Wednesday, December 21, 2011

Afghanistan: Strategic Options before the US

In my last blog entry, I had outlined how Russia is playing a high-stakes, long-term, strategic poker to regain its former dominance and glory. Today, I examine a few history lessons relating to war; and in the light of Russia's game, and also because of lack of a coherent long term US foreign policy, now that US involvement in Iraq and Libya has ended, I attempt to explain how America is painting itself into a strategic corner, as far as the major remaining theatre of war, Afghanistan, is concerned.
History has always shown that supply lines are at the root of war strategy. If supply lines are closed, the army that has advanced becomes isolated and vulnerable. For this same reason, access to sea ports that make possible cheap logistics via sea have always been considered strategically important. Also, physical features like lakes, seas, rivers and mountain ranges often form national borders that act as natural fortifications or buffer zones.
History is replete with instances where supply lines, ports and geographic features like narrow straits that control access, have played a big role. Control of the narrow Strait of Istanbul (aka Bosphorus Strait), connecting the Black Sea to the Mediterranean Sea has been the prize at stake in more than one war (including WW-1's Battle of Gallipoli), as the Suez Canal has been in the 1960s. At Dunkirk in WW-2, breaking the isolation and seige was at the heart of the evacuation by Allied forces. Again, the German army was repulsed in Russia towards the end of WW-2 by the “scorched earth” strategy–the retreating Russians left behind nothing that the enemy could use–no buildings (burnt/ razed), no crops (burnt), and no food or water (poisoned wells). The long, thin supply line was constantly broken by Russian guerillas, and to make matters worse, the winter of '41-42 was the severest in a long time. Soldiers froze to death in their sleep; diesel froze in fuel tanks; there were severe food shortages due to the scorched earth policy. This put such a severe strain on the logistics of supporting an advancing army that the Nazis eventually capitulated.

The above references to supply lines brings us to why Russia's strategic gameplan has attained even more serious geo-political overtones: supply lines to Afghanistan, an important theatre of war, where the US and NATO forces are deeply involved, have become vulnerable. Pakistan, in anger over killing of 24 of its soldiers at an Afghan border checkpost, has closed two US supply lines to Afghanistan: via Torkham (Khyber Pass) in the north, and via Chaman in the south. These were the cheapest and easiest supply lines, though risky because of risks of ambushes to the convoys. A few years back, to reduce dependence on the route through Pakistan, the US developed the so-called Northern Distribution Network (NDN) project. It was hoped that the NDN would be less subject to armed attacks, delays, and pilferage that have hampered movement of goods along the Karachi-Peshawar route. In setting up the NDN, the US must have expended considerable diplomatic capital in nudging and getting co-operation from several CIS states involved, and above all, from Russia. An attempt to get China and India to partly fund the NDN because of potential benefits to their economies was a non-starter. This eventually allowed multiple alternative supply lines to be established, albeit a bit costlier (about 250% of the Karachi-Peshawar route), into Afghanistan from the North. Why multiple? Because the sole customer of these routes was the US/NATO, and having multiple options was thought to offer better bargaining leverge to the US. But as we will see in detail below, each NDN route is an uneasy option for the US, especially after Pakistan has shut its doors to NATO and US.

  • The best route for NATO/ US forces to send supplies to Afghanistan is the route from the Arabian Sea (Karachi, Pakistan) to Afghanistan via Peshawar, Chaman and Torkham on the Af-Pak border. This is short, relatively easily motorable, and access to Pakistan via Arabian Sea is relatively easy for the US and its allies, thanks to its military bases in Iraq, Kuwait, and Saudi Arabia. Even this route has pushed the cost of gasoline from $3 per gallon in the US to $400 per gallon delivered at the forward positions in Afghanistan. When convoys are ambushed, the costs are said to go up to $800 per gallon!
  • The second route (called NDN North), is the next most viable route (because a large portion uses Soviet-era railway lines), starts in Riga, Latvia along the Baltic Sea, and goes through Russia, Kazakhstan, and Uzbekistan before entering Afghanistan. While Latvia, Uzbekistan and Kazakhstan may sympathise with the US rather than with Russia, it is of no avail, because Russia can shut that route overnight. Moreover, Latvia is 100% dependent on Russia for gas; and the other two have signed long term gas exploration and supply treaties with Russia. Hence, if Russia is angered, this route will close.
  • The third route (bypassing Russia, called NDN South) is from Poti, Georgia, along the Black Sea via Baku, Azerbaijan, crossing the Caspian Sea by ferries, to Aqtau in Kazakhstan and thereafter, through Uzbekistan, on to Afghanistan. Turkmenistan is not yet an option as its Government has not granted overland transit permission for non-lethal supplies, but only for humanitarian aid supplies headed for Afghanistan. This too is uncomfortable strategically, because Russia, if angered, can easily block access to Poti, Georgia in a war-like scenario. It can also lean on Kazakhstan and create trouble for its Government through multiple levers (not discussed here). So this route too, like the second route, is feasible only when Russia is in good humour, though it bypasses Russia entirely. It is uncomfortable logistically, because it means that consignments change over from ship to road to ferries and back to road transport. Plus, it goes through two CIS countries (Uzbekistan and Azerbaijan) where the overhang of Russian influence is still heavy. We cannot also ignore the frequent water-sharing disputes between Uzbekistan and Tajikistan resulting in Uzbek blockades of traffic into Tajikistan lasting for weeks on end, sometimes.

  • The fourth route (called the KKT route), bypasses Georgia, Uzbekistan and Azerbaijan but goes through Russia, ( :-) Russia keeps popping up like a bad coin!), Kazakhstan, Kyrgyzstan and Tajikistan.
  • The final route, and the most expensive, to be utilised only if other routes are not sufficient, or in case of life and death, is by air costing approximately $7 per pound of supplies – either over Russian and multiple CIS countries' airspace from Europe over the Black Sea or through Pakistani airspace. Now, any of these countries could deny access to US supply airplanes. Cheapest would be over Pakistani airspace, but this route is currently closed. The US's air base in Manas, Kyrgyzstan is also subject to Russian influence.  

So the conclusion is that the US has very few options in Afghanistan, and a great deal of hope that Pakistan will eventually be prevailed upon to swallow their anger against the US. Just a few days after Pakistan closed US and NATO supply lines to Afghanistan, Russia also threatened to close the NDN North in partial retaliation of the US's attempts to place ballistic missiles in Poland and other countries bordering Russia. They have also threatened to place short range missiles in Kaliningrad, aimed at specific targets in Europe. This is aimed at the most vulnerable spot in the US's Afghan strategy, at the worst possible time for the US. It is thus clear that Russia is more than willing to use the NDN as a diplomatic bargaining chip. Putin has signalled this loud and clear by lowering the diplomatic temper with the US several notches by accusing them of meddling in Russia's internal politics, in the context of post-election anti-Putin protests in Russia (some papers have called this Russia's “Tahrir” moment). If the US is actually doing what Putin is alleging, they are playing dangerous, high-stakes diplomatic poker. Russia, however, knows that if Pakistan changes its mind, or if the US retreats from Afghanistan, the NDN card will no longer work.
While it is some more time before things turn dire, if Pakistan does not make a U-turn from its current diplomatic position vis-à-vis the US and NATO, the options before the US are basically two; and both are “lame-duck” options that can diminish the US standing in the world considerably:
  • Eat diplomatic crow dished out by Russia to keep the most viable NDN routes open as long as they remain involved in Afghanistan; or
  • Completely retreat from Afghanistan well before the US Presidential election in Dec, 2012, like they have done recently in Iraq under cover of darkness and surprise. This is the most likely scenario. While the Obama administration spin doctors may project it politically as a decision to withdraw voluntarily (like they are projecting the Iraqi withdrawal), this will actually be projected by Pakistan and the Taliban, and seen and believed by much of the Arab/ Muslim world as a humiliating forced retreat arising out of defeat.
Currently no one in the US administration is talking about what happens if Pakistan sticks to its guns long enough. Everyone is cynical enough to believe that Pakistan will change its tune. But to understand the probability of this happening, note that for the first time, in Pakistan, the fundamentalists, the army and the politicians (even the opposition) are on one side. It will take great courage for any of these groupings to change their tune vis-a-vis the US radically. Expecting this to happen in some time is the equivalent of running a war and putting the lives of 140,000 armed forces personnel plus those of countless contract employees working in Afghanistan, to support the US and NATO fight against the Taliban, at stake on the basis of blind hope and faith, not hard-headed strategy and tactics. Putin's recent uncharacteristically belligerent diatribe against Hillary Clinton, John McCain and the US's meddling in internal politics of Russia (meaning the protests about the recent elections being unfair etc.) is as clear an indication as any that Russia is gearing up to extract a heavy diplomatic and political price from the US for keeping the NDN open. Come winter, and Russia dons its hardest negotiating hat in Ukraine; now they will do it with the US too. 
(Maps are from Google Earth (TM))

Tuesday, December 20, 2011

Russia's Strategic Geo-Political Game

Russia, after the break-up of USSR into 15 CIS countries, has been reduced to a country with long, flat borders that are difficult to patrol and defend, with most of its neighbouring CIS countries, and precious little access to the sea except to the icy Barents and Kara Seas.; and through Kaliningrad, an outpost cut off from the contiguous land mass of the rest of Russia, to the Baltic Sea. Russia also has a narrow window to the Black Sea southwest of Volgograd.

Commercially, it has much of Europe by the short hairs, because of its stranglehold over supply of natural gas. At least 18 CIS and European countries are between 25% and 100% dependent on Russian natural gas, and have almost fully converted to gas for internal heating. So, every winter since 2005, when large parts of Europe are difficult to live in without gas heating, Russia turns on the diplomatic pressure using Ukraine (through which its gas pipeline passes) as the whipping boy. Over the last 6 years, Russia has played hardball and negotiated hard with Ukraine. This year's negotiations may begin any time now. 

Russia under Vladimir Putin (and now Medvedev with Putin breathing down his neck) has been playing a very smart and patient strategic game for the last over 15 years, where it uses all its strategic advantages to gain and extend its power and influence. In particular, it is keen on expanding till it gets access to a natural bulwark against invasion, in the form of sea, river, lake or mountain range; and rebuild Russia to its former glory. This intent is borne out by Putin's recent regret that leaders of the erstwhile USSR did not fight to prevent its collapse. In 2005, he had described the described the demise of the USSR as the "greatest geopolitical catastrophe" of the 20th century. For example,
CIS Countries Map taken from Google Maps.

  • Russian troops have recently (in April, 2010), ostensibly at the invitation of the Kyrgyzstan Government, bivouacked in Kyrghyzstan, thus making Tajikistan, Kazakhstan and Uzbekistan, the three CIS countries bordering that tiny, poor country, very uncomfortable. Kyrgyzstan is mostly mountains and highlands, giving this country strategic vantage points to peer into their neighbours' backyards.
    • At the south-east, Russian troops can look down from the Tien Shan mountains almost into Tashkent, capital of Uzbekistan.
    • At the north, from Bishkek, the capital of Kyrgyzstan, if you shout, you can be heard in Kazakhstan. Indeed, Almaty, the largest town in, and the former capital of, Kazakhstan, with 9% of this thinly populated country's population, is less than 250 kms away. I had predicted in this blog in April, 2010, that there will be trouble in Kazakhstan in the next 2-3 years, covertly fomented by Russia. This seems to have begun, if this report is to be believed. A state of emergency is currently in force, and curfew imposed, in an oil-producing town. Kazakhstan is an important exporter of crude, and interruption of supplies are a possibility, leading to upward pressure on global oil prices.
    • The third country, Tajikistan, large parts of which are mountainous and inhospitable, borders Afghanistan, a geo-politically important state. Besides, Tajikistan is currently locked in a dispute with Uzbekistan about sharing of waters of a river which is being dammed in Tajikistan.
    • Kyrgyzstan also has a long border on the east with China, and from the mountains there, you can peer into China's Uighur (muslim) province, which Al Qaeda cells have reportedly infiltrated. Further, the US has an air base called Manas in Kyrgyzstan which is a supply line to Afghanistan. Since the new Kyrgyzstan Government owes its existence and continuance in power to Russia. This air supply base for US operations in Afghanistan is in danger, if Russia is angered by US foreign policy.
  • Kaliningrad gives Russia a shared border with Lithuania and Poland, and easy access to North Europe. As Lithuania is 100% dependent on Russia for its natural gas, like Latvia and Estonia, Lithuania has not much choice but to allow Russia land and airspace access to Kaliningrad, which is at the forefront of Russia's objection to US missile bases in CIS countries or other East European economies: Russia threatens retaliatory placement of nuclear warheads and missiles in Kaliningrad, virtually on the doorsteps of several Europe-facing CIS countries and all major EU countries. Thus, being NATO member-countries is a cold relief for Lativa, Lithuania and Estonia.
  • Russia's friendship with Venezuela and Bolivia through Chavez and Pablo Morales respectively raises the spectre of a “gas-OPEC” which can control gas pricing and distribution throughout the world. Even Iran and Kazakhstan have explicitly supported such an idea. Simultaneously, by offering sweeteners to Iran to lay a new pipeline for gas to Europe through its territories, it is moving forward to make Europe even more dependent on Russia for gas, far into the future. Note that Bolivia, Venezuela, Iran and Russia together account for 45% of proven gas reserves in the world. Add Turkmenistan, Kazakhstan and Uzbekistan, with whom Russia has signed long term exploration and supply agreements for gas (read: buys all its present and future gas output), and this figure crosses 50%. Throw in Equatorial Guinea, Trinidad and Tobago, Algeria, Argentina, Brunei, Nigeria, Oman and Qatar, all of whom are members of the Gas Exporting Countries Forum (GECF) of which a Russian is the Secretary General, and this formidable multilateral group controls more of the gas production and reserves of the world than OPEC did for oil. Besides, international companies have by now been pushed out of Russia, more or less, and Russian oil and gas is now consolidated in, and controlled by state-owned entities.
  • Russia, along with 5 or 6 other UN member countries, notably including Venezuela, headed by Hugo Chavez, a known US-baiter, has recognized two breakaway provinces of Georgia (South Ossetia and Abkhazia) as separate countries in 2008. Russia has set up military presence in both these provinces, cocking a snook at the US and Europe, by drawing parallels to what they did by recognizing Kosovo earlier the same year over the objections of Russia. Thus, it breathes down the neck of the Georgian leadership, with South Ossetia being within shouting distance of Tbilisi, the capital. Abkhazia gives Russia much broader Black Sea coastline access, and cuts Georgia's access to it by half. When Georgia appealed for help, Europe did not budge because of its fear of angering Russia that supplies so much of Europe's natural gas. The US could not even think of coming to Georgia's rescue in these two theatres – because Russia patrolled access to Georgia via the Black Sea, and absent reliable supply lines, other than diplomatic support, it could do little else.
  • Russia is so huge that it is easy to forget that in the south-east, Vladivostok, the last stop on the Great Trans-Siberian Railway at Russia's south-east tip, is very near the northern tip of North Korea, US's great bugbear. With the death of Kim-Jong Il, this geographic proximity has potential to invite international interest. I won't be surprised that with a young, untested leader in the saddle in N Korea holding a nuclear button, Russia and China attempt get friendly with N Korea. Revival of old proposals like a train from Russia through N Korea and onwards to S Korea; an oil pipeline through a similar route; and so on can be expected. In the north, the eastern-most point of Asia, that is almost permanently ice-bound, the Bering Strait separates US territory (Diomedes Islands, Alaska) from Russian by less than 50 kms, though a day apart on the calendar. (You may be able to spot Sarah Palin's kitchen from this part of Russia!) It is possible to ski across a frozen Bering Strait from Russia to the US (or vice versa) at this point (skiing to yesterday or tomorrow!). A time will soon come when Russia will begin to leverage these geographical quirks too. 

Monday, December 19, 2011

Has the US financial system thrown all caution to the winds?

I occasionally look at the US Debt Clock, and record my impressions on this blog. The biggest figure by far on this page, full of mind-bogglingly high figures, is the figure of currency and credit derivatives to which the US economy is exposed. The US financial system is becoming bolder – in the last 6 months, it seems that they have completely thrown caution to the winds, knowing that the rest of the developed world have little choice but to sink or swim with them.
Currency & Credit Derivatives Exposure of the US economy:
8 April, 2010
$648.975 Trillion
See this
26 Jul, 2011
$611.499 Trillion
See this
19 Dec, 2011
$766.628 Trillion
See this
From April to July, 2011, there seemed to be a 5% winding down (see this). However, since then, the exposure has shot up in the last 5 months to an unprecedented level. To put the current figure in context, currency and credit derivatives exposures have risen by $155 Trillion in 5 months – whereas the US GDP is $15 Trillion. The rise in this figure in only 5 months is 10 times the current GDP of the US economy; and 2-½ times the world GDP of $63.04 Trillion (World Bank figures, quoted on Wikipedia. See this).
Keep in mind that a large part of such exposures represent postponement of recognition of losses. This shows that the US economy continues to think that the rest of the world is a limitless risk sink; many ecnomists thought that the world had been cured of this naive belief. Stupidity is alive and kicking in the financial system!

Monday, December 12, 2011

The Passing of a Generation

My grand-uncle (paternal grandfather's brother) passed away at 2:10 am today morning. Since I am myself almost 50, this isn't at all surprising. Yet, it is a passing away to grieve about. He has been the pater familias for longer than I have lived. As the 9th of 10 children (7 brothers and 3 sisters), he was the last torch-bearer of his generation. His passing marks a passing of baton acrosss generations in the family. All his siblings have lived up to ripe ages, 65 upwards. Even in this family, this grand-uncle was unusually long-lived – he was 101 years, 5 months and 19 days when he passed away. The only one in his family to come anywhere close was his mother, my great-grandmother, who passed away at 99.

Longevity, continued good health and sharp mental acuity even at age 101 were remarkable aspects of his life; but more remarkable was the fact that he lived life in exemplary fashion. He was well-off by the standards of his time; but never really rich, but yet, he commanded a “following” among his friends and family that could not be explained fully. His house has been an open house for the extended family for well over 5 decades. I have always felt closer to him than any of my other grand-uncles, because I lost my grandfather when I was 6 years old; I remember seeing him only about twice or thrice.

I remember hazily his recounting of his experience in the 1944 Mumbai docks blast, where a ship berthed in Bombay (as it was then known) Harbour blew up – I recall his telling me (along with a few of my wide-eyed cousins) that one of his office colleagues had a huge bar of pure gold land with an almighty thud in his living room balcony, a few kilometres away from the docks. That story was quite riveting – almost like an eye-witness account. I must have been, perhaps, 5 or 6 years old at the time. I later read a story in an old Readers' Digest magazine issue about that incident that lent great credence to that story. On second thoughts, I can say that RD became more credible in my mind because of this article, rather than the other way around. So strong was his influence on my mind. A few years later, RD thereafter really shaped my eclectic reading interests – I became addicted to reading and would read no less than 15-20 issues of the magazine every three months (by picking up old copies from raddiwalas) for several years. The only other relative who shaped my reading habits was my late uncle, Chaitanya D Haldipur.

Among my earliest memories were attending my grand-uncle's 60th birthday celebrations, in 1970. We went by BEST Bus No.85 from Shivaji Park (a 12-15 minute walk from our home, then) to Tardeo, where it stopped just by the gate of the building where he stayed. There were so many people that I was a happily anonymous 8-year old having the run of their vast (so it seemed to my eyes then) apartment that day. I had a close look at a bouquet of 60 red roses sent by his office colleagues (he must have retired from service that day (I now guess) in a wicker basket, covered with crinkling cellophane probably the first time I had seen a bouquet.

For a few decades, he did a great deal of social work in our community, and I gathered that he was as liked as he was disliked, for his forthright views and actions, though I was never very aware of what he did. All I know is that for a few years, he was the full-time Manager of our community's Math at Shirali in Karnataka State, where he was credited with quite a lot of reforms, that resulted in the Math becoming financially self-sustained and less dependent on donations from the community. After that, I gathered that he was one of the founder-trustees of the Shree Trust, which set up a Math in Karla, between Mumbai and Pune.

My grand-uncle was headstrong, but managed a remarkable partnership of marriage that lasted exactly 75 years, with my my grand-aunt, who passed away just 6 months ago. As long as she was alive, he complained and chafed because his immediate family would not allow him to go out of the home by himself. Read this in the context of the fact that he had won a WIAA safe driving award many decades ago, and till he was past 92, he drove himself around in the Mumbai traffic. For this, he became some kind of a hero in the eyes of the extended family and his friends and well-wishers, but his immediate family would be on tenterhooks whenever he made off with the car riding over every objection raised by them. The family eventually decided to end these “escapades” by selling off the car. All this time, he looked perhaps 20 years younger than he actually was!

Indeed, an anecdote is shared by many in our family circles about one of his visits to Shirali, when he was around 85. He travelled alone by bus to Bhatkal (the nearest town where the bus stopped), where a car was to pick him up. The car driver was told to look out for an 85-year-old man travelling alone, and instructed to take special care of him. AtmaBappa got down from the bus, not looking much over 60 at that time. He could not see any car or placard-waving driver waiting for him, so after waiting a few minutes, he took a taxi and went to Shirali on his own, while the driver waited in vain, looking out for a frail-looking 85-year-old !

When he was 100, when I once visited him, he was spiritedly holding forth when suddenly, in the middle of a sentence, he asked me, “Where is Revati?” Only when I assured him that she was in the bedroom, talking to my wife, did he continue. It was a remarkable bond. He was physically fitter than she was, throughout their life together. Revatipachhi, as I called her (meaning Aunt Revati in Konkani, my mother-tongue) was the complete opposite – she was cool and frail; AtmaBappa (Uncle Atma) was mercurial, oozing health and energy. She was about 5 ft tall; he was almost 6 ft tall. She could barely be heard; his resonant baritone voice boomed across three thick walls of his home for over 50 years. They became the longest living couple in India as reckoned by sum total of their ages (using dates of birth as recorded in their passports). I like to think that they both lived so long because they both did not want to be the first among them to die, leaving the other alone.

While he stayed independent till the very end, he appreciated the lifetime of dedication of his daughter-in-law, Rekha, to her family. Rekha has been the one strong, steady feature in their domesitc life. At one time, there were four residents in that home, and three of them were unable to walk without support. Rekha took care of their every need selflessly. On his 99th Birthday, he announced to me in Rekha's presence that from now on, Rekha is the Boss of the House. He then told me sotto voce, that he was only saying it now, but that has been the case for quite a few years already!

When Revatipachhi passed away 6 months ago, something was snuffed out of AtmaBappa's life. While earlier, he was impatient with everyone because they restricted him and did not allow him to go around without a walker (which he was forced to use after a hip bone fracture when he was 99), now he had fallen silent. The last time I met him while he was up and about, which was probably a month ago, for the first time in my memory, he almost looked his age. He seemed lost, as if in some distant thoughts. It now took him 12-15 minutes to walk in tiny steps using a walker, from the living room divan to the dining table. But yet, he refused to be touched or assisted by anyone. He insisted on walking on his own, his streak of independence undulled by the ravages of Time.

His 101st birthday (just a month after his wife passed away) was a quiet, normal day, in June this year. I went to greet him. I touched his feet, and no sooner had I said, Many Happy Returns, he said in his usual stentorian tone, “No! Don't say Returns! I don't want to see another Birthday!”. I returned home with a slight feeling of despondency. At 99, he refused to undergo cataract surgery in one eye, saying,”What do I need better eyesight for? What will I see?” That seemed like his usual pragmatic self. But this was different – I had seen a person waiting to die.

The end came, for all practical purposes, about 2 weeks ago, when he got up to walk when nobody was around him, for a few seconds, and fell to the ground, with his head hitting the ground hard. The resultant blood clot and brain swelling pushed him into a coma, from which he never really came out. Doctors were amazed to see that his vital parameters were all perfect till the very end. They actually expected him to emerge from his comatose state soon. But that was not to be. After 2 weeks in the hospital, they brought him home. His wife had insisted that she not be admitted to a hospital, because she wanted to die at home. He probably wanted the same – because, within 24 hours of his returning home, he breathed his last.

Atmaram Ganpatrao Haldipur, RIP.

Friday, November 25, 2011

India is not the only country with problems!

I recently visited two countries in Europe - United Kingdom and Switzerland. While in Switzerland, we did all the touristy things, but in the UK, we were guests - our hosts were delightful company throughout, with very well brought-up and articulate children, with sharp minds of their own. 
My host, Sanjay and I took a brief day trip to Brighton. He informed me that Brighton was the gay capital of the UK, so just the two of us walking down the main street of this town would not raise any eyebrows, "even if we held hands", he added, tongue firmly in cheek! 
We saw some "homeless" persons - who were dressed in jeans, shirts and a cap, fairly well dressed, I thought, by Indian standards, but were kneeling on the pavement and begging for alms. What surprised me was that they were selling a magazine that is supposedly brought out by the homeless in Brighton and nearby areas, in which the advertisements and cover price go to fund some of the homeless. Sanjay told me that the homeless are not necessarily the dregs of society - indeed, he pointed out that in his office, there was one employee who was officially "homeless" - after a messy divorce, he had to leave the marital home, and he defaulted on credit card debt because of the alimony burden. It seems that homeless is a misnomer - they are entitled to, and get dormitory-style accommodation (in some cases, heated!). 
In a country that counts itself as one of the richest, this was a glimpse of what they called poverty. Definitely, this was relative poverty, and not the grinding, Rs.32 per day consumption level kind of poverty we encounter in India. While there, I read in the newspapers how many people entitled under the UK laws to accommodation based on their family size would be registered for these benefits in  the UK as well as in some other rich socialist country like Norway. They enjoy homes in both countries; and either use one as their vacation home, or surreptitiously rent out the house to other immigrants who have difficulty proving that their stay in the UK was legitimate. Many such persons are employed in so-called  "Indian" restaurants, which are actually Bangladeshi or Pakistani owned and operated.  This is corruption India-style; the equivalent of our CGS quarters that are supposedly allotted to Central Government employees at various levels. Many of them have their own homes, and prefer to "rent out" or illegally sublet the premises allocated to them, enjoying income that escapes the tax net altogether.
I now understood that the UK had its share of problems. And these problems were being exacerbated by many of the home mortgages that had slowly slid "underwater" in recent years. I was so surprised at evidence of homelessness in such a cold country that I did not capture it on camera.  
Then, in Switzerland, everything was almost picture-postcard-perfect. So beautiful, in fact, that we tired of clicking photographs of the landscapes everywhere.
Except for the fact that the Swiss haven't been able to rein in their rebellious graffitti artists who spray-painted and defaced public property almost everywhere. 
In a few places, we found that the authorities had spray-painted in white over this graffitti, but it still left the wall looking shabby.
I thought to myself, at least Switzerland seems to be wealthy enough to have homes for all their people. Then, I was proved wrong. I came across a "homeless body", or a "hobo" as they are often derogatorily referred to. Except that this guy looked like he must have starred in a Wild West movie. He carried his luggage around everywhere, and sat (and probably also slept) on bus terminal benches when he tired of walking around.  
This photograph was taken in a town called Bulle, in a bus terminal when we were returning from Nestle's Cailler chocolate factory in Broc.  
As I returned to India, I thought of when our country will reach a level where poverty and disrespect for public property is reduced to a level that one has to take photographs to record evidence that it exists. I knew it would be decades before it happened, but I am hopeful of good things happening. 

  • I am proud of the fact that we Indians have come to accept the reliability of Electronic Voting Machines, something that even the US and the UK have yet to adopt. 
  • I have especially great confidence in the UID initiative being led by Nandan Nilekani - it will become the largest biometric identification database in the world very soon, if it hasn't already become. 
  • India's banking industry is the strongest in the world today, and I can withdraw money from my account free of charge from any ATM or branch of any bank - something that even the developed world cannot boast of. 
  • Some time back, I had blogged on the wonderful experience I had in replacing my lost passport. I am sure this is an experience that thousands like me have had.  
  • Besides, the reduction in corruption that may result from a strong Jan Lokpal bill and an increasing pride that Indians will have in their country, that will lead them to eventually banish the scourge of absolute poverty. 
  • This very pride will also ensure that public property is well maintained. Have you noticed that the speakers and LCD televisions in Mumbai's new local trains have survived for well over a year without being stolen or damaged? 

We are learning, I dare hope, to preserve public property. India is on the move, not-withstanding the troubles that seem to be filling the papers nowadays. 

Saturday, November 12, 2011

Hit by Randomness

Being very logical and conservative, I believed completely in Nassim Nicholas Taleb's idea that events with very high impact but very, very low probability occur far more often than one thinks probable. 

The accuracy of this belief came home to me yesterday evening quite forcefully. For a few days, the normally diligent maid who comes in to clean my office did not turn up. Phone calls to her mobile number remained unanswered. A slight concern remained at the back of my mind, but I did nothing about it. This maid, who has been with me two years would even phone in to say she'd be late.  I ascribed it to the fact that she leads a very challenging and exhausting life, and may be unwell. She lives in rental accommodation with her mother and her son, who is doing very well in school (as a single mother, she is justifiably proud of that). She is still fighting in Court for maintenance against her husband who has abandoned them both. She works in a few places doing cleaning work from around 6:30 am, and then works in a company in Crawford Market till 8:30 pm and returns home close to 10 pm. 

Then, yesterday I heard from her brother, who lives nearby but separately. She had met with a freak accident that has changed her life completely. An act of random irresponsibility leading to a devastating black swan impact on this hard-working lady. Hit by randomness, as Taleb would put it. Bad luck, as most Indians would. Either way, it is entirely senseless and inexplicable. 

It will be some time before she can pick up the threads of her life. Her brother's intention was to ask if I would be good enough to wait for her to get well enough and come back to her job. I assured him that I would wait. She has taken a rain check on my offer for financial help. Need to go and meet her - will do that tomorrow.  

Sunday, November 06, 2011

Is the West afraid of democracy?

In recent times, governments in both, the US and Europe have shown that this could indeed be true!
We now look at a few examples in recent years, of the West running scared of true democracy.
  • Hamas was democratically elected as the governing party in a free and fair election which the US itself had approved of holding. Since that victory, neither Israel nor the US have recognized the Hamas government as a legitimately elected government in Gaza and the West Bank. All its talk of exporting democracy to justify ousting despots has been shown to be hollow and self-serving.
  • The US also took an inordinately long time before ditching its long-time ally Hosni Mubarak, and throwing their lot with a spontaneous non-violent democratic uprising in Egypt.
  • The current move to scuttle Palestine's application to be recognized as a country and admitted to full membership of the UN via a US veto in the Security Council is another example of the US running scared of democracy in action. The vote in UNESCO, where the US has no veto, shows what would happen if true democracy were allowed to prevail. 107 countries voted for admitting Palestine as a member of UNESCO while 14 countries (basically the US, Israel and like-minded countries) voted against.
  • Poland, Czechoslovakia, among several countries, wanted a referendum (the most democratic method, where every citizen can participate in the decision) to decide on the Lisbon Treaty (proposing constitutional change in the EU). However, they were all prevailed upon to not hold the referendum; instead, elected representatives alone ratified it.
  • Ireland, however, held a referendum and the proposal to join the EU was defeated. A year later, another referendum was forced to be held in Ireland on the same question when enough votes swung in favour of the Lisbon Treaty. That decision was hailed as a resounding endorsement of the Lisbon Treaty. This is a new kind of democracy where you repeatedly ask the same question, till you get the answer you want.
  • The most recent case is when the Greek PM, George Papandreou proposed that the rescue package cobbled together by Germany and a few other EU countries be voted on by the people of Greece (referendum). It had the effect of a hungry cat among a flock of alarmed pigeons. Why should the prospects of a Greek referendum trouble the richer countries?
  • Because Greece as a country is any way in a soup, whether they agree to the rescue package, or don't. It is has a choice of entering 8-ft deep water, or 25-ft deep water. The real rescue package is not for Greece, but for the banks in the developed countries that are holding Greek government bonds that have fallen steeply in value. For them, it s the difference between accessing EU's rescue funds to rescue them from the fallout of poor investment decisions and not getting that access, and bearing the entire loss themselves. With the backdrop of Occupy Wall Street campaign, and the widespread anger against bankers, a referendum would almost certainly return a resounding “NO” to the EU package.
  • So it is not a surprise that Papandreou was prevailed upon to abandon his idea of a referendum. It continues the long saga of the democracies fearing democracy.

Thursday, November 03, 2011

Mother Teresa of Somalia

Picture this: Somalia: the longest-running failed state, a country at war with itself for over a decade. Now picture this: Dr Hawa Abdi, a lady, a gynecologist, imbued with a spirit of service that has made her daughters into converts to her cause. She and her two daughters now run what has grown from a single room to a 400-bed hospital. These bed are always full, but in the hospital campus stay 90,000 displaced people who also need medical help or a shelter from the violence and madness outside the camp. Her hospital has become one of Somalia's largest relief camps.
In May, 2010, she was abducted and held at gunpoint for being a woman and running the camp, but the womenfolk in the camp nearly 75,000 are women or children) – through sheer numbers, and aided by a flood of approbation from the world over, they forced Dr Abdi's release. Dr Abdi, however, was made of sterner stuff – she insisted that the leader of those who abducted her apologise in writing for her abduction and vandalisation of the hospital.
Currently, Somalians are reeling under a famine, and all she can provide is drinking water, and a rent-free place to stay. While the majority of those in the camp are women and children, men are allowed to stay with two conditions (the first applies to all in the camp):
  • those staying in the camp do not talk about family or clan (the reason why Somalia is so deeply divided), and
  • they do not beat their wives. Any wife-beater is locked up in an empty storeroom.
Just 5 doctors (including Dr Abdi and her two daughters) and 16 nurses at the camp conduct 20 surgeries every day and treat 300-400 patients every single day, seven days a week; AND manage the camp. Truly deserving candidate for the Nobel Prize. Hope that she is nominated soon – the prize money will help her foundation and Somalia greatly.  

Thursday, October 20, 2011

Is China a currency manipulator?

Once upon a time, there were two countries, one named the US of A and the other named China. US of A bought Chinese goods cheaply for several years, by simply printing more of their money. China scrounged and worked hard, to be able to provide acceptable quality at very, very cheap dollar prices. US of A benefited hugely from a low priced yuan - it gave them more goods and value per dollar of spending. In the meanwhile, China saved, and saved, and saved. In US of A's dollars. So the US of A was the grasshopper that danced all summer, and China was the ant that saved up for the winter, from Aesop's fable.
China's thriftiness allowed the US of A to spend in excess of their incomes, and not bear the consequences, because, by buying up US of A's treasury bonds, China in effect sequestered the extra dollars printed in the US of A that could have led to inflation at home.
Now, US of A finds that they have reached the limit of deficit financing, and its cupboards are as empty as Old Mother Hubbard's was. They have suddenly realised that they have to repay all the Treasury Bonds that China has accumulated. They want to pay back the debts after China has appreciated the yuan, so that they will pay less dollars to pay off their debts. So they decide that China has to allow the yuan to appreciate against the dollar.
But China now has new-found confidence - the confidence of the rich ant, with a granary replete and bulging on all sides with dollar debts issued by the US of A. So it looks the US of A in the eye and says, "Please manage your own currency, we will manage ours." When pressed, the Chinese will point out that they have never lectured the US of A on what to do with their currency even when they were buying Chinese manufactured goods at a small fraction of what it would cost them to manufacture and sell, so why should China listen to lectures now?
So now, the US of A is doing the equivalent of the grasshopper in W Somerset Maugham's version - marry a rich widow and escape the consequences of past profligacy, by alleging that China is a currency manipulator, and forcing China to value its currency upwards. If China gives in, then they have been hit twice - once by being forced to sell goods cheaply with an undervalued currency; and once again when it is time for them to reap the benefits of investing their savings in US of A's Treasury bonds.  
Which version of "The Ant and the Grasshopper" will triumph - Aesop's, or Maugham's? The jury is out. I certainly hope that Maugham's cynical and dishonest grasshopper does not triumph. In this case, currently, it is worse: China's currency has risen, and yet they are being branded currency manipulators. 

Monday, October 10, 2011

Lessons in integrity from Bharat Ratna Sir M Visvesvaraya

Please read on till the end! 
Bharat Ratna Sir M. Visvesvaraya (15 Sep 1860- 14 April, 1962) was one of India's finest sons. The breadth of his achievements mark him out as the Leonardo Da Vinci of India.
He was a Civil Engineer par excellence. He devised innovative techniques that were well ahead of his time. Among them,
  • The Block System of Irrigation – to optimize, control and evenly distribute water supply to agricultural lands over many villages. The supply was rotated within “blocks” in each village to curtail misuse and water-logging. This system, devised in 1899, is still used in Deccan Canals.
  • The "collector well” in Sukkur in Sindh province (Pakistan). The area was hot and arid, and they had to pump water from River Sndhu to a hill nearby, filter it and supply water to the town through pipes.They did not have enough money for filters. Visveswaraya solved this ingeniously by digging wells in the river bed itself close to the river bank to obtain spring water through percolation. Thus filtering was achieved without installing filters. To increase supply of water, a tunnel was driven from the bottom of the well under the flowing river. This is now standard civil engineering textbook content under the Heading, “Collector Wells”.
  • He designed and patented Automated Floodgates, which permit flood water to enter a reservoir without water level exceeding full reservoir level, thereby reducing risk of submerging surrounding land. The gates are automatic because they open and close at the rise and fall of water in the reservoir for flood control. He designed water supply schemes for many towns in Bombay Presidency, Hyderabad and later as Chief Engineer of Mysore State.
As Dewan of Mysore State, he established many rural industries and set up basic education for small shop owners in the fields of book-keeping and commerce. Agricultural schools were opened to help with modern agricultural practices that reduced farmers’ overdependence on rain and good luck. Many industrial workshops and training institutes were set up. Public libraries were established. The Kannada Sahitya Parishat was formed. Many books on science were published in Kannada. The University College of Engineering (now known as University Visvesvaraya College of Engineering) and Maharani’s College for Women came into being. He established the Mysore University, as until then, all colleges in Mysore State were under Madras University. He established the Bhadravati Iron and Steel Works, The Mysore Sandal Oil Factory, the Mysore Sandal Soap Factory, the Metals Factory, and the Chrome Tanning Factory. He started the Bank of Mysore (now State Bank of Mysore) and The Mysore Chamber of Commerce. The Institution of Engineers (India) celebrates his birthday, 15th September every year, as Engineers Day.
He differed with Mahatma Gandhi whose view essentially was “Industrialize and Perish”, while Sir MV's motto was the opposite, “Industrialize or Perish”, but great men that they both were, both respected each others' views and capabilities.
Sir MV led a very simple life. He was known for his honesty and integrity. In 1912, Maharaja of Mysore appointed Visvesvaraya as his Dewan.
Before accepting the position of Dewan of Mysore, he invited all his relatives for dinner. He told them very clearly that he would accept the prestigious office on the condition that none of them would approach him for favours.
When on tour on official business, Sir MV carried a set of candles bought with his personal money, and used them for personal work like reading etc in the night after he was finished with official work.
Just think – this man lived a life of total personal integrity that we cannot even imagine today. It has taken another simple person like Anna Hazare to raise our collective anger against corruption. Across the political spectrum are ranged small minds who do not want to see corruption rooted out of this great country. They do not realise that because of their selfish interests, India is held back from fulfilling its rightful role in the world by the “hand-brake” called corruption. It is time to release the hand-brake and surge forward..

Friday, October 07, 2011

Dexia Bank Collapse: What it means for Europe, Belgium and the World

Dexia Bank is among the Top 50 financial institutions in the world. It is not just some small, unknown bank. It is different from other banks because it, and with it, Belgium, are caught in an uncomfortable spot. How? Let me attempt an explanation.
  1. Belgium has external debt to GDP ratio of close to 100% already. The Government thus does not have room for manouevre to fund losses of Dexia. That's already been done once - in 2008, the Belgian Government took control of Dexia. Various arms of Belgian and French Government now hold over 50% in Dexia. This closes off one source of succour. Worse, there is a political standoff in Belgium because of which there is no functioning Government at all at present in Belgium! Worst time for such problems to hit.
  2. Dexia's leverage at present is estimated to be almost 60:1 – double that of Lehman Brothers when its collapse was triggered. So Dexia is not in pretty shape at all. Worse, of its over €500Bn of assets, €20Bn are debts of Portugal, Italy and Greece, all of whom are in need of bailouts.
  3. After the 2008 takeover by the Government, instead of getting better, things got worse, because Dexia was a source of funds for the various parts of Belgium's Government. When they took it over, instead of stopping loans to Government which were the major part of its NPAs, they stepped up lending to Government, which enabled the Government to reduce its fiscal deficit somewhat. Now, if the Government were to bear even a small part of the losses of Dexia, its external debt to GDP ratio will shoot up to almost the level that Italy is at currently (which is 134%). So PIIGS will no longer be a sufficiently comprehensive acronym of European states in deep fiscal trouble. We have to find some way of adding a “B” to it. Just for comparison, US, Australia and India are at 99%, 94% and 22% respectively. France, one of the co-owners of Dexia, is at 208%.
  4. The only time-tested solution for banks or financial institutions in such a mess as Dexia finds itself in is to break up the institution into a “good bank” and a “bad bank” - like India did for Unit Trust of India a decade or so ago. Usually, the bad bank sells the 'bad” assets for anything they can get for it – which could be single digit percentages of the book value. In Dexia's case, this is apparently not feasible because (a) Belgium's Government does not have the money and the political will (there is no functioning government now!) to bail out Dexia because it would mean choking its own source of funding; and (b) “Good bank” assets have not takers almost anywhere in the world today. So the good bank-bad bank solution will not work very well for Dexia. But that is the only solution – so you can expect sell-offs of any saleable assets.

    Already, Reuters reports Qatar as being interesting in buying out Dexia's Luxembourg business. So the dismembering of the Bank has officially begun. The vultures are circling, but then, there aren't too many vultures, this time. Trading has been suspended in Dexia's shares, and S&P has downgraded Dexia's group companies steeply. In its downgrade press release, it notes that there is negative revaluation reserve in respect of available-for-sale securities of almost €6.9 Bn. Moody's has followed S&P in steeply downgrading (by 3 levels) the sovereign rating of Italy, and also some Italian banks in the last 2 days. Besides, 12 UK banks and 9 Portuguese banks have also been downgraded. Sovereign ratings of Spain, Ireland, Greece, Portugal and Cyprus have been cut as well. From the US, Ben Bernanke has said that the US economy is close to faltering. Deutsche Bank has warned that it will miss its profit target.

    One must remember that failing banks are not just like manufacturing or services companies that fail. Banks, as they fail, tear asunder the transaction enablement capability of its citizens. Thus, slitting the banking system's throat is akin to slitting the underbelly of a crocodile – however strong the economy may otherwise be, the banking system is its weakest link. This, all the above news in just a few days is bad news indeed, for the entire world. When banks collapse, other businesses will follow, and depositors will panic, causing a financial logjam in not just those countries, but in all countries where businesses have business ties with enterprises in countries whose banking systems are collapsing.
    In India, our very own SBI has suffered a downgrade because of its low Tier-I capital level that would require it to raise money and/or ask for Government help/ support. So where is the good news? If at all, it is in India where the Government has both, the wherewithal (with some difficulty) and the will and inclination, to support its banks.
    PostScript: This is the text of an email I received. Makes for interesting reading.
    Uncertainty has now hit Japan. In the last seven days, Origami bank has folded, Sumo Bank has gone belly up and Bonsai Bank has announced plans to cut some of its branches. Yesterday, it was also announced that Karaoke Bank will go up for sale and will likely go for a song, while shares in Kamikaze Bank were suspended today after they nose-dived. While Samurai Bank is soldiering on after sharp cutbacks, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank, where it is feared that staff may get a raw deal.

Thursday, October 06, 2011

Re-visiting Modern Accounting Standards

Should acquisition cost of an asset depend on how it is financed?
To my mind, and to most non-accountants, the simple answer seems to be No. But that is not how modern accountants see it. Costs incurred (including interest) till the time an asset is ready for use is treated as part of the cost of the asset. Whatever compulsions may have been behind adoption of such a treatment as standard, it tends to militate against simplicity, and creates needless (in my view) complexity.
Can a company have Net Profit After Tax equal to double its turnover for a quarter?
Common sense tells us that this is impossible. How can profits exceed turnover, that too profits after tax? However, modern accounting is not all common sense. Or maybe, it is such highly developed common sense that it takes truly uncommon levels of sense to understand why this can happen. As it happens, there are several reasons why this can happen. Deferred Taxation Accounting (DTA) is one of the reasons. DTA is one more area where accounting has been made dreadfully complex. So much so that it creates situations occasionally as the one described in the question above, where quarterly Net Profits After Tax of some companies exceed even quarterly revenues! How can accountants explain to laymen this paradox – where, say, the quarterly turnover of a manufacturing company is Rs.50 crores and its NPAT is Rs.90+ crores? Most accountants trying to explain this situation will end up tying themselves and their listeners in knots. This happens in the relatively rare instance when a company has just turned the corner after several years of losses. One argument in favour of the currently favoured treatment of deferred taxes is that it makes clear the differences in expected tax provision on reported profits, and the actual tax provision. However, we lose sight of the fact that the net result of the income statement becomes almost impossible to understand, even to reasonably financially literate individuals. Surely, this could not have been the intent of introducing such accounting treatment!
Is it a bad thing to allow retired employees medical treatment for life in hospitals run by the company?
Certainly, one cannot fault managers in Tata Steel if they begin to think like this. Accounting for Employee Benefits is another area where accounting complexity has reached ridiculous levels (in my view). Tata Steel used to routinely allow their retired employees and their families to be treated in the wonderful hospital they have built in Jamshedpur; and absorb and meet the net losses or cash shortfalls of that hospital quite routinely, as part of its employee-friendly initiatives. Let us say their costs were Rs.30 crores per annum, give or take a few crores. When AS 15 was made mandatory, suddenly they realized that because they allowed their retired employees and their families to enjoy these facilities for life, they suddenly had to recognize the present value of all the costs they expected to incur over the next several years, as a cost in a single year. This resulted in a hit to their Income Statement to the tune of hundreds of crores in the year in which the new Standard was made mandatory (if I remember it right, it was over Rs.250 crores). Why? Could not well enough be left alone? Now, it has accountants and managers thinking closely about the impact of such facilities to its past employees on its current profits, way beyond the actual cash expenses of offering such facilities. Simplicity flies out of the door, to be replaced by dreadful complexity. What I wonder is, what purpose is served by such complexity?
Why did Warren Buffett call derivatives "weapons of financial mass destruction'?
Buffett should have included "securitised, structured products" which are a class of "innovative" derivatives, by the same appellation. We know now that derivatives and securitisation have made financial life, and accounting for the new-fangled "innovations" they spawned infinitely more complex. Banks in the developed world are still facing the consequences of the complex accounting legacy of the millions of securitised structured note transactions it entered into almost without thinking in better times. They are now realising the impact of all that complex accounting – it only passed the parcel of risk onto others. It did not eliminate risk. Ultimately, every bank in the developed world was left holding such risk parcels to varying degrees. But they did not simply pass on risk to others. Some structured products passed on risks to a distant tomorrow.
We have yet to see the complete impact of such contracts that, in addition to passing the risk around to different people, also passed the risk to a future date. There are several apparently innocuous deals and assets sitting on the books of several companies (not just banks) which represent accounting legerdemain of pushing losses off to a point of time in the distant future, so that the current management came out smelling like roses though their results should have had the faecal matter hitting the overhead rotating cooling device. They are the financial equivalent of mines in modern warfare. They will go off and claim the lives of innocents at any time in future, without warning. This is because several best-selling "structured products" designed by mathematical geniueses sitting at investment banks the world over, were designed to hide losses from shareholders, future management and regulators alike. We have yet to see the full impact of such deals. Liabilities under such contracts will crawl out of nowhere, as it were, and trouble future managers and bankers alike. This is the long-term legacy of allowing untramelled financial innovation. AS 30, 31 and 32 (collectively dealing with accounting and reporting of derivatives) is something that almost 90% of practising Chartered Accountants – those charged with implementing them and checking their implementation incompanies, will privately admit to not being comfortable with. I think these Accounting Standards is a gigantic case of GroupThink – the management phenomenon where even a unanimous decision taken by a Group is completely at variance with what almost all of those participating in taking the decision privately think and opine. We need the small boy who points out shrilly that the Empe3ror is not really wearing clothes!
Why should we bother about all these complexities?
Almost all the modern accounting standards that have contributed their bit to making accounting more complex and less understandable have behind them the objective of making a company's Balance Sheet more "realistic". What they have actually succeeded in doing is to make the Income Statement almost impossible to understand or predict. Why should one prefer Balance Sheet accuracy to Income Statement accuracy? I think that the Balance Sheet showing assets at unrealistic low values based on historical cost is a form of desirable conservatism in accounting. We have succeeded in making the Income Statement, which is a good indicator of how well a company is being run, almost too volatile to be of any use – whether to compare results with past years, or to compare results with those of peers. Therefore, what I make above is a case for a complete re-thinking of the basis of modern, fair-value based accounting, and slowly going back to the traditional historical cost based accounting.

Steve Jobs, RiP

He was a technical AND marketing genius. I do not remember a single person who has had such deep impact over such a sustained period, as Steve Jobs has had, on the state-of-the-art in multiple consumer-facing industries. Personal computing, animation films, portable music players, music and entertainment marketing, smartphones, and hand-held tablet computers – all these are markets which he created, and in which he led his company to success at a level that can only be dreamed of by other companies. He did not make products – he made objects of desire. He changed the ways of working of every industry that he touched.
He built the first commercially successful personal computer in 1982 – the Apple II, after first developing the prototype in a garage, along with another technical genius, Steve Wozniak, whose autobiography is titled iWoz. This was the first commercial computer to have a mouse and an OS with graphical user interface. For several years – maybe 10 years, no machine came out on the market with comparable graphical OS. This probably represents the longest period of a technical monopoly ever.
He then went on to build the successors, called Macintosh computers, or Mac for short, which has been through several avatars. They became the gold standard for ease of use and stylish looks. Like every product that Jobs introduced, they were objects of desire, that sold even though they were usually far more expensive than the competition.
The famous story of how he got thrown out of the company he had founded is too well-known to recount, but genius that he was, he continued to develop cutting edge technology, in a company appropriately called NeXT. While the company never did come out with a commercial launch, several technologies developed there were incorporated into later versions of the Mac OS and other products. During that phase when he had nothing to do with Apple, he also bought and spent time on building a young startup company called Pixar Animation, where he learnt and taught the world how to to create full-length ultra-realistic 3D animation feature films using cutting edge computing technologies that his company used, as well as nifty software that it developed for internal use. The only other company that had successfully made animation films before, Disney, had made 2D films. Toy Story, Pixar's first film, was a blockbuster hit heralded a new genre in personal entertainment. It was inevitable that Disney and Pixar would merge, especially after Apple Inc reclaimed Jobs as its own. However, the success of Pixar and the deal with Disney made Jobs wealthy independent of Apple – an important factor that allowed him to dictate his own terms when he came back. Apple had become a basket case in the nearly 10 years that it ran without Jobs – to the extent that Jobs got arch rivals Microsoft into the company to continue to make Office for the Mac, and also a significant stake in Apple. This horrified Apple loyalists, and people felt that Microsoft had bought into Apple at a throwaway price, that allowed Apple to raise some much needed money and to stay alive, something that Microsoft also needed to defend themselves against charges of monopolistic behaviour. The reality was that Microsoft needed Apple to be alive, not kicking. But he had not contended with Jobs' steely determination to reinvent Apple.
Jobs' speech at Stanford's commencement, Stay Hungry, Stay Foolish, is an all-time classic with advice for anyone who aspires to be a creative success. It is a story of persistence and resilience, along with curiosity and willingness to question the weight of collective wisdom. It is something that every young person on the threshold of a career would be well advised to read and internalise.
Jobs' second innings with Apple has been even more exciting than the first, by almost any measure. He revived a moribund company to become the most valuable company on Earth by market capitalisation and profits. Jobs has left behind a company that has more liquid cash resources than the US Government. It sits on the largest cash pile in the world of any manufacturing company. It may be surpassed probably only by Berkshire Hathaway, which is mainly an investment company.
Jobs' second innings at Apple began with the i-Mac – with transparent plastic-encased monitors, computers and peripherals, not much functional difference, but great looks that evoked gasps at first sight made it the first hit product that gave Apple its second wind. Thereafter, there has been no looking back. i-Pods,i-Tunes, i-Stores, i-Phones, i-Pads, and the yet unheralded i-Cloud have all followed in monotonous succession; each redefining rules of the marketplace, and creating new standards to such an extent that Apple blazes the trail, and the entire world simply plays catch-up. It seemed as if Apple was unstoppable – till, cruelly, cancer took hold of Jobs. He battled on for a few years, but all the medical knowledge of humankind could not extend the life of this great man.
I don't envy Tim Cook – while he has been Jobs' close aide and confidante for several years, and been the de facto day-to-day head at Apple for a long time,  stepping into Jobs' shoes won't be comfortable – he will feel like a pygmy wearing three-league boots. The world will keep comparing him with Jobs. Like the i-Phone's latest version (4S) released a couple of days back, even though it has almost all-new innards, looks no different from the earlier version. Early reports suggest that Apple loyalists seem to be disappointed – quite possibly because it was the first product in more than a decade to be launched without Jobs' involvement, either at the launch or in its making.
Steve Jobs, RiP.