Is it the car - or the driver? - The Honest Truth By Ajit Dayal
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Investing in India - Honest Truth by Ajit Dayal
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24 DECEMBER 2012


An advertisement by Bushmaster, the manufacturer of the weapon used by Adam Lanza to gun down 27 people (including 20 children) and then take his own life in the town of Newton on December 14, has an image of the now infamous AR-15, semi-automatic combat-style military rifle with the stark letters in bold type: CONSIDER YOUR MAN CARD ISSUED.

Marshall McLuhan, the media guru, said, "The medium is the message".

And what he meant by that (source: Mark Federman, MacLuhan Program in Culture and Technology, Wikipedia) is "Thus, the message of theatrical production is not the musical or the play being produced, but perhaps the change in tourism that the production may encourage... Similarly, the message of a newscast are not the news stories themselves, but a change in the public attitude towards crime, or the creation of a climate of fear. A McLuhan message always tells us to look beyond the obvious and seek the non-obvious changes or effects that are enabled, enhanced, accelerated or extended by the new thing."

So, the man with the gun may no longer use it as a weapon of defence. He may use it as a harbinger of death. He has changed the end use. The gun is now a warning, a threat.

The "innovation" of the gun as a manly thing to own has led to a new, unintended consequence: we are not safe in hotels, malls, movies theatres, youth camps, and schools. All of these are unintended consequences because we made the medium of the gun a message of aggression as opposed to the original message of defence.

Just like the passengers in the two cars at Marine Drive on the evening of December 20.

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Boss-man sets an example, driver follows his path

I was in my car, stationary at a red light, waiting for red to turn green.

A white Mercedes with the boss-man in the back pulls up and inches past me, and comes to a stop a few metres ahead of the red light. A few seconds later, a black BMW with another boss-man at the back comes by and stops on the right of the Mercedes - but a few feet ahead of the Mercedes. Therefore, way ahead of the line behind which all cars should be standing at a red light. Within seconds the BMW speeds ahead and, within a micro-second, the Mercedes follows.

The light is still red.

I continue to wait at the signal, wondering when the red light will turn green.

The BMW and the Mercedes are out of sight.

Gone: with the disdain and defiance of a teenager programmed to be heartless and defiant to any form of authority.

Have the BMW and Mercedes - advertised as products of great design, engineering and luxury - become symbols of an unintended consequence?

These specific vehicles don't stand for design, engineering, and luxury. No, they depict crass power, the ability to break a law, the nonchalance of the boss-man in the back who sees no merit in educating his driver to be civil and to stop. Icons of an era where the end is more important than the means.

The physical comfort of the driver steering the leathered symbol of irreverence is enhanced by the driver's expectation that if he gets caught for breaking the law, his boss-man in the back will encourage the driver to be a part of the system. For the driver, though uneducated, knows that the boss-man became a boss-man by gaining the ability to eliminate government road blocks to any project, to knock down any obstacle in his exercise of personal wealth enhancement.

Bushmaster positions its guns as "manly". The extension of the medium of the gun, to apply the McLuhan quote, is that it can be used to murder innocents in an assault. That is the unintended consequence.

In the western world, BMW and Mercedes are signs that you have arrived in a higher middle class, or upper class strata. In developing countries like India - and please do observe the traffic etiquette of the drivers of these vehicles next time - they are symbols of success for those willing to break the law. That is the unintended consequence not envisaged by the creators of BMW or Mercedes.

How comfortable are you as an investor in shares of listed companies?

And what about businesses and listed companies?

They were entities created to generate a business, hope for its financial success, and then give a fair share of profits to all the shareholders who bore the equal risk as providers of capital for the venture. That is what a "listing" was all about. The "owners" would hire "managers" to run the enterprise. The interest of all shareholders would be protected by these managers. And, yes, these businesses would follow the laws of the land and be "enterprising".

That was the ad campaign for "capitalism": The encouragement to shed the failed socialist model and vote for reforms.

That was the intention of the reforms: A more luxurious drive for many in a well-designed framework with a better engineered machine. A new economic model that was ready to live up to the challenges of the new world.

India, you may recall, was Shining.

But, what have we got now that the shine seems to have worn out of the jaded cricket team? A hangover from the hungama of all the grab-the-cash battles of T-20?

Are the "promoters" fair to all shareholders?

Have the captains of industry, revered by the media who salivate at the prospect of more advertisements, built their business on true enterprise? Or have they built their business on hijacking governments and policy-making?

You tell me.

Allocate your 200 points to the 2 criteria for the business groups mentioned below.

As an example, I have given my point allocation to HDFC (a maximum of 200 points out of 200 possible, in my opinion!).

Fill up this table below and email it to HonestTruth@equitymaster.com

Let's see what you think the unintended consequences of the innovation of "capitalism", Indian style have been.

Have the captains of Indian industry ensured that the reforms have delivered a more equitable and fair corporate sector, or have we been left with the unintended effect of creating multiple Adam Lanza's out to destroy any modicum of respect, decency and fairness?

Table 1: Fairness to shareholders, free enterprise or government friendships?
Group / Company / Founder This group is successful because it is "fair" to all shareholders: (give a score of 0 for an unfair group and up to a maximum of 100 for a very fair group) This group is successful because it runs a business based on market dynamics, and no favours from the government (give a score of 0for a business that runs on favours and go up to a maximum of 100 if that group runs on pure market determined forces) Totals of both previous columns must be between 0 and 200. The higher the score, the better is your perception of the business group
HDFC (my view, feel free to modify) 100 100 200
Adani, Gautam      
Ambani, Anil      
Ambani, Mukesh      
Bharti, Mittal      
Birla, Kumar      
DLF, Singh      
Essar, Ruias      
Infosys,      
Mahindra, Anand      
Mallya, Vijay      
Pantaloon, Biyani      
Sterlite, Agarwal      
Tata      
Wipro, Premji      

Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)
Quantum Long Term Equity Fund Quantum Gold Fund
(NSE symbol: QGOLDHALF)
Quantum Liquid Fund
Why you
should own
it:
An investment for the future and an opportunity to profit from the long term economic growth in India A hedge against a global financial crisis and an "insurance" for your portfolio Cash in hand for any emergency uses but should get better returns than a savings account in a bank
Suggested allocation 80% 20% Keep aside money to meet your expenses for 6 months to 2 years

Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"


Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.


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