Category: World

China’s new lineup

Anybody who predicts what the next Standing Committee and the Politburo will be is almost certain to be wrong ! This is why most newspaper columnists are content with naming possible candidates and leaving it at that. This blogger does not care if he is proved wrong or even as a fool. There are no consequences to getting it dead wrong. So here’s my prediction what’s going to happen !
There are only two near certainties in this political game. One is that Xi Jinping will continue as Secretary of the Communist Party, Chairman of the Central Military Commission and as the President. The second is that Zhang Dejiang, Yu Zengsheng, Liu Yunshan and Zhang Gaoli will retire from the Standing Committee . Everything else is up for grabs.
Two of the key moves that is the subject of much speculation is what will happen to Li Keqiang the current Premier (most views are that he will stay on as Premier) and that of Wang Qishan (Xi’s ally in the anti corruption drive, but who is crossing the informal retirement age of 68).
My guess is that Li Keqiang will be pushed out and Wang Qishan will replace him as the Premier. This is not considered likely today and if it happens, will be radical and  unexpected. If it indeed does happen, it will indicate that Xi has taken total control of the Party. My reasoning is that Li has been a disappointment as  Premier  with his management of the economy, his key job. He will also carry the can for the stock market troubles of 2015. Li belongs to the Youth League faction which has been systematically defanged. There is precedence in China of the Premier being replaced – Li Peng giving way to Zhu Rongji in 1998. Wang Qishan , as we have seen in earlier posts, is the de facto No 2 in China today.  He is an expert on the economy and if he were to be appointed Premier, he will be Xi’s trusted lieutenant in the soft landing of the economy that is a big imperative for China. This will mean Xi is bending the retirement rule – something I am guessing he will do as a strawman for his own options 5 years from now when he will face this retirement rule himself.
I think Li Zhanshu is a shoo in for the Standing Committee. He is currently the Director of the General Office of the Party and is a right hand man of Xi.  Stacking the Standing Committee with his people will be a primary objective of Xi.
There is a good chance that Wang Yang, currently Vice Premier will be elevated to the Standing Committee. He is not a Xi loyalist  and was potentially a candidate for the Standing Committee  even the last time around. He is however efficient and strong and has quelled his reformer (read political) instincts. He has kept his head low over the last five years and for sheer ability is likely to rise.
Another likely name is Wang Huning. He is currently the head of the central policy research office. A  non controversial choice who doesn’t belong to any faction. A theoretician whom Xi seems to rely on and is often seen on Xi’s overseas trips as an important adviser.
If Xi is in total control of the Party and has not needed to cut any deals, then this is the likely Standing Committee – cut down to five members . Xi Jinping, Wang Qishan, Li Zhanshu, Wang Yang and Wang Huning.
If Xi however decides to stay with a seven member standing committee, then the two additional names, would be as my guess, Zhao Leji and Han Zheng. Both are “senior” but not powerful and therefore likely to simply make up the numbers and duly nod their heads to anything Xi says.
If my prediction is even 75% right, then it is clear that Xi is all powerful. None of these members can be a potential successor to Xi and it will also indicate that Xi is preparing to stay on after 2022 as he hasn’t groomed a successor unlike what his predecessors Jiang Zemin and Hu Jintao did.
 Just as important as who gets in, is who doesn’t get in. The disappointed persons would be
– Li Keqiang, the current Premier. He would be the biggest casualty if he were to fall. If he doesn’t get dropped, Xi is just being cautious not to make too many changes. Li’s power will continue to wane and he will, at best be a bureaucrat continuing to run the economy. Real decisions will  made by Xi.
– Hu Chunhua, the current party chief of Guangdong. He is of the next generation and had been touted as a potential successor to Xi even five years ago. He has recently been making noises pledging loyalty to Xi.  His elevation to the Standing Committee will mean he is the clear front runner next time around. His non inclusion will be a strong signal that Xi intends to stay on even after 2022.
– Chen Min’er, current party chief of Chongqing. He was just brought in there to replace the disgraced Sun Zhengcai, a potential successor to Xi who fell in a power struggle. Chen is a staunch Xi loyalist. Its unlikely that he would be nominated, but if he were, it would be a clear signal that he would take over from Xi at least nominally in 2022, while Xi holds real power from the backroom.
A team like the one I have predicted will mean the following for China
– Xi Jinping is all powerful. He will start to acquire Mao like cult status. It is only hoped that he wouldn’t unleash horrors on the country as Mao did.
– The Party will become even more ruthless in suppressing dissent. Personal freedoms will be even more curtailed and censorship will worsen.
– The economy will be managed efficiently. Economic troubles will come but they will be managed as best as could be.
– On foreign policy China will become increasingly belligerent and muscular.  They will be difficult to deal with diplomatically and might pick up fights with other countries. The current US administration will constantly lose on anything they pick up with China.
– The anti corruption drive and the defanging of political opponents will intensify. Xi might however face a challenge when Jiang Zemin dies. Major political activity tends to happen when somebody important dies.  The two major upheavals in China happened in 1976 after Zhou Enlai died and more famously in 1989 when Hu Yaobang died which led to the Tiananmen incidents. Jiang is nowhere near as liked as Zhou or Hu were, but it may be a trigger for old timers and those who had lost out in the Xi era to maybe flex their muscles.
– Xi will stay on post 2022 and will be the main power for at least another decade. He will install one of his men as the General Secretary, but will stay on as the Chairman of the CMC and wield real power. He may even be appointed Chairman of the Party, a post that was abolished after Mao.
How wrong I am would be revealed in the days after October 18th when the line of 5 or 7, which I alluded to in the first sentence of this series of posts will walk in and be introduced.  Even if I am 50% right, I will lay claim to being a “Zhōng guó tōng” (China expert) !
Enough of politics. This blog will go back to plodding on business and economic matters. It will return briefly to China and politics when the actual line up is announced in end October.

A French soap opera is about to unfold

The world’s richest woman just died. If you didn’t know this, please stop focusing on the tweets and turn your attention to more weighty matters of the world.
Liliane Bettencourt passed away four days ago at the age of 94. She was the heiress to the founder of L’Oréal, the world’s largest cosmetic company; the only child of Eugène Schueller who founded L’Oréal in 1907. She herself worked in the company from the age of 15 and rose to become its deputy Chairperson.
The future of L’Oréal is now in play. And therein lies a story that could give a beating to any soap opera on television.
In 1974, fearing that France would nationalise the company, Bettencourt did a deal with Nestle wherein she offloaded about half her holding in exchange for shares in Nestle. Since then Nestle and Bettencourt have had one of the longest tangos in business history. Nestle, a food company, with no presence at all in cosmetics, had a 30% stake in the world’s largest cosmetics company (now down to 23%). But in an agreement with Bettencourt, Nestle remained a sleeping partner and promised not to acquire any more shares or to bid for Bettencourt’s own shares as long as she was alive. Presumably Nestle had thought that she would not live so long. But they kept their word and until now have not interfered at all in the business just pocketing the dividends and biding their time. So much so that very few outside the business world probably even know that Nestle is a major shareholder in L’Oréal.
In the meantime Bettencourt’s life over the last decade has been another soap opera all by itself. Sometime in 2007, at the  ripe age of 84, she took a fancy to her photographer and started to bestow gifts to him worth over €1 billion. Her daughter filed a complaint with the police that her photographer was taking advantage of her weakened psychological stake to amass a personal fortune. She and her daughter had an extremely public spat with each accusing the other of having gone mad. The courts finally made Bettencourt’s grandson as her overseer and the fortune was vested with her daughter and her two grandsons. But everything was in a state of limbo as long as she was alive.
Cue the events in Nestle. Nestle , for long, has waited patiently to consummate what was really a delayed acquisition. Both the last two Chairmen of Nestle sit on the L’Oréal Board. They were probably waiting for the death of Bettencourt to acquire L’Oréal . But alas they now have an activist shareholder in Dan Loeb who has a fair stake in Nestle and is pushing it to do the opposite – sell the stake in L’Oréal and return the money to shareholders. So there is no saying what Nestle will ultimately do – acquire L’Oréal or divest !
There are other big fish circling. Given how cheap debt is , there are enough and more funds of various stripes, including probably the notorious 3G Capital and their close friend Warren Buffet, who are getting all excited. Also interested would be two giants in the cosmetics field – Unilever and Procter & Gamble, who have long eyed Nestle’s stake with envy and made noises about what a Foods company is doing with a stake in a Cosmetics company.
Complicating this will be nationalism, for after all L’Oréal is (very) French. Would Macron be willing to let a French institution fall into the hands of the ugly Americans ? If he interfered, the tweeter in chief would surely have something to say !!
And what will Françoise Bettencourt Meyers, Liliane’s daughter and the two grandchildren to whom the 30% stake in L’Oréal passes, do ?  Would they act in concert. Or would they go their own ways ? Would they buy ? Or sell ?
Every investment banker is drooling and shivering with anticipation. It is fair to assume that no first class seats are available on all flights to and from Paris, London, New York and Lausanne !
Watch this space. The knives will be out on 18th March when the six months period after Bettencourt’s death ends and  all agreements expire.    Bettencourt’s life was colourful to say the least – marrying a Nazi sympathiser, losing money with Bernie Madoff,  a strange affair with her photographer, being declared mentally incompetent, accused of giving cash stuffed envelopes to Nicolas Sarkozy,  having numerous Swiss bank accounts …… But even by those standards, what will follow in the fight for L’Oréal will be, to put it mildly, interesting.

    Ramamritham falls in love

    Who is the person I hate the most ? No; not that one, whom I frankly don’t care about . He is half the planet away and troubling other folks; not me. My visceral hate is reserved for somebody much closer home. The “dotard” called Ramamritham. Allow me an unhinged rant please; I badly need it !
    You see, the problem is that Ramamritham has fallen head over heels in insane love. We all know how crazy he is even when supposedly normal. Now that his brain circuits have been singed with love, he has become a monster. The delectable damsel who has swept this idiot off his rockers is called Aadhaar.
    For the benefit of the one American reader who claims to be ignorant about India (no; not the lady – she is an expert !), Aadhaar is the national ID that every resident of India is supposed to get.
    The government introduced Aadhaar some 5 years ago ostensibly as a way to identify individuals to whom subsidies could be paid directly and thereby minimise leakages.  The government gave pious assurances (including to the Supreme Court) that Aadhaar was not compulsory or mandatory and it would never make it so.
    I think the government framed this with good intentions, but had not factored that the old toothless fart, Ramamritham, would fall in love with this.  They say love makes you irrational, and if anybody needed any further proof of this, look at what this apology to the human race is doing.
    He first made Aadhaar mandatory for buying gas cylinders. Then he made it mandatory to operate any bank account. Then he made it mandatory to file a  tax return.  But where he has gone completely bonkers is that he has now made it mandatory for a mobile connection !! And where it truly descends into madness is that its not just an Aadhaar number that this clown wants. He wants a fingerprint match for every mobile owner !! No; I am not joking. He wants to fingerprint you before you have a mobile phone.
    Consider the logistics. There are 1.2 billion people in India. Perhaps some 800 million own a mobile phone. And we being the argumentative Indians we are,  don’t possess just one connection . Almost everybody has two SIM cards. And this is what Ramamritham wants us to do.
    1. Go physically to a store of the mobile company (they usually have one store for a million users)
    2. Stand in a queue ; you can imagine the length of the queue yourself
    3. Give your mobile number and Aadhaar number to whoever is behind the counter
    4. You will get a one time password on your phone
    5. Give this number to the flunkey
    6. He will enter some 10 fields into a computer system that has been ordained by Ramamritham.
    7. You then place your thumb on a fingerprint reader
    8. If it goes through (and that’s a big IF – see below), then the flunkey does some more fiddling with the system
    9. You then place your thumb a second time (Ramamritham wants to make absolutely sure)
    10. If it again goes through, then say four different prayers and then go home
    11. You’ll get a SMS saying that your request has been registered and that you will get a confirmation in 24/48 hours
    12. If you get a SMS after 24/48 hours, you should follow the instructions there and type Y or N or don’t do anything
    13. If you fail in any of these steps, go to Step 1
    Note : The big IF arises because , this being India, any sensible store has bought a cheap Chinese fingerprint reader and it is impregnated with the smudges of the half a million people who have tried to bestow their affections on it.  Therefore your fingerprint is rarely read on the first attempt. If you fail in three attempts, your Aadhaar gets locked and if you want to unlock it then you have to undergo some contortions not dissimilar to what a certain Mr Scaramucci suggested a Mr Bannon was in the habit of doing.
    800 million Indians have to do this twice ( not just once, for you see everyone has two SIM cards). If you are stretcher bound, you still have to do this. Nobody else can do it for you because you have to press your damn thumb on that damn machine in the store. If you don’t do this by February, be prepared to just not have a mobile phone. Cost estimates for the whole nation to cater to Ramamritham’s love affair have been pegged at Rs 1000 crores.
    I have lived in the most obsessed country in the world which wants to control every single bit of information you have access to – China. This is the country that has blocked Twitter, Facebook, YouTube, WhatsApp, ………… This is the country that employs a million people to read every tweet and delete those that it doesn’t like. Even in that country, buying a SIM card was as simple as going to a corner shop and just buying it. No paper, no forms, no crap. It takes all of 2 minutes. And I am now supposed to be living in a liberal democracy called India. And I have to do all of what I have outlined in this post, simply to have the privilege of talking to a friend.
    Unfortunately this is not the worst of it. The other day, I had to receive a payment from some company. They demanded my Aadhaar. Very soon, if I have to pee, I am sure I will have to validate my Aadhaar.
    Readers are invited to design the most creative torture that can be inflicted on Ramamritham. And to the good American referred to earlier in the post. Let’s do an exchange. I’ll gladly take your dear leader in exchange for Ramamritham !!

    Wooing HQ2 ? Yuk !

    If you are an American, here’s a a nice issue to distract you from your fixation about you know who and direct your attention to a different issue you can get all worked up about.
    Witness each city falling over each other and doing the most stupid of things to land HQ2. Tucson Arizona, where one of the readers of this blog lives ,  uprooted a 21ft cactus and tried to deliver it to HQ1. The mayor of Kansas City actually bought one thousand items from the company in HQ1 and wrote a review of each one of them. Mayors of cities are looking silly in videos that they have made asking Alexa where HQ2 is going to come up and Alexa answering of course, the city they are mayors of. Shall I go on ?
    If you are wondering what all this hullaballoo is  about, this is all to do with attracting Amazon’s second head office. Amazon is based in Seattle (this is HQ1). They want to create a HQ2 somewhere else. And why are cities willing to stand in a line and kiss Bezos’ ass (cue the nod to the awful American version of the Queen’s English !). Because he is promising to invest $5 bn and create 50,000 jobs. How did they come to this magic figure of investment ? Because he says the average salary of the jobs created would be $100,000. 
    The antics of Tucson and Kansas City are harmless on their own. HQ2 won’t come there anyway. The real danger is the big cities offering tax breaks to Amazon. Without a doubt this will happen.
    This is a terrible idea. Cities and states that do sweetheart deals to tempt businesses into moving are doing an appalling act of profligacy.  This is worse than a bribe.  Think about it – this is a perfect way of taking money from the poor (remember indirect taxes are not progressive and a fair amount of the state revenues in the US come from indirect taxes) and giving it to somebody who does not deserve or need the money. One city does this , and the next city will do the same for another company.  And before you say Bingo, everybody has been given a dole.
    The right way to attract companies is to do the boring things – create infrastructure, make a talent pool available by vigorous education and training, attract outsiders by making it a great place to come and live, have a favourable business atmosphere in the form of ease of doing business and reasonable tax rates.  That is when companies will come and stay on. That’s why New York in Finance and the West Coast Cities in technology are what they are.  Not because they gave tax breaks.
    If you are an American, you should vigorously protest against your city doing a sweetheart deal with Amazon.  
    For Indians, who can look at all this with an amused smile; we have of course been long guilty of doing such deals with companies. But I want you to get agitated in a different angle. The capital of the IT industry in the country did all the right things 30 years back – great place to live in, pleasant weather, abundance of talent, a cosmopolitan place for people to come, etc etc. It did not give a tax break. And yet every IT company worth it’s salt came.
    And then this city let it all go to seed and become the appalling wreck of a city that it is today.  This is the best way to drive every company out. No member of the Homo Sapiens species will ever come to this place again. Instead the entire population has mutated into Pithecanthropus Erectus, which being extinct, is delighted to be able to come back into existence even if condemned to living in a hellhole ! How does this blogger know of such a mutation ? Because he has mutated himself !

    Xi who must be obeyed (with apologies to The Economist)

    The title of this post is directly stolen from The Economist which ran a cover story by this name a year or so ago. They themselves were punning the quote from here.

    The much awaited China’s People Congress ended today with the expected climax – the unveiling of the new Politburo Standing Committee ; the men who will run China for the next five years. More of this in just a little while. This ended a week of speechifying and staged events.

    First, the two things that stood out during the days preceding the event today.  Xi Jinping opened the Congress with a speech lasting an incredible three and a half hours, reaching new heights of torture and boredom. It was a hugely self confident China strutting about as a world power, with Xi vigorously patting his own back. He outlined some of the directions for the next five years which were typically broad motherhoods, but gave some clues on where they are heading.

    The most important outcome was the enshrining of “Xi Jinping Thought” in the Communist Party’s Constitution. This is a peculiarly Chinese obsession. Their infatuation with obscure theories and doctrines knows no boundaries. “Mao Zedong Thought” was supposed to be the guiding doctrine of the Party – never mind that it is rubbish, the Party has long ditched many of that nonsense, etc etc. Then Deng Xiaoping “Practice” was enshrined into the Constitution after his death. At the end of their terms Jiang Zemin and Hu Jintao’s “theories” were also included, but their names were not mentioned (such semantics are very important in China with those two acknowledging that they are a step behind the two taller and earlier leaders). Xi hasn’t bothered with any such finesse. Halfway into his term he has enshrined his name and “Thought” – the implication being he is Mao’s equivalent and even above Deng. A dangerous move almost Trumpesque is self aggrandisation. His “Thought” is mostly bland with lots of garbage , but who cares. These are political moves cloaked in ideology.

    And then today, came the line of seven men who walked in, and that was how the world got to know about the new Standing Committee. Readers of this blog may recall that this blogger made a prediction in this post a month or so ago. I got one thing wrong – that Li Keqiang the Premier would be dropped and that Wang Qishan, Xi’s right hand man would stay on beyond retirement age and would become the Premier. That didn’t happen. The powerful Wang retired and Li has stayed on as the Premier. I predicted a 5 man Standing Committee reduced from 7 (that didn’t happen) but also named the potential seven man Committee if it stayed at that number. I got that dead right, including the order of seniority – after Xi and Li came Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji & Hang Zheng. I got real lucky !

    Here is my take on the implications of what happened over the last week

    – Xi is all powerful. That we knew of course.
    – Xi has decided to not break all traditions and to preserve some of the norms and continuity. Hence the  retirement of Wang Qishan and the continuance of Li Keqiang.
    – No successor to Xi has been named, as expected. This leaves Xi’s options open. He can stay on as a power centre either formally or informally after his term ends in 5 years.
    – The two possible successors Hu Chunhua and Chen Min’er are on trial. They have to earn the right to succeed over the next 5 years. But even after, they will probably have to be subservient to Xi.
    – The Party is going to tighten the hold on China even more. Forget any liberalism, tolerance and such other “esoteric” concepts.
    – China will be aggressive in world politics. The world simply has to learnt to adjust to that. America will be the county most affected. It will be on the losing end more often than not.
    – Zhao Leji will be the new Wang Qishan. He will continue the anti corruption drive and Xi’s political opponents will continue to be targeted.
    – China is entering into dangerous territory of authoritarianism.  Chinese history shows  how much the entire country loses when such autocratic tyrants take charge – recent examples of Ci Xi and Mao are enough to illustrate this danger. There is every risk of Xi going the same way – generating sycophants, staying on too long, getting drunk on power and doing stupid things.
    – The Deng Xiaoping era is finally over (that it lasted 25 years after his death is amazing by itself). Most of the safeguards he tried to institutionalize are slipping. The wisdom of Deng is being frittered away. In many ways, he is the loser from what has happened. China will learn to its cost, the implications of ignoring its wisest man in recent history.

    Life returns back to normal in China. This blogger will not blog about Chinese politics for the foreseeable future. A parting thought however – watch out for Hu Chunhua, Chen Min’er, Zhao Leji, and of course, above all, Xi.

    Insanity in Property


                                                                          (Photo : Google Maps)

     

    The world’s costliest building it has become. Yesterday, “The Center” in Hong Kong – a 73 storey landmark was sold for $ 5bn. Yes, FIVE BILLION US DOLLARS. For a single building. No you are not hallucinating. It really did happen.
    The Centre was a jewel in the portfolio of Li Ka-Shing. If you don’t know who he is, well, he was, and probably is, Mr Hong Kong.  One of the richest men in the world. For long he has symbolised money, power and all the glamour of Hong Kong.
    This post is not about the old man. It’s about insanity in property valuations. Yes land is scarce (anybody who has been to Hong Kong knows how scarce). And yes, it is demand and supply that sets prices.  And yes, it is a free market – nobody is compelled to buy or sell at any price. But even then, it is only right to pause and reflect on what such insane property valuations mean.
    It means, most of the world’s population cannot afford a house. Full stop.  This is one of the biggest problems in the developed world (ask any Brit how bad it is), and increasingly in the developing world. It simply drives up the cost of doing anything . In India for example, the tuition fees in a school are not for teachers – it is really to pay for the property. Ditto hospital costs. It is also the reason why you will never see a typical supermarket in the city of Mumbai .
    Such ridiculous property valuations are one of the greatest causes of wealth inequality. The very few, who for historical reasons happened to inherit land, or buy property make wild fortunes at the expense of the large majority. After all any pricing is simply the value that society collectively places on  any dimension of life . Is anybody in the world seriously going to argue that property must be placed on a far higher pedestal than virtually anything else in life ?
    Back to the $5 bn building. In case you have some difficulty comprehending what $5 bn is,  it will pay for 12 years of Honk Kong’s spend on Child and Family Services or  6 years of the spending on the elderly, or 7 years of spending the on the disabled or 20 years of spending on youth or 2 years of the entire police budget or 4 years of the health budget …… Shall I go on ?
    Readers must know that this blogger is taking a grave risk by putting up this post. A reader, who is a dear friend has castigated me for becoming a raving loony leftist and has threatened to personally come and clobber me if I write one more example of becoming a “commie” in old age ! I will have to take precautions for my safety tomorrow !!

    Reading this post may make you blind

    We’ve all made fun of Americans and their crazy law of torts. That’s why you have such gems such as “Contents Hot” on a coffee cup or a “Remove baby before folding” sticker on a pram. In that same vein is the recent move in California that may soon have the warning “Coffee Causes Cancer” in coffee shops !  Granted that the land of the free scores somewhere mid tier in the international rankings of IQ, but still …..
    A news item about P&G and Tide laundry pods however made me pause. P&G has released an ad featuring  Rob Gronkowski, the New England Patriots’ star exhorting people not to eat Tide laundry pods ! WTF ? 
    Apparently some teenagers have started a campaign called the ‘Tide Pod Challenge”. You are supposed to eat a Tide Pod and then post the video online. Reportedly some 40 cases of this nonsense have already happened in the first 15 days of 2018. It became serious enough for P&G to take note and issue the aforementioned ad exhorting people to wash clothes with their Tide laundry pod and not eat it. Without a doubt, their legal department opined that if they kept quiet, it was only a matter of time before they were slapped with a class action suit from a parent that the company was liable because they did nothing to prevent their children from eating the damned pod !
    The purpose of this post is not to rail against the stupidity of on line antics. There is enough and more written on that. But where does personal responsibility end and where does company liability begin ? We seem to be living in a day and age where there is no personal responsibility whatsoever and its always someone else to blame. If its a rich juicy company, then great. Blame them and sue for a zillion dollars.  Is it the job of a company to monitor every nonsense that’s happening on social media and guard against them ?


    I am taking no chances. I am a poor man and will be bankrupted if you sue me ! Please therefore take note that reading this post on a screen may be injurious to your eyes. Please also note that if you are sipping coffee at the same time it might spill and burn your thighs as it is hot !!

    CEOs sacked for conduct don’t deserve severance pay

    This blogger has been fascinated with lululemon for some time. The Vancouver based company has been peddling fashion wear for yoga and been successful at it. Firstly this blogger is amazed that you have fashion wear for yoga. Secondly, can a company really be named lululemon ? And spelt without a capital L ? There was also the business of yoga pants that, er, revealed too much, a few years ago. With that sort of pedigree, it is a “must follow” company !
    (Wunder Under Hi-Rise 7/8 Tight Full-On Luxtreme 25″ for $98.00 USD – Note the price !)

    They are in the news again. They fired their CEO yesterday. The gobbledygook announcement they put out said “lululemon expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr. Potdevin fell short of these standards of conduct.” In plain English, the Board fired him. He did something wrong, relating to employees, and they fired him. Plain and simple. Nothing earth shattering about that – CEOs are fired for a variety of reasons and this happens all the time. But clearly he was fired, not for poor performance, but for something he should not have done with employee(s), but did. We should not speculate further.

    So far nothing spectacular. But what got my goat was also the statement in the announcement that “Potdevin will receive a cash payment of $5 million, including $3.35 million upfront and an additional $1.65m over the next 18 months, according to a separation agreement filed with the Securities and Exchange Commission.” This is outrageous. He’s guilty of misconduct and you pay him $5 million ? I’m gobsmacked. Yes, there must have been a separation payment in his employment contract. That’s standard in almost all CEO contracts. Why CEOs – any employee’s contract. You have to be paid a severance pay (however measly it may be) if you are fired.

    But this guy is being fired for wrong conduct. Would any low level employee guilty of the same conduct as Mr Potdevin ever be paid a severance pay ? No chance ? Then why should he be paid simply because he was the CEO. If there was an iron clad clause in his contract that said he would be paid no matter what the reasons for firing are, then the guys who drafted such a contract must be fired and made to pay a fine equal to this severance pay.

    This sort of action is why companies are hated by the general public. Any corporate action must not only be fair, but be seen to be fair. The Board of lululemon deserves to be fried , roasted and hauled over coals. It is a listed company. What are the shareholders doing ?

    CEOs are exactly the same as any other employee of a company. I have no problem with them being paid handsomely for the work they do. But they should not be paid for conduct that necessitates a firing.

    Indra Nooyi is not an idiot !

    No No. PepsiCo is not foolish enough to launch Doritos for women. For Gods sake, PepsiCo is one of the greatest consumer marketing companies on earth. Sure, even the finest companies can lay a goose egg once in a while. But  not such an obvious bloomer like Doritos for women.
    The brouhaha started with an interview Indra Nooyi, the Chairperson of Pepsico gave to Freakonomics. As reported in the New York Times –
     Ms. Nooyi told the interviewer that women did not eat Doritos the same way men did.“They don’t like to crunch too loudly in public,” she said. “And they don’t lick their fingers generously, and they don’t like to pour the little broken pieces and the flavor into their mouth.”She was asked whether PepsiCo — which owns Frito-Lay, the manufacturer of Doritos — was planning “a male and female version of chips.”
    Ms. Nooyi responded: “It’s not a male and female as much as, ‘Are there snacks for women that can be designed and packaged differently?’ And yes, we are looking at it, and we’re getting ready to launch a bunch of them soon. For women, low-crunch, the full taste profile, not have so much of the flavor stick on the fingers, and how can you put it in a purse? Because women love to carry a snack in their purse.”
    The Sun (of the  notorious British tabloid fame) took this and reported that Doritos for women was being launched. Social media picked it up and hyped it with juicy headlines.

    Feminists responded by lashing out and saying this simply reinforced gender stereotypes. Men  lashed out saying this was PC going too far. Sending a tweet is easy – you don’t have to think and you can spew whatever banality you wish to without any consequence;  just ask a certain old man occupying a seat of power. And then before you could say Doritos, a full blown controversy had erupted. The company had to issue a statement that No, they were not launching Doritos for women !
    Indra Nooyi must be scratching her head in bewilderment. All she was outlining in her podcast was how Frito Lay really tried to understand consumers, tried to get insights and tailor products accordingly. Very likely they may have launched a variant that was less crunchy, if that’s what women preferred. But they wouldn’t do something as dumb as launching a “Doritos for women”.
    Just goes to show how careful anybody has to be when making a public appearance. It seems altogether appealing not to appear in public at all – after all no human is infallible enough not to utter an inanity. It also shows how lots of people have nothing else to do but to respond to every nonsense and tweet some rubbish. A certain distinguished reader of mine is a prodigious tweeter. He may want to pause 🙂

      Immigration and Agriculture

      There are some basic facts about agriculture. One ; you cannot do away with agriculture; you have to eat after all. Two; However much you mechanise agriculture, there are large portions of it that have to be done by hand and you need manual labour. Three; agricultural labour is hard hard work. You and I cannot do it. Four; everywhere in the world, the natives do not want to do agricultural labour. Five; You therefore have to “import” labour – poor people from places other than where the farms are and usually from another country. Six; the natives do not want these “immigrants” to come.
      This is a real problem, which as stated, does not have a solution. Witness what’s happening in the UK.
      The Brits don’t want to work in the fields. Therefore most of the agricultural labour comes from Eastern Europe (white Christians, mind you; the problem is compounded in the US because the labour is Hispanic). The Brits have voted to leave the EU and don’t want anybody coming into their country. End result – fruit is rotting in the fields as reported in the article linked. 
      This was not even about illegal immigration – these workers all came perfectly legally from Eastern Europe and since it was seasonal work, actually often went back to their countries after the picking was over. And yet the Brits have spat on their face and told them they are not welcome.
      The same rural folk in the UK are the ones who voted for Brexit. London overwhelmingly voted for staying. And the main reason for voting exit ? Immigration. We don’t want foreigners; period.
      The UK farming lobby wants to reinstate the seasonal workers scheme. The deal is , please come and do the dirty work we don’t want to do, stay in some ghetto so that we don’t see you, give us all the fruit and then bugger off to where you came from. Couching it in polite language does not detract from what it really is meant to be.
      Agricultural labourers should simply organise themselves and show the middle finger to the UK. If you want us to work, treat us as decent human beings and give us the respect we deserve. Or else, you can do your own dirty work.
      To paraphrase the Duke of Norfolk – you cannot have your fruit and eat it too !

      Thus spake Gates

      Regular leaders of the blog know that this blogger is an unabashed admirer of Bill & Melinda Gates. He is of the opinion that they must be sainted – for they have have done more good in the world than many, if not most, religious leaders.
      They publish an annual letter which is like a “State of the Union address” in their field. This time they have answered in their letter, the ten toughest questions they get. And yes, Donald Trump is one of them, but if you expect an incendiary answer, well, you don’t know the Gates.
      I consider their Annual Letter as required reading for any human being with a heart. Here is this year’s letter.
      Its a bit different as it addresses questions, some of which are not developmental in nature – like Trump, or what do they do when they disagree. But it is , as always, an interesting and often motivating read.
      May I exhort you to read this one, and then every one of their previous 10 letters. It is a far more productive use of your time, than reading you know what !

      Sack all Fund Managers !

      Here is uncontestable proof that all Fund Managers are a waste of time. They are (mostly) lavishly paid for nothing. If that sounds a radical statement, read on.
      Its a well known saying in financial circles that you cannot beat the market in the long run. The sage of Omaha, Warren Buffett has been saying this for a long time. In 2007, he publicly laid a bet that the S&P 500 index would outperform hedge funds over a 10 year period. He wagered $500,000 on it to anybody who would take up the challenge, observing cheekily , ” “After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line?”
      Surprisingly only one person took up the bet (shame on you hedge fund industry). Protege Partners handpicked a  portfolio of hedge funds. And the wager was on – the S&P 500 against this handpicked pool of hedge funds.
      Ten years ended on 31 Dec 2017. And guess who won ? The hedge fund pool gained 22% over 10 years. The S&P 500 rose 85%. No contest ! Buffet won a handsome amount and promptly donated it to the charity,  Girls Inc of Omaha.
      There’s a big lesson to everybody who is saving and investing. In the long run you cannot beat the market index. Repeat after me, In the long run you cannot beat the index. Repeat again, In the long run you cannot beat the index. Write it out 1000 times.
      And yet, we listen to advice from friends. To tips. We hire investment managers. Fund Managers design all sort of esoteric funds and write research reports on how their funds are outperforming the market. A million online portals exist that cater to advice on investment. All of them charge a fee. All of them get handsomely paid.  
      Instead follow the advice of Warren Buffet (for free; no fees charged). Simply invest in an index fund – the S&P 500 if you are in the US, the Footsie if you are in the UK, the Nifty if you are in India. A fund that will charge minimum fees to simply hold the basket of securities exactly mimicking the index. And then forget about it. Come back after 10 or 20 or 30 years. You would have made more money than anybody else. It’s as simple as that.
      There’s only one slight problem. Warren Buffet has beaten the S&P Index handsomely in the 50 odd years he has been at the helm of Berkshire Hathaway !

      The poor state of business journalism

      If you clicked on Business News from the US on Google, here’s a sample of the news items that are featured
      Business news has become a reality show. Where are the many important economic issues facing the world ? Where is the reasoned debate ? I had hoped that the dry area of economics and business would be the last to succumb to trivialisation and  sensationalisation. Alas, it has already fallen.
      Take the case of the Nirav Modi – Punjab National Bank fraud that has hit the headlines in India. It is a massive fraud and yet try as I might,  and despite the millions of words written and aired on this (the favourite word is scam – in India everything is a scam), I am not able to make out what exactly happened. There isn’t one journalistic piece on what exactly happened in detail, why it happened and how can it be prevented. Instead the predominant coverage is that because of the same surname as the Indian Prime Minister, the opposition Congress Party has been going around calling Nirav Modi as “Chhota Modi” (Smaller Modi) although there is absolutely no evidence of any relationship.  Both the parties are blaming each other loudly (from what news has come out, this appears to be a plain banking fraud with no link to politics).
      The two finest business newspapers in the world – Financial Times of the UK and the Wall Street Journal have become obsessed with Trump. No, I don’t want to read anything about him, thank you.
      The Economist remains the only “good” read. Alas, this blogger’s subscription is having some niggles and there has been no issue to read for a month.
      Can we examine America pumping itself with steroids? They are reducing taxes, increasing military spending, increasing social spending and presuming to invest in infrastructure at the same time, and that too when the country is near full employment. This is deficit financing on a staggering scale , being done by the party that ostensibly hates deficits. 
      Can we examine the Brexit issue in terms of what exactly the trade deal issues are ? Can we examine China’s pile of debt ? Can we marvel at Europe overtaking the US in economic growth – yes that happened last quarter. Can we think about the boom in India’s indirect tax revenues ?
      Instead I am being told that a Transavia flight made an emergency landing because a passenger refused to stop farting.

      High Court Of England And Wales Rejects Pak’s Claim

      In a major legal setback to Pakistan, the High Court of England and Wales has given an extremely landmark and laudable judgment on October 2, 2019 after a long drawn out legal battle that dates back to 1948 rejecting rightly Pakistan’s frivolous claims and ruling explicitly that the VII Nizam of Hyderabad’s descendants and India can collect 35 million pounds from London’s National Westminster Bank. Thus the decades old legal battle has now finally culminated in India’s favour! Very rightly so!
      Needless to say, this historic verdict has left Pakistan red faced and has left India with a big smile on its face! Justice Marcus Smith of the High Court of England and Wales who authored this extremely wonderful judgment has rightly ruled that the 35 million pounds that is about Rs 306 crore deposited in the London Bank rightfully belonged to the Nizam’s family and India and threw out the frivolous claims made by Pakistan through its High Commissioner in London. It also made it clear in its noteworthy judgment that the funds worth 1 million pounds (now 35 million pounds) were sent by the erstwhile Nizam Asaf Jah to Pakistan for “trust for safekeeping” and that their ownership vested in the Nizam himself. 
      It may be recalled that at the time of partition in 1947, the then Nizam Asaf Jah had sent the said funds to the then Pakistan High Commissioner for London for safekeeping of independent princely state of Hyderabad, in case of invasion from India. Subsequently, however, the Nizam claimed that he had not authorized the transfer and sought the return of the amount. Nevertheless, the request came to be denied by the NatWest Bank at UK, where the funds were kept, which said that the fund could be released only on an express agreement of Pakistan which held the legal title to the funds. 
      As it turned out, we saw how consequently the Nizam whose legal claims were fully backed by the Indian government took legal recourse and issued proceedings against the bank which ultimately failed due to Pakistan’s sovereign immunity. However, what went later in India’s and Nizam’s favour was that this obstacle was finally removed in 2013 when Pakistan claimed ownership of the fund and submitted a claim, thereby waiving its sovereign immunity. The matter was thus then placed before the High Court of Justice Business and Property Courts of England and Wales which finally culminated in this extremely laudable and landmark judgment!
      Truth be told, Justice Marcus Smith in his landmark judgment explicitly held that, “Nizam VII was beneficially entitled to the Fund and those claiming in right of Nizam VII – the Princes and India – are entitled to have the sum paid out to their order. I will leave it to the parties to frame an appropriate form of order for my approval.” The Ministry of External Affairs (MEA) while hailing the noteworthy verdict that upheld India’s claim and which also rejected Pakistan’s contention that the Nizam had transferred the funds as a gift or as payment for a shipment of arms. The MEA statement also said that, “The Court has issued a wide-ranging judgment today after analyzing documentation going back more than 70 years and embracing the law of constructive and resulting trusts, unjust enrichment, foreign act of state, illegality and limitation of actions,” adding further that the court “rejected arguments advanced by Pakistan that the dispute was non-justiciable, either in whole or in part; that the doctrine of illegality somehow barred recovery; or that the claims of other parties were time barred.”
      To recapitulate, this historic case pertains to the transfer of 1,007,940 pounds (now worth 35 pound million) and nine shillings by the Nizam’s envoy and Foreign Minister in London – Moin Nawaz Jung, on September 16, 1948 to Pakistan when the Indian Army’s tanks were closing in on Hyderabad from all directions. Moin Nawaz Jung transferred the money to the account of Habib Ibrahim Rahimtoola, the High Commissioner of Pakistan in London, which the bank processed on September 1948. However, Hyderabad’s armed forces had already surrendered to General JN Chowdhury on September 17, 1948 after a military operation known as “Operation Polo”.
      What then unfolded was that within days of surrender, the Nizam sent a message to the National Westminster Bank demanding the money to be transferred back to his account. Pakistan also claimed the money with its tall claims. The case has seen many twists and turns over the years before it finally ended in India’s favour! In 1965, the Nizam assigned to the President of India, his claim to the fund and joined forces with India to fight for his claim on the money. It is unclear however as to how the fund will be divided.
      Not surprising that Pakistan while fulminating said that the judgment had not taken into account the “historical context” that led to the Nizam transferring the money to Pakistan’s high commissioner in London, in order to protect his state from “Indian invasion”. The Pakistan’s Ministry of Foreign Affairs said that, “Pakistan is closely examining all aspects of the detailed judgment and will take further action in light of legal advice received.” This present case was first instituted by Pakistan in 2013 against the bank to transfer the money to Pakistan. 
      What’s more, Pakistan’s claim rested squarely on the premise that the money was transferred for the weapons supplied by the country to the Nizam. The court relied on the testimony of Prince Muffakam Jah who was the brother of the seventh Nizam, documentary evidence as well as public documents produced by India and Pakistan. Paul Hewitt who was partner in Withers LLP, who has acted for the VIII Nizam since Pakistan issued proceedings in 2013 was quoted as saying that, “Our client was still a child when the dispute first arose and is now in his 80s. It is a great relief to see this dispute finally resolved in his lifetime.”
      Let us now briefly have a cursory look at the summary of the judgment. The salient points here are worth mentioning. It is held that, “I conclude that Pakistan’s illegality arguments fails for the following reasons:-
      1. First, India is indeed correct in her assertion that the question of illegality is “analytically irrelevant” to the claim to the Fund advanced by India. 
      2. Secondly, even if the question of illegality were relevant to India’s claims, the Settlement between the Princes and India has rendered the issue irrelevant because the rival claims to the Fund of the Princes and India have validly been compromised, such that the question of illegality is no longer before the Court.
      3. Thirdly, there is no illegality alleged that is sufficient to cause this Court to prevent the Princes and India – specifically India – from asserting her claim to the Fund.”
      Conclusions and Disposition
      Finally and most importantly, this elegant and excellent judgment authored by Justice Marcus Smith in his conclusions and disposition sums up by saying that, “I conclude that:
      (1) The Fund was held by Pakistan through her High Commissioner in the United Kingdom on trust for Nizam VII and his successors in title. The Fund was not held by Rahimtoola personally, nor did either Pakistan or Rahimtoola have any beneficial interest in the Fund.
      (2) The trust was either a constructive trust in favour of Nizam VII or a resulting trust in favour of Nizam VII. It was not, as I have found, an express trust because I find that Nizam VII did not communicate to Moin any authority to effect the Transfer and create a trust. However, Moin’s conduct was consistent with the unexpressed wishes of Nizam VII. Both Moin and Rahimtoola intended that an express trust should arise and – had there been a communication of authority by Nizam VII to Moin – an express trust would have arisen.
      (3) There is nothing in the involvement of Pakistan, India, Hyderabad or Nizam VII as sovereign states or rulers of sovereign states to prevent a trust (whether express, constructive or resulting) from arising.
      (4) It is unnecessary, given the Settlement reached as between the Princes and India, for me to determine whether it is the Princes or India that is Nizam VII’s successor in title, whether by virtue of the 1963 Settlement and 1965 Appointment (in the case of the Princes) or the 1965 Assignment (in the case of India). However, it is appropriate to record that the Nizam’s successor in title can be no-one other than the Princes or India. The administrator of Nizam VII’s estate (Mr Lintott) was a party to these proceedings and was given every opportunity to bring a rival claim to those of the Princes and India; he did not do and is bound by the outcome of these proceedings. It is also appropriate to record that during the course of these proceedings, I have seen no hint of the possibility of any further claimant to the Fund beyond the Princes and India.
      (5) The Princes’ and India’s alternative claims in restitution succeed against (i) Pakistan and (ii) in the alternative, the Bank. I find that Pakistan’s assertion of a defence of limitation is an abuse of the process of the court and order that the paragraphs in Pakistan’s statements of case asserting this defence be struck out. The Bank never pleaded a defence of limitation, and I find that a claim in restitution is properly maintainable against the Bank.
      (6) Pakistan’s contention of non-justiciability by reason of the foreign act of state doctrine and non-enforceability on grounds of illegality both fail.”
      It is then also rightly held in para 341 that, “In these circumstances, Nizam VII was beneficially entitled to the Fund and those claiming in right of Nizam VII – the Princes and India – are entitled to have the sum paid out to their order. I will leave it to the parties to frame an appropriate form of order for my approval.” 
      No doubt, it is a very well written, well drafted and superb 140-page extremely landmark and laudable judgment which rightly rules in favour of the Nizam VII and India and rejects strongly all the frivolous claims made by Pakistan! Pakistan must be gracious enough to accept this extremely landmark and historic verdict by the High Court of England and Wales but that it can never be! In spite of knowing fully well that its tall claims hold no legal basis still it chose to knock the door of the High Court of England and Wales. The result it got is now before all of us to see for ourselves! Pakistan has every reason on earth to sulk as its tall claims of ‘arms-for-money’ argument and ‘safeguarding-the-money’ argument got rejected as it did not cut much ice with the Judge and India and Nizam of Hyderabad have every reason to celebrate as their logical stand got the full backing of the court and it was ruled that the money must go to the Nizam’s descendants and India! India had earlier tried to settle the lingering dispute amicably but Pakistan never cooperated and so no mutually agreed solution could be arrived at! 
      Sanjeev Sirohi, Advocate,
      s/o Col BPS Sirohi,
      A 82, Defence Enclave,
      Sardhana Road, Kankerkhera,
      Meerut – 250001, Uttar Pradesh.