Ayn Rand..and relevance
Once upon a time long, long ago I used to be a fan of Ayn Rand’s books!
This must have been circa 1980 when I was a student and believed that there is a perfect world…and it exists in the world occupied by the White Man. It was a time when it was easy to believe that democracy existed, capitalism was perfect, Americans were literate, Indian philosophy was not relevant today, and Ayn Rand was the ‘Economic God of Perfect Capitalism’.
Then I graduated, did my CA, read a little more. Then understood Bhagwat Gita better.
Saw that the Americans loved democracy so much, that they kept it all to themselves! They did not like democracy unless it was made at home – OMG what patriotism!
Capitalism was spelt – L-O-B-B-Y-I-N-G (and my Economics teacher did not tell me that). Capitalism meant wheat, rice, sugar grown in India could not be sold in USA, but Pepsi had to be allowed to buy potato in India at Rs. 3 a kg and sell chips to Indians at Rs. 500 a kg. Gillette was allowed to buy Indian steel, Indian plastic, use Indian models but sell shaving blades at US prices :). No, I am not complaining – I hold shares of Gillette.
India will not allow foreign retail, but Citibank was allowed to sell anything in retail – ask Hero Honda group!
The way Ayn Rand understood capitalism was that the owner was wanting the long term good of the organisation. Sadly this was her understanding of a ‘An unknown Ideal’
However, today I meet CEOs who have a 2-3 year view on the company where they work. Management and Ownership is really diverse – nobody owns up the responsibility for the long term (say 30 years) of the organisation. Imagine I have bought a ULIP for 25 years in a company where the CIO changes often!
Ayn Rand is relevant only when the owner is managing. When employees, minority shareholders and the majority shareholders have a divergent view on what should happen in the company….well it is the MAJOR shareholder who wins. Sometimes it is the employee who wins. Many a times it is the ego of the CEO (who may not have any shares at all) which makes him do things AGAINST the wishes of the board of directors!
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Patachitram
Hi Subra,
I found the comment on Gillette very interesting – “Gillette was allowed to buy Indian steel, Indian plastic, use Indian models but sell shaving blades at US prices . No, I am not complaining – I hold shares of Gillette.”
Sometime back i had heard a scathing comment from One IIMB marketing prof on why the IT companies should call themselves as high tech when even a company which makes something as mundane as shaving systems has a sizable number of patents. Couldn’t help but remember that.
Did you know ? “Gillette invested $750 million in developing the concept for the Mach 3, obtaining 50 different patents for the design”. Interesting isn’t it ?? No wonder we pay American prices for shavings our Indian beards 🙂
And we find almost no other brand of shaving blades (at least in twin blade category) in Indian market.
Me woke li’l to the Gillette story. Will add good numbers when the next opportunity presents itself 🙂
Regards
Dr Mohammed Ali Khan
Subra
I suggest you read atleast this, for a start
http://www.aynrand.org/site/News2?page=NewsArticle&id=21923&news_iv_ctrl=1021
Maaran
Dr. Khan , that was a very good read. Thanks for the link.
pravin
lobbyists are needed only because the govt and not the consumer wields economic power in an economy where the state has abolished the fundamental right to property and has to auction resources it doesnt own.it is not a part of free markets at all.
ditto for central banking.
as far as hired ceos are concerned,it is upto the shareholder/owner to set the right incentives.if they cant come up with something that doesnt focus his attention on the longer term,how is the market to blame?.
markets are about freedom.i think freedom is the highest value we should cherish as free souls.even above a full stomach and a comfortable house
subra
i had read the link earlier..and ACTUALLY SHOULD have connected to my article…CANNOT BLAME CAPITALIsm…bcoz capitalism does not exist.
Not sure pravin from where u are coming..but corruption in awarding contracts in the private sector – i deal with both the sectors – is as rampant as in the income tax dept.
salaried ceos screwing the shareholder value – we have an internal magazine where we talk about it – among about 200 people – believe me, WE SEE IT EVERY DAY..some of the examples that our free lance analysts see are STUNNING misuse of corporate money in the pvt sector. Believe me, market forces do not work because of shareholder inertia…so if it works over 140 years…I WOULD BE DEAD! some examples are so stunning you will not believe it EVEN IF I SHOWED YOU. Like the example of a CEO of a loss making company who flew down from US in FIRST CLASS for ONE DAY (he was attending a meeting there) to attend a not very relevant BIRTHDAY…shareholder be damned. What Pranab is doing to oil companies many big shareholders do to their companies 🙂 ohhh it hurts…I have sold 5-6 companies with a FANTASTIC future because I was not sure about rewards reaching me, the poor stupid shareholder 🙁
Maaran
Subra, People in power corrupt. Be it politicians or leaders of corporations. Free market capitalism is not conceived to work in utopia where people are pristine pure.
Your views are from the perspective of an investor or a saver who is crucial to free market capitalism as he/she is the one who provides the much needed “capital” for entrepreneurs to buy “capital goods” so as to provide a good/service to the consumers.
This class of people are critical to the whole process and wouldn’t exist if there is no concept of “private ownership”. The investors/savers take advantage of this natural arrangement and benefit immensely from the enterprise of people with good ideas & execution skills.
Coming back to the instances you quoted, these are issues of corporate governance in listed companies. (or corporate mis-governance) You would expect a competent Board to detect wrong doings & protect interests of all shareholders. Senior management is paid the highest for a reason. What Pravin means is the incentives to do good for the company are built into the corporate policies that are communicated clearly to employees.
But becoming a shareholder or an investor in a listed company or any private sector company is purely VOLUNTARY. One can not blame capitalism for bad investment decisions that he/she makes.
If you think either the management is involved in wasteful spending or worse yet committing fraud, the natural response is ,like you did , to exit the company. The corollary is we don’t have this luxury in case of public sectors like Air India, Indian Railways. Even the slum dwellers subsidize these companies.
If the board is incompetent, can not detect irregularities or worse yet can not find a way to do business profitably, as a shareholder you have no one but yourself to blame. Eg Satyam (Institutional investors were the first to raise red flags as opposed to the Board). Infosys/TCS/Wipro shareholders have not complained.
There are plenty of companies that give returns quarter after quarter. Investors & shareholders will reward those managements handsomely or get rewarded themselves. Bother to check your portfolio ? 🙂
The real world evidences show everyone is so much better off with private ownership & not public sector.
manish
Do one thing… when you wake up tomorrow, start counting the things that you use and think you get it at the price you get it with the quality you get it at courtesy of Ayn Rand capitalism in America or else where. Start with toothbrush and end with v**gra… cars, internet, google,laptop, tv, cell, cable etc etc there is no end to the list. From Anacin, polio shots, pesticides, your CA text books – you get my point. You discredit capitalism with a handful of examples of its failures but fail to recognize zillions of successes all around you.
By the way you don’t pay the same price as in US for Gillette
http://online.wsj.com/article_email/SB10001424052748704789404575524273890970954-lMyQjAxMTAwMDAwMTEwNDEyWj.html
And if you think Gilette is overpriced in India, it presents you a golden opportunity to start a blade company, make a blade with same quality as Gillette, sell it for 2 paisa less than Gillette…you will be a billionaire…ofcourse Gillette will not let that happen, it will reduce its price by 4 paisa and then you and it goes on…. That is the beauty of AR capitalism…
If Pepsi buys aloo at 3rs/kg and sells chips at 500rs/kg, why would any customer buy it..there is a value add somewhere along the way. Same way TCS pays 10$/hr to its programmer and charges its clients 100$/hr because of the value add…
If you are meeting CEOs who have 2-3 yr view of the company and scewing it up.. you are meeting wrong CEOs and investing in wrong companies.. Try and meet Steve Jobs, Tata or the CEO of Procter and Gamble(which owns Gillette) who visits remotest villages in China personally to meet the chinese Dhobis(not to attend a wedding) and understand how he can customize the washing powders to chinese markets
Just because we see news everyday about 100s of accidents on highways, lets not call highways/cars irrelevant for our transportation and suggest going back to bullock carts.. lets try and fix it and make it better(eg., build better roads, educate drivers, enforce speed limits etc)
Sukumaran
Vow Subra what a discussion…and now you are getting portfolio advise. Sure ‘you are meeting wrong CEOs’ time you moved from the village back to the city. Time you start meeting ‘honest’ CEOs of big companies. L O L.
if people see your internal comments on ‘honest’ people they will either puke or scream in disbelief…and the SCREAM will be real.
anyway people who believe in doctrines believe in them…you are better off making money for yourself. Jai Ho capitalism ki! America Mata ki Jai! Bharat Mata ki Jai!!! Capitalism ki Jai! Ayn Rand ki Jai! Should we do a A R play this Independence day? LOL
pravin
well,capitalism is not going to abolish dishonesty at all.not by any means.corruption is not the same as fraud/cheating.corruption is where the victims are left with no choice.when praful patel pays his AI employees very well,the rest of the taxpayers (everyone is a tax payer via indirect taxes) are directly affected.a disgruntled taxpayer has no choice but to pony up OR go to jail. a private sector CEO who is dishonest can be fired or the investor can walk away from that company.ditto for employees,suppliers or any other stakeholder. the moot point is freedom.it includes the freedom to be cheaters.in the public sector there is no freedom because you have no choice but to go with it.
america ofcourse is no shining beacon of capitalism.but clearly societies which are freer achieve more. i’d like someone to critique why freedom is a lesser value than egalitarianism
Maaran
“if people see your internal comments on ‘honest’ people they will either puke or scream in disbelief…and the SCREAM will be real.” – It really makes me wonder why you should keep this a secret at all ? Have you reported this to anyone at all ?
If I see a crime being committed, the least I could do is report it to police if not help the victim.
Parag
Hi Mr. Subra,
Gillette brought me to your blog through Google Reader.
I find your blog very interesting & informative.
Thanks.
kumar
Well.. saying Ayn Rand is irrelevant because you see corrupt CEOs all over is like saying GOD is irrelevant because you see corrupt pujaris everywhere
Pakka
I think Kumar’s point is spot on. What we see is not capitalism but crony capitalisim. Capitalisim is about individual freedom, free society and free money.
Read Hayek, Mises & Rothbard. Go to mises.org and learn about capitalisim and money.
Maaran
I was discussing this with one of my colleagues and this came up.
A lot of indians supposedly educated truly believe that our socialistic country has “created” and “ensured” freedom & liberty for everyone. Understanding what freedom means is something so fundamental but rarely taught & appreciated in India.
Constitution & laws do not “create” freedom. They are meant to “protect” the freedom & liberty all of us have and especially from the state. A market economy is only a natural social arrangement. But a Socialistic state thinks it can go against nature and plan , orchestrate how millions of indians act in their daily lives.
Sukumaran
With Cuba privatising its hospitals and US nationalising its banks and insurance companies…can you please name a socialistic country or a full capitalistic country in the world? I am still looking 🙂 LOL
Maaran
Sukumaran, Don’t understand the pun in your question.
Why should the state arbitrarily decide “what industry to privatize”? That’s socialism for you. Why should I subsidize someone’s petrol, power, air travel when I don’t even consume much of these myself? That’s socialism.
M S PANJWANI
Subra,
Everyone in their responses are falling on each other to show “who knows America and Ayn Rand better-this is a typical Indian psyche.
To express our knowledge about America and Ayn Rand is a sense of achievement for all of us.
Now if Subra might have posted something about India and Swamy Vivekananda, would he be able to get this many responses?
Indian intellectuals loves to discuss America and Ayn Rand,leaving India and Vivekananda to Baba Ramdev.
Sometime back there was a post on “poor english” and “poor construction” in the same blog, we love foreigners.
After reading responses of readers…their zeal and excitement about expressing their knowledge about above cited subject…me thinks:”it’s only the beginning of capitalism in India”-picture abhi baaki hai mere dost…….LOL
M S PANJWANI
@manish
aapka post padh kar dil khush ho gaya mere bhai……
Pakka
Pajawani Vivekananda also talks about individual freedom and choice but with a focus of spirtuality. India heritage (pre colonization) is very liberal (read european liberal) there were many great Indian liberals too, go to liberalsindia.com.
This is has nothing to do with India, America or Ayn Rand, it has do with ideas of capitalism & socialism.
The tragedy is people talk about capitalism when they do know what it means. Mercantilism, corporatism is what is practiced and labelled as capitalism.