“At around 50 million users you’ll come across the language barriers. What do we need to do? We need some policy initiatives, we need linguisting tools, voice to text needs to be funded by someone. These things take money. A grant of 4-5 crores (from the government).The present view is - let Google do it, Yahoo do it, Rediff do it, but it’s the wrong approach. Tech and tools need to be freely available. If one or two people do it, it doesnt become an industry. The Ministry of IT has an Annual Budget of Rs. 1000 crores.”

The increasing popularity of Quillpad, Lipikaar, Google Transliterator, etc. should help.

“With mobile commerce, the challenge is margins. If the operator keeps 50%, no point. We need a payment system where the margin is no more than 1-3%.”

Not likely to happen until the big operators stop growing (in terms of subscriber / ARPU) at a double-digit pace and start looking for other revenue streams.

“When the IAMAI had initially approach the government for assistance related to broadband, they found they had shot themselves in the foot. Balakrishnan explained: “A part of the reason why the Government support did not happen is that the IAMAI focused on stating bigger and bigger user numbers. They quoted 50 million, when the base was 10. Most of members of IAMAI committee were youngsters looking to raise capital, so larger numbers helped them. When we went to the government, they said - what’s the problem? (i.e. you have a large base anyway).”

Ah yes, the need to show a large and fast growing market (the J curve / hockey stick) while pitching to VCs. Been there, done that. :)

“What we miss are the Angel investors, who will come and give you 10-20 lakhs. I know there are some who do that, but you need some 5,000-10,000 from them. What’s missing is a provision in Indian Income Tax act, which allows you to write off angel investments.”

Amen! Couldn’t have said it better.

Early-stage (seed) funding is where the biggest gap - and opportunity - is. At Venture Center, we are doing something about this. But unless the GoI pushes reforms in this space (eg. favorable tax treatment for angels/VCs setup as LLPs), the 10L-1crore funding scene will remain stagnant.

During the golden era, competition simultaneously drove down returns on assets and drove up target returns on equity. Caught in this cross-fire, higher leverage became banks’ only means of keeping up with the Jones’s. Management resorted to the roulette wheel.

. . . when evaluating banks and their management, there is a need for greater focus on returns on assets rather than on equity. Good luck and good management need to be better distinguished. Put differently, returns to investors and managers need to be more accurately risk-adjusted if the right balance between risk and return is to be struck for individual firms and for the financial system as a whole. Second, there is a need to place much stricter system-wide limits on leverage.

… it is unmistakable that the most drought prone states, like Rajasthan and Gujarat, produce by far the most Capitalists while the well watered states like Kerala and West Bengal produce the most Communists. [Kerala and West Bengal have regularly voted Communist for at least the last 20 years and are the only states in India to have done so.] What is even more remarkable is that it is the rainfall/drought variable that appears to dominate regardless of variation in religion, ethnic group, or differential exposure to foreign trade or colonialism.

… ethnic Chinese arriving in tropical rainforests from colder, drier, more seasonally affected regions of China had a cultural advantage over their tropical counterparts when it came to saving, investing and other entrepreneurial activities. If “every cloud has a silver lining”, maybe occasional droughts have a silver lining as well.

Interesting take. Not quite tested on a statistical basis. But it’s easy to relate to, especially for me - I’m from Kutch, the driest part of Gujarat, and growing up it was obvious that entrepreneurship was a the way of life in the community, and getting a job meant something was wrong with you!

… globally we are tracking or doing even worse than the Great Depression, whether the metric is industrial production, exports or equity valuations. Focusing on the US causes one to minimise this alarming fact. The “Great Recession” label may turn out to be too optimistic. This is a Depression-sized event.

That said, we are only one year into the current crisis, whereas after 1929 the world economy continued to shrink for three successive years. What matters now is that policy makers arrest the decline. We therefore turn to the policy response.

The current surge in commodity prices, for example, is being fueled by China’s demand for speculative inventory. Damage to the domestic economy is already significant. If lending doesn’t cool soon, this speculative force will transfer even more Chinese cash overseas and trigger long-term stagflation.

The international media has been following reports of record commodity imports by China. The surge is being portrayed as reflecting China’s recovering economy. Indeed, the international financial market is portraying China’s perceived recovery as a harbinger for global recovery. It is a major factor pushing up stock prices around the world.

But China’s imports are mostly for speculative inventories. Bank loans were so cheap and easy to get that many commodity distributors used financing for speculation. The first wave of purchases was to arbitrage the difference between spot and futures prices. That was smart. But now that price curves have flattened for most commodities, these imports are based on speculation that prices will increase. Demand from China’s army of speculators is driving up prices, making their expectations self-fulfilling in the short term.
 

‘Government knows best’ - at its worst!

Most of Harvard’s endowment was tied up in illiquid investments whose values were fluctuating (i.e., plunging) daily. But Moody’s, the financial ratings firm, was predicting a 30 percent decline for university endowments for the fiscal year that ends this month. In a subsequent letter, Faust went further, warning that a drop so precipitous seemed probable.

Such a plunge would claw the endowment back by more than $11 billion. Subtract the endowment’s $1.4 billion contribution to the university’s operating costs for this year—a contribution paid for in previous years by endowment returns, but which this time would represent a withdrawal—and Harvard would be left with $24.4 billion. As the old saying has it, “A billion here, a billion there, and pretty soon you’re talking about real money.”

Especially interesting given that I’m currently reading Creative Capital: Georges Doriot and the Birth of Venture Capital by Spencer Ante. The book talks about the many innovations that Doriot brought to HBS and venture capital.

Obviously, when you binge buy and compress imports of a single commodity, carried mainly by capesize ships, into a very short space in time, you tend to create two issues at the same time. Firstly, you tend to push up freight rates due to the time-compressed/explosive demand growth for that ship-sector. And more significantly, you create queues at loading and discharging ports which tend to reduce availability of spot ships driving prices even higher.

Based on the congestion at Chinese discharge ports and the present increased level of iron ore imports the index could actually cross 5,000 points. We think that congestion should clear up once this binge buying of iron ore abates or more new Capes are delivered from the ship-yards than the demand can absorb. Once one or both of these events take place, congestion will vanish very quickly with the BDI crashing down as quickly as it has advanced.

Commodity inflationistas much keep this in mind.

Sri Lanka wants George Soros, Mark Mobius and other top fund managers to invest in the country and help the Colombo Stock Exchange “take off” after the end of a 26-year civil war.

Daily average trading on the Colombo Stock Exchange surged 20 times to 1 billion rupees ($8.7 million) after the government declared victory over the Tigers on May 16, driven by demand from the local population, de Silva said. The key Colombo All- Share Index has climbed 12 percent during the period, taking its gains this year to 42 percent.

The exchange wants to double its capitalization to $14 billion in a year, he added.

This should be interesting. Impact cost for short-term traders way too high - the only play is buy & pray.

I think to build a great company you need to have a well defined hypothesis based on a theory for a market’s evolved future.

And I think the most effective way to enter that market is to build a company like a scientist testing the theory. As an experiment.

True. Or do what Felix Dennis suggests in How To Get Rich

Keep your eye on the ball marked “The Money is Here”.