What lessons for Indian bankers and the government?
Bankers are never popular! Why this is so?
One has to think for an answer.
Now, the American banking system is in turmoil.
The big Wall St.Bank, Lehman Brothers, collapsed.
Those who are specialists in the banking and financial system know well that it is the critical basis for the world capitalism. Capitalism, as it is today, is driven by the big American banking system.
The very way the big commercial banks like the just collapsed Lehman Bros functions or functioned shows that is big time speculation in stocks and stock markets that led to this collapse.
Big thinkers like the Nobel Prize winner economist Joseph Stigler says it is the greed of the big money speculators that led to the collapse.
Now what is the reaction in India?
As expected the government, the RBI, or the so-called big players like ICICI, HDFC men don’t open their mouth, except to deny, for official record sake that the American collapse wont affect the Indian banks.
This is false.
There is news that about nine Indian banks, led by SBI,ICICI,HDFC and others have been affected to the extent of about 420 million dollar exposure(read, lending or investments in the American bank)!
The US government had bailed out the collapsed bank by “investing” about 700 billion dollars! Government buys the bad assets!
The point is that unlike what the CPI (M) says the American capitalist system is highly controlled by the American government.
So too in India, the government controls and directs the direction in which the private sector capitalism, if we want to use such an expression, functions.
So, there are lessons here from USA for India.
The government must intervene and control the banking system so as to function within limits, not over-speculate in stock market investments, also in investments in foreign stocks etc.
Just now we have read an interesting book on Harvard Business School.
Here is an interesting and latest book. “Two years at Harvard Business School (Ahead of the Curve) by Philip Delves Broughton, published in 2008, just now delivered through e-bay.
What makes for success in business? The book by an young British student who passed out of Oxford in 1994 and got his MBA from Harvard Business School (HBS) in 2006.He was the only one with a journalist background, and who went to HBS expecting to get what other MBAs of HBS got, that is big fat salary and then life as secure as other MBAs thought they get.
Finally when he graduated he surprisingly found himself without a job offer!
The book is gripping in its details and in its honesty of purpose.
Incidentally, there were Indian professors teaching in HSB and his account of the two Indian professors is also very interesting. The book is a mine of high level information. Each sentence makes you sit up and think over. In the jargon of the HSB, the Google earners, the owners are all not billionaires, zillionaires! The top earning bracket is that where you at least own a private jet.
So, the expectations from a would be HBS MBA is that you land up in a very high paying job. A HSB MBA costs 175,000 dollars for two years.
How the MBAs went into various jobs? The very top went into the private equity and hedge funds on salaries of hundreds of thousands of dollars. People called them “studs”! Next went to investment banking and consulting. Five per cent, 45 students went to McKinsey. Many went to Silicon Valley for technology jobs and others for venture capital firms. Seven to Google, nine to Microsoft. So, sixty per cent went to jobs immediately after they graduated. The rest had job offers and waiting. There was one only without even a job offer! Who? Who else, the very same author of the book it.
But what we find very interesting is that not all who got high paying jobs were happy with the way world turned to them, they had their own nagging doubts. How long one spends life in a 9 to 5 jobs?
There were other doubts as well. How long one works? All life or take a mid-career break. Then do what? Go into government? Yes, many did. McNamara, the defence secretary in the Kennedy government was an obvious one and McNamara crops up in these pages more than once. Also, there are certain unkindly cruel jokes about men who make up the success story.
What interested us in this instance is the story about the bigwigs who visited the campus and visited the classes and met the students what they spoke and what impressions they left behind. All the names are here, from Craig Buffet, the successful investor to many others. Also, there are cases and case studies about the men who made big money. The case of Andrew Carnegie is very touching. Michael Porter, the HSB professor is also here. He was rated very high, one of the seventeen professors, the highest academic positions available and only one of two in the business school. The other was incidentally one who won the Nobel Prize (for his work on stock options) in 1997! The Times of London ranked Porter as the most important business thinker in the world! His famous theory is about competitive advantages. He might still win a Nobel Prize, says the author. Incidentally, Porter taught the author in his class about Microeconomics of Competitiveness and this was about how to drive change and growth at the grass roots level.
Now, one story is about J.P.Morgan, the legendary banker.
How to lend money by a banker?” Ordinary banks use individual credit scores to size up borrowers. But a sophisticated lender looks more deeply. What drives this banker? How much does he want to succeed? If I were a lender presented with red hot ambition to succeed, with all of the seething insecurity, that extraordinary will to power, that unquenchable need for cars and what not, I would lend and lend again, and the last thing I would call my loan would be “junk”. I would be delighted to have the opportunity to lend to a man so motivated to make money. J.P.Moragn said along these lines in testimony to the Congress. Morgan was being questioned by a relentless corporate lawyer. The lawyer asked Morgan: if the lending criterion was the money or property as collateral by the borrower, Morgan shot back: “No, sir”
Morgan said: “The first thing is character”.
“Before money is property?” questioned the lawyer again.
“Before money or property or anything else” Morgan said.
“A man I could not trust could not get money from me on all the bonds in the Christendom>”
The financial system turns on personalities as much as anything else.
So, the J.P. Morgan legend was born!
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