Subba’s Serendipitous moments

April 3, 2009

Sad about Silicon Graphics

A Silicon Valley icon disappears — unwept, unhonored, unsung. Thanks to my analyst friend for the tip.

Silicon Graphics which made the hottest workstations for high end applications and built awesome machines for making movies was sold for just $25 million to server maker Racker Systems.

I almost wanted to cry because I have seen the power of their technology when I used to be marketing CAD/CAM systems 20 years ago and often competed with them. SGI machines were used to make movies. Jurassic Park and Terminator 2 were made on SGI machines.

Silicon Graphics was founded by the famous Dr. Jim Clark who subsequently left the company and founded Netscape.

There have been bigger failures, but they still were acquired for billions, not for something like $25 million.

I did see it coming even 2 years ago when I wrote about the lessons that one can draw from its road to bankruptcy. But is eventual sale for such a miniscule amount at a bankruptcy court is definitely saddening.

Well, guess that’s business!

March 2, 2009

Warren Buffet– An enlightened sage!

Filed under: Business,Inspiration,Leadership — Subbaraman Iyer @ 12:12 am
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The surest test of a man’s character is his behavior when he has to deal with adverse circumstances and his admission of his errors or mistakes.

Warren Buffet often referred to as the sage of Omaha and considered to be the greatest investor of all times had his worst year. Berkshire Hathaway book value per share fell 9.6% in 2008 its biggest decline ever. The company also reported its fifth year-over-year quarterly decline. The $117 million quarterly gain  in the Q4 2008 is a 96% drop from Q4 2007 $2.9 billion in fourth-quarter income.

Despite the poor results,  the company’s book-value performance in 2008 still far outpaced the Standard & Poor’s 500-stock index, which fell 37% last year, including dividends, as well as hedge funds, which last year averaged about an 18% decline.

The share price is actually revealing and the share price has dropped 32% in 2008 and about 19% in 2009 beating the S&P marginally.

In his characteristic humble way, Warren Buffet in his annual letter to the shareholders said:

“During 2008 I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt. … Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action.”

For  the richest man on the planet to admit that he was dumb should teach all of us lessons about humility and the fallibility of human judgment. I have long been an admirer of the Warren Buffet’s wisdom, but now with this humility, he truly is not just a Sage, but an Enlightened Sage.

Coming after Alan Greenspan’s admission of shock that markets didn’t work, it only goes to show the ultimate measure of one’s greatness — Admitting one’s mistakes.

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February 25, 2009

Crisis creates a new consciousness

The picture from the Economist serves  as the perfect metaphor for the current crisis.

Every crisis brings along with it a new consciousness and a completely new perspective.

Individuals who have faced a terminal illness suddenly seem to value life and relationships more. Some turn intensely religious. Life is never the same before.

I think the same could be true for organizations. After a turnaround, most organizations have a renewed sense of purpose. IBM became a world class services organizations after Lou Gerstener came on board in the mid nineties.

I am beginning to slowly think that this is could be true for economies and countries. Liberalization acquired new currency and followers after India faced the economic crisis in 1991. Many “old model” firms died, some refashioned themselves and many new organizations just became global firms thanks to the liberalization. Infosys is one of them.

Now what has changed during the current financial crisis:

  • Nationalization which was so ‘un-American’ has suddenly found eminent backers from Alan Greenspan to Paul Krugman. It increasingly looks like that Citibank may be nationalized any time.
  • Markets are not perfectly efficient and people are not always the best protectors of their own self interest.
  • Belated realization that the CEO compensation and the bonuses for Wall Street traders have contributed to the crisis. When President Obama said that the bonuses handed out by banks represented “the height of irresponsibility” he spoke for a huge silent majority. As Raghuram Rajam says : “At the very least, shareholders deserve better explanations. More generally, unless we fix incentives in the financial system we will get more risk than we bargain for. Unless bankers offer these better explanations, their enormous pay, which has been thought of as just reward for performance, will deservedly come under scrutiny.”
  • The greatest brand names can struggle to survive. Lehman Brothers, Merrill are now consigned to the bins of history and even Citibank are struggling. It pays to be humble.

Can you think of any new consciousness that has emerged as a result of the economic crisis?

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February 23, 2009

The Greenspan shift

Filed under: Business,Perspective — Subbaraman Iyer @ 2:07 am
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What goes through the mind to change one’s ideology — from a high priest of free market and laisser-faire capitalism to becoming an advocate of nationalism?

I wonder about Alan Greenspan’s — the former Fed Chairman recent recommendation of nationalising US banks on a temporary basis.

Is it the extent of  crisis when this whole thing started unfolding under his watch and that there’s no other option left but to nationalise some of the banks?

Or was he truly ‘shocked’ that markets didn’t work as he said in the Congress testimony a few backs back? His exchange with the Congress representative is crisp, clear and honest:

Referring to his free-market ideology, Mr. Greenspan added: “I have found a flaw. I don’t know how significant or permanent it is. But I have been very distressed by that fact.”

Mr. Waxman pressed the former Fed chair to clarify his words. “In other words, you found that your view of the world, your ideology, was not right, it was not working,” Mr. Waxman said.

“Absolutely, precisely,” Mr. Greenspan replied. “You know, that’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

Initially I wondered whether he was being naive about Wall Street being self-regulating, that it was in the interest of the financial world to protect the consumer and the shareholder’s equity.

However, later, I think it is the hallmark of a truly wise person to admit one’s limitations and endorse the right solution for the problem. It only means that he is not a prisoner of his own view. Standing up and owning an error in front of Congress is not easy. He is the only person who has admitted some culpability. No CEO in Wall Street or anyone in the Government have done so.

One should also not ignore that Alan Greenspan steered the US economy though one of its largest booms in history.

The common view is that people tend to be stubborn as one age. It takes a rare mind to abandon what you have believed in all your life.

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