoinette may have lived as a Queen, but she ended beheaded for a reason, a reason that she could not understand when she suggested to give cookies to the mob if they were hungry. Any bad harvest could kill a sizeable chunk of the population, and if there was hunger and disease at the same time, half of the population dying was a possible scenario.

Since the industrial revolution in the Nederlands, UK, and some European locations, the things have changed. As it has been spreading all over the world, inequality is less than ever. And if some folks live worse off, is specially because they compare themselves to their richer cousins.

No one starves in Spain. Many people have made bad investment decisions and they will pay a price for it. Some will not be able to afford the holidays in Mexico this year so they will decide to stay at home. Some people I know have had to cut on Saturday restaurants. And some have real trouble to get to the end of the month, yes, but not hungry.

Many people in India and China are still starving. Many more are hungry. Obviously, too many, I may add. But less than ever. Mao’s China was probably the poorest in centuries, but Deng Xiaoping opened the capitalist way that is slowly (yes, if you think of all of China, not of the booming part only) reversing the trend. The same happens in India (and sooner it would happened if the current government was as brave as some that preceded them, instead of wasting India’s time).

Of course, if you look locally, there are some losers and some winners, but humanity wins. And if you look at the greatest foes of this 2012, you will here about debt affecting many people, but you will here a lot about public debt. Don’t blame that one on the capitalist system, blame it on bad governments.

The world overall is more equal in opportunities. More than ever. Capitalism, with its flaws, has started a globalisation trend that is only benefiting humans.

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Economics, Economy, Macroeconomy, Microeconomy, Politics, Thoughts

And we are no longer asking “why” to the crisis

It’s amazing how we tend to forget. Not so long ago some people were still being blamed, bankers mostly, the beheaded god Alan Greenspan, some professional confidence man (aka con) Bernie Madoff, and a few more, but except for the latter that has even seen the disgrace in its own family, the former have gone back to their oversized bonuses and Mr. Greenspan is enjoying a deserved retirement, maybe with less conferences than what he had hoped for.

We’ll end up believing that the crisis is more a natural catastrophe, like those earthquakes in Japan, than a punishment. Isn’t it always easier not to blame yourself? God, with infinite power and without any need for an explanation, has just decided to punish you. And that’s all. Why think? Why blame? Why even change?

A system that privatises gains and socialises losses can’t be good. And that’s what we are seeing all over the world. All citizens end up sharing the burden. The “too big to fail” has been finally accepted by the whole humanity, the final enshrinement of the “moral hazard”.

Maybe we have finally reached our destination. We are capitalists when it’s time to reap benefits, but socialists with losses. Be aware, that only applies to big corporations. Finally, the richer 5% has some way to outgrow us all, to keep concentrating more and more power in their hands and make sure that when they fail they won’t have to answer for it.

I read today in the news that this year General Electric, in spite of a huge profit figure (true, it could have been better but it’s still huge) is only paying 7.4% of their profit in taxes. Congratulations to their accounting department, finding every possible trick, every crack in the fiscal legislation, every opportunity not to pay… But, at the end of the day, do you feel like they are making the same effort as citizens are? How much do you personally pay?

And another example, this time from Spain, from the likely next president in another year, a sentence in a conference in Germany: “If Spain is having a bad time it’s not the Spaniard’s fault”. Whose fault is it then? The hidden external enemy? God’s?

Beware, things that do not work can’t last for long…

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India, Personal, Thoughts

New roads ahead both for me and Warren Buffet (To India or not to India)

The office

Decisions. Whether to leave or stay. Leave from where? From India or to India? I’m not even sure of the right declension for the verb leaving.

And in the following days I do have to make a decision. Sorry for spitting it all out here, after so many blog-silent weeks. I’m in the midst of accepting an assignment here for at least three years. And the decision was already taken, yes, but as the conditions keep changing the decision needs to be remade now and again. It is said that we join companies and we leave bosses, this case could be right the opposite.

But enough about that, whatever you write can be used against you someday. Today Berkshire Hathaway has its figurehead Warren Buffet visiting India with a humbling attitude. He says he will talk to the Prime Minister, Manmohan Singh, about whatever Manmohan Sing wants to talk about. He also says he’s late to be in India and that from now one he will make a big investment per year in this country. He also says, and that’s why I called him figurehead, that the guy that makes the most money for Berkshire Hathaway is not him, but an Indian as well, in charge of the insurance business. Obviously the Indian press have quickly jumped to call him the heir.

Such a great entrance! Humility around an iron fist. Ladies and gentlemen, there is no business as show business. This is what I call the new American soft power. Humble but right to the Prime Minister in a country where business still relies on personal contact! They know how to do it. Actually, if I could, I’d join their ranks right now.

My road is humbler indeed. Not to be leading a huge investment company with resources aplenty but to develop business in India. A tough job. Another learning experience and, hey, in the end it’s all about learning. But also means leaving behind other personal development experiences and obviously a very important part of my life.

What is it that I want to be? Where do I want to be in five years time? I need to figure out as soon as possible as only then I will be able to make the right decision.

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Personal, Thoughts

When you cannot longer recall how many times you’ve been to India

When you do not longer wonder by hearing the expression of “doing the needful”, when you realise that there are other ways of thinking, and by being different they are not better or worse (an easy temptation that leads to failure) but just different, when you see the order in the chaos and walking in a Mumbai slum doesn’t make you cringe anymore, when you are being told that you may have Norwegian accent (yes, me), when you use the words yaar and walla as basic words, when you learn to walk under the rain (and I mean really walk under the Monsoon with a smile), when you repeat the verbs twice and ask no at the end of the sentence, when you get used to see very simple people smiling, when they do not longer chase you for money, when you realise that being in a crowd is a different way of being alive, that’s when you start loving this country.

Because India can and should be loved. There’s a layer of dirt, a crust of inefficiency, true, but there’s more than that, much more. There’s this will to move ahead, this aim to be, this sturdy yet huge democracy, this terrible mother mistreating her children yet, somehow, still loving them.

India changes you. And does so from within. Makes you better. New connections in your brain. Not linear ones, true, but since when humanity has traveled a linear path? Never. India is as organic as a human body, as imperfect as any of us. Yet it thrives as any of us can thrive. It’s a unique opportunity of developing a diverse society without resourcing to authoritarianism. A path that many others we’ve left behind may follow.

Once you’ve been here, really here, I mean, you’re never the same. A part of you never leaves India, and a part of India comes with you.

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Economy, Personal, Politics, Thoughts

From Germany to Spain by train (the Eyjafjallajökull volcano and a “laisser-passer”)

Yes, I was one of those people stranded around Europe thanks to a cloud of ashes that no one could see but make brighter reds at sunset. My journey was a 42-hour journey through Europe’s interconnected railway connections, but also an eye-opener on the frailty of globalisation and a living proof that the railway systems of the European countries are not effectively interconnected.

Belgium is a good example. Ongoing works on a track to Liege. No way to get there on time, but with a 15-minute delay. A train loaded with people that are connecting to the Thalis, a high-speed train taking people directly to Paris and Brussels. Two trains leaving at almost the same time we arrive. They hold one for a few minutes and, to the travellers’ consternation, let the other one go. A whole journey ruined because of a three-minute coordination error. Lots of wasted space on the leaving train, lots of upset passengers that need relocation on the station. Belgian management at its worst. Fortunately a compassionate soul understands the disaster they have caused and change my first class tickets to Spain for some piece of paper: a “laisser-passer” (let him pass, a safe-conduct). With it I can sneak into any train, no seat assured, but if there is a seat, I can take it. That was the key to my escape.

A journey away, in Brussels, the Belgian capital, lots of people queuing at the counters. People sitting and standing everywhere. No trains to leave. We manage to sneak into one. Half of the places were free!

Then in Paris. Train workers on strike for the 14th day. No way to get info in Paris Nord. In Paris Lyon we are stopped by some first-attention workers selected, I guess, by their ability to mutter some words in English. Totally unhelpful, there are no spaces in trains for the next three days. Everyone should go home. The poor bastard even doubts that my reservations are authentic and asks me for proof. Amazing.

Next stop at Paris Austerlitz. Instead of flocks of British citizens trying to get their chance as in the last station, this time it’s crowds of Spaniards there trying to get home. No places till Saturday. I manage to talk to a nice guy from the company which tells me something that I’ve already heard a couple of times before: “hold on to that laisser-passer, that’s the best thing anyone can have out there” and then shares some secret with me “there’s going to be some special train service taking people southwards to Toulouse tonight at 21:56 at Paris-Bercy station”.

That was another key moment. The secret train. One of those trains that France has put up in order to help travellers through France.

Paris Bercy. That station does not even appear on the maps. (Just check it, amazing! It’s not Bercy metro station which is in the centre of Bercy, a huge borough) I had to go back to my source and ask for some references. Not even the taxi driver knew where Paris Bercy was. Fortunately and thanks to my confident I knew it was just after crossing the Bercy bridge over the Seine. Once there, there were some sign.

The station is used to transport cars by train. It’s an auto-train station. They have added some passenger wagons to a huge line of car-transporting wagons.

Ten people controlling the entrance, god forbid that some crowd would jump onto the train to get home. I’m sure they would only select the travellers really deserving it, the desperate ones, the children. After all that’s what was in the news: France doing all they can to help expatriates get back home.

Fortunately, my “laisser-passer” worked. They seemed to be impressed by it. I know it’s going to end up hung up somewhere at home. We could board the train… and then we left for Tolouse. I was to share my journey with a lot of refugees, sing songs and share experiences, or so I thought.

Well, you can see the reality. Fortunately there were two people to talk to. The rest of the train was empty. I guess they had a tough time deciding which of those refugees deserved going back home. So they decided not to let anyone go. These are the trains, the special trains, meant to be helping people get back home. And that’s how they go: empty.

There were still a lot of things to come. The 14th day of railway workers strike in France cancelled the following trains I hoped to take and I had to make it in a bus to the Spanish border. There I read again about the special resources countries were providing to help those stranded get back home. Astonishing.

Yes, resources were there, somehow. But totally uncoordinated and wasted. Here lies the proof of the case against European efficiency and how politicians and media speak of things they don’t know about. In the meantime, the non-transported travellers mean loses both for them and the companies they work for, for the airlines and for the whole Europe. Another notch down the economic crisis that is dragging us down.

At the end of the day, the Eyjafjallajökull leaves us with lessons on how the globalisation is frail, too frail. Myself, I should be in India now. Instead I’m at home in Barcelona, and happy to be here by the way. Is the air transportation sector so frail to completely collapse under some ashes? Is the railway transportation system so inept that it just wastes more and more resources while failing to respond in an emergency situation? Why are the politicians lying to us so blatantly about the extra efforts they’ve made to help people get back home? How can railway workers just keep on strike in this situation and Mr. Sarkozy simply do nothing about it?

We are less prepared than we think we are. And we must get ready and push towards open skies and build the next generation of air navigation systems the sooner the better. Also it is necessary to overhaul the whole inefficient European rail transport system.

Experiences. We all learn from them. I also try to. And from one reconforting image, the most positive thing the volcano did (as if telling about our shortcomings wasn’t good enough…) the impressive sunset over the Seine in Paris, the one thing that has improved and turned even more reddish with the Eyjafjallajökull’s ashes.

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Business, Economics, Economy, Macroeconomy, Personal, Thoughts

Basic macroeconomics again: government savings, private deficits and the Ricardian debt equivalence theorem

If you brush up your basic macroeconomics you will remember this: in an open economy, if national saving is insufficient to finance national spending, an influx of foreign capital will be needed to balance the accounts. That’s the story of the US -or Spain-. Where we invest (spend) more than we save (earn).

In times of high leveraging, where the private sector has grown too indebted, a deleveraging process is mandatory. Whether it takes ten or five years, it doesn’t really matter. It has to happen. It will happen.

But what if it’s the private sector that has gone too indebted? How can the public sector help?

Well, it’s not only that, as I said, the national balance must equal the foreign financial balance. The fact is that the national balance is necessarily made of two balances that add to each other: the public sector balance and the private sector balance.

That means that the fiscal balance plus the private sector balance must be compensated by the external balance. In other words: money goes out of one sector only to enter another, whether outside or inside the country. But it’s a zero-sum game.

Worrying.

If the government is saving, the only way that the private sector can save is by means of exporting, suddenly, a lot more.

Otherwise, more saving by the government, means more private sector deficit thus more leveraging.

Hmmm, sounds ingenious, but makes sense too.

Can we expect all the countries to suddenly double their exports? No way that’s going to happen as exports are also a zero-sum game. What someone exports, someone else is importing. So, what’s the alternative?

Let me say it again in plain words: if the governments reduce their debts is because part of the taxes that are being paid by the private sectors will be committed to paying creditors, that is, they will go out of the cycle. More taxes, less returns in services or infrastructures. Yes, that is, hurting the private sector.

What can a government do to reduce the debt burden? Obviously, inflate prices, which in times close to deflation is no simple task to do. But again reducing the savings of their citizens, whether people or companies.

But it has to be sudden, unexpected. As creditors wouldn’t accept low interest yields if they were expecting inflation. Credibility is important and we don’t want to lose our reputation as a country.

Let’s say that you can only lose your reputation once, just like your virginity. Next time you won’t be able to make this move or to get credit at such low rates.

So, what’s the alternative to increasingly indebting the private sector? Because if you do for a long time, the increasing frailty will become evident, more than evident, obvious.

Let’s increase debt to reduce deficits? Bonds maybe? Some safe heaven for governments?

Maybe they are for governments but, in the end, they must be paid off sometime. The contested Ricardian debt equivalence theorem states that government expenditure on the private sector is equivalent whether it’s financed by taxes or bonds.

Okay, there’s a lot of restrictions to that Ricardian debt equivalence, or Ricardo-Barro equivalence proposition. We may not care about our descendants so we may not care to indebt them either. But one thing is clear: a debt is a debt and, along the road, it must be paid. The equivalence says that, somehow, the private sector will get ready to pay that and the ultimate effect will be the same.

The lesson? Damned if you do, damned if you don’t. Maybe getting government deficits under control right now is going to make the economy even worse. Believe me or not, it doesn’t matter. Just do something for me…

Stop seeing the government deficits and debts in isolation. They are part of a bigger system.

At the end of the day, there’s the need for more competitive if countries are to scape the leverage trap. And productivity adjustments come with a high price, be it devaluations where they are still possible (beware your reputation, U.S.) or by means of drastic reduction of labor factor costs… yes… wages (beware Spain).

Okay, that was tough. Sorry. Not the usual me. Lots of theoretical threads I needed to spit out. Oh, is it going to be the first post without a picture?

No way! Here it is. Commonsensical:

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Management, Personal, Thoughts

Personal branding (not a facade but clarity)

Posting again after a too long hiatus. And thinking of branding, personal branding. I overheard a conversation that made me cringe about faking. Personal brands are confusing muddy concepts under suspicion that make us recall the marketisation and productisation of people. Let’s package ourselves with a nice and faux decor so as to facilitate our buy out!

Wrong. Sorry to be so bold. But that’s not it. It’s about credibility, it’s about reputation. And you don’t rebuild those every week with a new rebranding. No one else can do it for you. Maybe help you, but that’s all.

The true personal brands are made of congruence. Congruence with personal values, which are those that must become obvious with our personal brand. You got no values? Start building yourself first. Or simply, look inside. Think, what do you stand for? What are you willing to stand for?

That’s your brand. Make those values visible. You won’t be able to ask them from other people unless you’re constantly showing them off yourself. Reliability? Quality? Decisiveness? Assertiveness? Put them on the table, your table, and others will start following.

And be constant. Trust and reputation take very long to build, but can be shattered in just one second. That’s why your brand must be anchored in your true self, otherwise it will be a lie. And people will realise.

It all goes back to leading with example. The example will become your personal brand, lest you’re not consistent with it. And your personal brand will become an explicit part of you that will be clearer every day. Not only others will perceive it but you’ll feel it grow steadily within you. Not a fad but part of your identity.

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