Every employee rises to incompetent levels

Laurence J. Peter first formulated and named the phenomenon in 1969, in a satirical book "The Peter Principle," where he stated that "In a hierarchy every employee tends to rise to his level of incompetence ... in time every post tends to be occupied by an employee who is incompetent to carry out its duties ... Work is accomplished by those employees who have not yet reached their level of incompetence." 

• You will see that in every hierarchy the cream rises until it sours.
• An employee does well. He’s rewarded with a promotion. He does well in that job, and is promoted again. This continues until the point he is no longer performing at a level deserving of a promotion, which leaves him at a level where he is incompetent.
• Being incompetent, they do not qualify to be promoted again, and so remain stuck at that final level for the rest of their career. 
• What’s true in general is often not true in particular. 
• A company that relies too heavily on sales as a criterion for promotion pays twice for the mistake.
• When good worker is promoted as supervisor and if he turns out incompetent then the firm lost a good worker and is saddled with a bad supervisor.
• One of the greatest pieces of self-awareness is the knowledge that management, whatever its perks, might not be worth the burdens it will impose on you.
• If a top-selling colleague from your team just became your new boss, it might be time to move on.
• Certain groups of managers – notably women and minorities — who weren’t promoted despite their competence and so didn’t get the chance to reach their level of incompetence. 
• The traits of good followers are nearly the same as the traits of good leaders. They “manage themselves well; are committed to the organization and to a purpose, principle, or person outside themselves; build their competence and focus their efforts for maximum impact; and are courageous, honest, and credible.”  If everyone were like that, the Peter Principle would probably never have been written.
• Percussive sublimation, in turn, is related to the Dilbert principle, which maintains that the real purpose of the hierarchy is to provide managerial roles that will minimize the ability of those employees to interfere with the actual work being accomplished by more productive staff members.

Who is trying to bring down PM Modi?

The right-wing Rashtriya Swayamsewak Sangh (RSS) in India kicked off a three-day conclave in Delhi on Monday by praising the main Opposition Congress party for securing India's independence. It also clarified it did not believe in a Congress-mukt (Congress-free) India but a sarvalok-yukt (all-inclusive) India. It came as a surprise because the RSS' prime minister, Narendra Modi, has spent four years spewing venom against the Congress, its prime ministers and the family that holds the party together. Certainly, the RSS revealed its changed thinking when it invited Congress chief Rahul Gandhi to this conclave. Despite Rahul's surprise hug for Modi in Parliament, better sense prevailed and he spurned the RSS invitation (unlike former president Pranab Mukherjee, who attended an RSS function in Nagpur in June, thinking he was laying the ground for himself to head a coalition government after the 2019 election). And though the RSS is eternally tainted with the assassination of "Mahatma" MK Gandhi in 1948, it has occasionally flirted with the Congress as evidenced by the fact of dozens of RSS men named as culprits in the 1984 anti-Sikh riots.

Still it is surprising that with a majority government still in the saddle and about eight months to go before the parliamentary election, the RSS finds it necessary to extend an olive branch to the main opposition party. It cannot be, as the RSS claims, that it is a misunderstood organisation and that this exercise is meant to dispel the wrong notions surrounding it. The RSS thrives on a certain element of mystery and myth given its rigid hierarchy and organisation and its para-military nature. There is only one explanation for the RSS's current behaviour: it has read the writing on the wall that its government is on its way out. Hence it is building bridges with opposition parties, because it fears what may come once Modi is out of power.

That things are not going well for Modi is evident from various other recent developments. NDA allies like Nitish Kumar's Janata Dal (United) have started acting tough. The Bihar chief minister, who till recently was silently facing all-round opprobrium for dumping his electoral partner (the Rashtriya Janata Dal) and hitching his wagon to the BJP, is now demanding his pound of flesh before the next parliamentary election - he does not want just a handful of seats to contest and has formally inducted Prashant Kishor, the data-genius behind Modi's 2014 victory, into his party to ensure it remains the senior partner in any future electoral alliance in Bihar. Telangana chief minister K Chandrasekhar Rao has demanded an early assembly election in which he hopes to do well, and he is least bothered about Modi's pet project of a simultaneous parliamentary and assembly election. Even Ram Vilas Paswan, a dalit leader from Bihar who is reliably a political weathercock, has been talking about leaving Modi's National Democratic Alliance (NDA). The rats are obviously deserting the sinking ship.

The RSS would likely be concerned. In Delhi there is a general expectation that Modi's parliamentary tally will decrease to around 150 seats following the 2019 election, and while that would ordinarily be enough to remove a leader and replace him with someone acceptable to coalition partners (who have been silently licking their wounds of neglect the past four-plus years), the RSS also knows that removing either Modi or party chief Amit Shah will not be easy. Both these gentlemen are apparently willing to sit in opposition and let a coalition government totter about for two to two and a half years before finally collapsing under the weight of its own contradictions. Modi fashions himself after iron lady Indira Gandhi, and like her, might bide his time to return to the top post as she did in 1980, after a nearly three-year hiatus.

This does not suit the RSS, which would rather try to retain governance under a different prime minister, heading a coalition that was much like the late Atal Bihari Vajpayee's government. There are various advantages to this: to consolidate much of the hidden social work and deep changes in the education sector that the rightwing has undertaken since May 2014. Modi has been such a polarising figure that a replacement government would want to first of all undo much of the damage to institutions that he has inflicted, in the name of getting things done, where his will was supreme over any Constitutional nicety or propriety.

First things first, however: the RSS has to save its own skin. There are many political parties who would like to give the RSS cadres a thrashing of their lives. The RSS must be highly conscious of the fact that the atmosphere against it will change drastically once Modi loses power. Hence, the RSS top brass have humbly recounted Congress's contribution of independent India's history, and have extended the peace pipe to Rahul Gandhi. It is a heartening sign for Indian democracy that Rahul has showed the RSS its place - that it does not rule supreme over all Indians, but merely over a sullen part of society, whose achhe din are hopefully soon coming to an end.

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IL & FS ruckus - Domino effect

The IL&FS downgrade has lessons for many other financial market constituents

• The ruckus that has followed the recent credit downgrade at project financier Infrastructure Leasing & Financial Services (IL&FS) highlights how financial troubles at a single institution in India can set off a domino effect across the entire financial system. 
• IL&FS and its subsidiary IL&FS Financial Services enjoyed high credit ratings and seemed to be a go-to name for short-term lenders until reports leaked out a week ago that the subsidiary had missed due dates on commercial paper, while the parent had defaulted on deposit dues to SIDBI. 
• Thereafter, rating agencies ICRA, India Ratings and CARE swung into belated action to abruptly downgrade IL&FS and its subsidiary from high investment grade (AA plus and A1 plus) all the way to junk status (BB and A4). With the ratings falling off a cliff, the 30-odd mutual fund schemes holding a ₹3,500 crore exposure to IL&FS entities were forced to take sudden write-downs, jolting their investors. 
• Domestic banks and insurers, also said to hold significant exposures to the group, may soon have to follow suit. IL&FS, meanwhile, is in parleys with its major shareholders LIC and SBI for a lifeline, which may not go down well with the latter’s policyholders and investors.
• There are lessons for almost all financial market constituents from this episode. For rating agencies, it is a matter of concern that, though the stretched liquidity position of the group was known for some time, it took an actual default for them to revisit their investment grade ratings. 
• Though the raters repeatedly flagged loan book concentration, high debt levels and the dire financial straits of group firms in their reviews, they seem to have pinned their hopes on IL&FS’ big-name promoters (LIC, Abu Dhabi Investment Authority, SBI, Central Bank) to bail it out of its troubles. This exposes the fragility of the ‘structured obligation’ ratings often handed out to weak entities hailing from marquee industrial groups. 
• The mutual fund industry too does not come out of this episode smelling of roses. Instead of restricting their exposures to the high-risk paper to their ‘credit risk’ funds, fund managers also parked it with their liquid and low duration funds, despite marketing them as low-risk alternatives to savings bank accounts. Here, SEBI should revisit its recent fund categorisation rules to ring-fence these categories of debt funds from credit risks. For banks, this again drives home the risks of funding long-gestation projects with short-term money.
• Overall, even if IL&FS manages to tide over this episode, it has underlined the need for institutional investors in the Indian bond market — banks, mutual funds, pension funds and insurers— to build their own capabilities for independent credit appraisal instead of over-relying on rating agencies for their investment calls. Of course, this does not absolve rating agencies of the need to to be proactive rather than reactive with their rating actions.

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Every one would like to invest in profit making companies and none would be interested in loss making companies even with a pole. Raising Rs.4,000 crores might enable IL&FS to fulfill payment obligations but problems remains where they were. Like most infrastructure companies that are on the verge of collapse, its investments in infrastructure will result in massive haircuts even if they are able to salvage. IL&FS with Rs.100,000 crores exposure is another big NPA. Its share price tumbled from Rs.94 in Jan'2018 to Rs.27 today (17/9/2018) i.e. depreciation of 71% in the current year. 

Indian economy's headwinds

India's GDP growth has peaked in the first quarter and going ahead some moderation is expected as weaker rupee and rising oil prices remain two major headwinds for the Indian economy, Credit Suisse said. 

• The 8.2% GDP growth for the April-June 2018 quarter of this year, though "encouraging", was largely owing to base effects. 
• The Indian economy grew at 8.2% on good show by manufacturing and farm sectors, according to official data. 
• Monsoon deficit is now at 6% and the acreage under kharif sowing is flat year-on-year.
• Weaker rupee and rising oil prices remain two major drag factors for the economy. These two headwinds could turn out to be a double whammy for India, exerting an upward pressure on inflation and downward pressure on growth, the report said.
• The core inflation is inching up and all these factors could prompt the RBI raise interest rates. Higher interest rates will have a negative impact on growth expectations.
• On the positive side, Credit Suisse expects economic growth to gradually get support from strengthening bank balance sheets as more companies exit bankruptcy, and as GST implementation progresses further which should provide a much more conducive environment for the investment growth to pick up.

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As on Sept 17, 2018, Sensex drooped by 4% and USD INR also shed 4% during this month. INR lost almost 13% against USD, during 2018 and earned dubious distinction of the worst performing Asian currency against USD this year. Some reports point out that Indian economy is better than only Turkey, Argentina and Venezula, which is worry some. Weakening rupee, rising oil prices, widening current account deficit, inflation & interest rates ready to take off, our economic pundits are clueless of what to do and are simply staring. Any thoughtless intervention will only widen CAD pushing inflation up. Not intervening while economy is on slippery slope is also wrong. Steadily FE reserves are getting depleted. No reserves are adequate enough, when economy is facing headwinds.

Justice should be tempered with mercy

'Mercy' is compassion or forbearance shown especially to an offender or to one subject to one's power.

'Justice should be tempered with mercy' has a reference to Portia's speech in Shakespeare's The Merchant of Venice. It means the offender may have justly deserved a harsher punishment. If justice is tempered by mercy, it is adjusted to satisfy the idea of ‘mercy’. Hence the judge is less severe.

If someone has done something wrong, justice often leads to punishment, whether by a parent or teacher towards a child, or by a court towards a person who has committed an unlawful act. Punishment can sometimes be harsh. It suggests that while justice be done, the punishment has to softened by kindness. 

No one can accept that "eye for an eye" or "tooth for tooth" or the "law of retaliation" is just. Any justice untouched by spark of humanity or mercy is savage as justice is not tempered with mercy. If you forgive no man their trespasses neither will your father forgive your trespasses.

Criminal courts are halls of justice, not halls of mercy. Prosecutors often ask for the maximum penalty for the offense to be leveled against the defendant. Justice ought to be tempered with mercy, as mercy can make for good public policy. Almost all of those who go to prison are poor, and the handful who aren’t the state seems determined to make broke before they are released. When a judge sends someone to prison, the goal should be not just to punish them for their crimes, but to ensure that when they are released they become productive members of society. Making sure an inmate is financially wiped out upon release isn’t the way to do that.

Justice is not equivalent to meted punishment for moral and legal wrong. Justice is relinquishing what is due. When justice is abused, law rarely repairs the social rift. Instead it discourages repeated social rifts. If the criminal is ungrateful he will continue his behavior. Society may choose that risk rather than ruining the life and reputation of an individual over a single incident of indiscretion.

Once a junkie, always a junkie.

Very rarely people change themselves, especially for good. In the name of civilization, humanity and religion, if punishments are lenient, it promotes and encourages wrongdoings which are inherently profitable. Unless risk is high and profit is low, people will be tempted towards wrong doings. Therefore punishments must be harsh.

Support local businesses

Locally owned businesses play a central role in healthy communities. Small business ownership has been a pathway to the middle class and continues to be a crucial tool for expanding prosperity and community self-determination. When a consumer supports his local business owners, he enjoys benefits he can’t possibly get from shopping at national chains. Here are some reasons to support your local entrepreneurs. 

• Improves family health.
• Locally owned businesses contribute much to local causes.
• You will know the people behind the product.
• Preserves uniqueness of your community.
• Better customer service. 
• More personalized service. Small business owners will bend over backwards for every customer, because every single customer matters when they are small.
• Locally owned retailers recycle a much larger share of their revenue (~52%) back into the local economy than the chain retailers (~14%), enriching the whole community. Similarly, the local restaurants re-circulate an average of 79% of their revenue locally, compared to 30% for the chain eateries.
• Locally owned businesses create more local jobs and provide better wages and benefits than chains do.
• Entrepreneurship fuels economic innovation and prosperity, and serves as a means for families to move out of low-wage jobs and into the middle class.
• Local stores require little infrastructure and make more efficient use of public services than the big stores and shopping malls.
• Local stores help to sustain vibrant, compact, walkable town centers and in turn reduce sprawl, automobile use, habitat loss, and air and water pollution.
• A marketplace with several small businesses is the best way to ensure innovation and low prices over the long-term.
• A multitude of small businesses, each selecting products based, not on a national sales plan, but on their own interests and the needs of their local customers, guarantees a much broader range of product choices.
• Shopping local is more important than people think. Even the value of your home goes up.
• Local small businesses outperformed their peers in income growth, employment growth, lower poverty rates and lower levels of income inequality. 
• Communities with a larger share of local businesses have more social capital, stronger social ties, higher levels of civic engagement, and better success solving problems.
• More local businesses ensures lesser usage of automobiles by as much as 26%.

43 Reasons You Should Support Small And Independent Businesses

Enacting policies that strengthen small businesses and expand opportunities for local entrepreneurs is one of the most effective ways of reducing inequality and expanding the middle class. In India, government finds it difficult collect taxes from large number of small businesses, especially in informal sector, and tendency has shifted to promoting larger businesses for better tax realization and in their quest for taxes collection simply forgot their fundamental responsibility of reducing rich-poor gap.  Modi and Jaitley are guilty of  inflicting deadly blows to 'informal sector' which provides livelihood to >60% of the people with their 'hare brained demonetization' and 'haughtily designed & implemented GST' which almost pushed the entire Indian economy to the brink of collapse.

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Our brains won't let us make economical choices on healthcare

Standing under a sign reading “pain relief,” I scanned the shelves, my legs throbbing after a 10K race that morning. I spotted a familiar red box: Tylenol Extra Strength, 100 pills for $7. Right next to it was the drug store’s generic version, offering 100 pills for $5. This should have been a no-brainer. I’m a physician, and I know the active ingredient, acetaminophen, is the same in both. It’s a simple molecule — a six-carbon hexagonal ring at the center with two side chains poking out — something any biochem major could manufacture in an afternoon. The U.S. Food and Drug Administration also makes certain that generic and brand-named drugs are identical. There were only two differences here: the packaging and the price. And yet I grabbed the more expensive box of pills. In that moment, my mind played a common trick on me — one that tells us why it’s so difficult to rein in healthcare costs. When it comes to our health, we are convinced that more expensive is better. If a brand-name pain reliever costs $2 more, we believe it must be safer and more potent. If a diagnostician wants to run duplicate tests, we shrug and agree. If a surgeon recommends a more complex and costly procedure, we presume there must be a good reason.

But why do we perceive that expensive is more effective? Expensive medications tend to make us feel better, even when they’re no different than cheap generics.

In a German study, people were asked to evaluate a side effect of two new anti-itch creams. Both were exactly the same, both fakes, but one came in a handsomely designed blue box and the other in a white box with bad orange lettering. Patients who used what they perceived to be the more expensive drug reported a much stronger physiological response. 

It’s not just patients who fall prey to such price-distorted perceptions. A 2016 study in JAMA Internal Medicine found that roughly 1 in 10 doctors still believe generic drugs are less effective than the brand-name versions. 

A doctor’s referral is the equivalent of a brand-name packaging. A study looked at adults who needed a knee or hip MRI. MRIs are virtually the same everywhere, but prices vary widely. Still patients went where their doctor suggested, bypassing an average of six lower-priced MRI providers on their way. Patients shelled out significantly more in co-pays and deductible expenses, but only 1% bothered to compare MRI prices in their area.

Americans are told again and again that we spend nearly twice as much on healthcare as other high-income nations (and get poorer clinical outcomes). Still, we keep treating healthcare like any other retail product or service, assuming that competition will boost quality and lower prices. But competition isn’t effective because consumers are unable to act rationally when it comes to medical decisions. We need to acknowledge this and help doctors and patients make smarter decisions.

Patients can make a habit of asking if there is a generic alternative for prescribed drugs. Similarly, before choosing a hospital or surgeon, they should be encouraged to review data from independent researchers. Often a friend or colleague’s recommendation of a “great” doctor or hospital is contradicted by the objective data. Businesses and government purchasers will have to play a bigger role.

In the Pacific Business Group on Health, a coalition of companies, crunched the numbers on hip replacements. PBGH found that hospitals charged $30,000 to $120,000 for the procedure. The more expensive locations may have luxurious lobbies and slick marketing materials, but their outcomes were no better. So PBGH members decided to contract only with in-patient facilities that would accept the $30,000 rate. Every hospital in California agreed to the new price.

Our brains conflate higher prices with higher quality and we could also nudge consumers toward wiser choices at the point of purchase. Perhaps it’s time for the FDA to step in and demand that other drugs with identical generic alternatives, carry a new warning label: This product is no better than the less-expensive generic. Had I seen that warning, I’d probably have put that Tylenol Extra Strength back on the shelf.

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