Are we becoming Information Obese?

Are we becoming Information Obese?

Physical Obesity- we are aware, we can see and some of us suffer from it.

Information Obesity- we are unaware, we can’t see but a large number of us suffer from it.

If we compare the two, there are a lot of similarities:

Physical Obesity	Information Obesity
Intake of food more than our body can process	Intake of information more than our mind can process
Large portion of the food consumed is unhealthy	Large portion of the information consumed is unhealthy or irrelevant
Leads to lack of physical stamina	Leads to lack of mental stamina (concentration)

The lack of concentration leads to poor quality of work that we do and more often than not, poor decisions. If we were to learn to control the flow of information, we would be able to cultivate focus. Our quality of decisions would improve because every single day, every single minute of it, we do one thing- we make decisions.

A few years back, I realized that I was always anxious and in some kind of a hurry. My mind was always clogged with things to do, ideas to work on and a seemingly unending list of stuff to read. It seemed as if my mind was on an invisible treadmill where the only objective was to finish one thing and hop on to the next. If happiness was a state of mind, then my mind was far removed from it. There was no time for the mind to soak in and relish the work at hand. I was reading a lot, listening a lot but had little time to think and virtually no time to think through.

It reminds me of a joke I had read: An auto driver was driving very fast. The passenger on the back seat cautioned the driver of the high speed and the possibility of an accident. The smart driver replied: “Don’t worry. I drive so fast that I have no time for an accident.” I found myself very much like the auto driver. I am going so fast that I have no time to think.

What I didn’t want?  My mind to be like a conveyor belt or an assembly line which has to continue working all the time.

What I did want? My mind to be well-irrigated with information but not inundated with it. I wanted to do a few things but do them well. And in order to do things well, the mind has to be tranquil not anxious.

I concluded that I was information obese and needed to go on an information diet.

The next task was to take corrective steps to rectify the situation and become better at attaining focus.

How do we check physical obesity? The first thing we do is to reduce the intake of food. So, the first thing in my battle against information bombardment was to slow down the incessant flow of information. What did I do?

• To start with a clean slate, you need to first wipe the slate clean. I unsubscribed from all blogs, all newsletters, cancelled subscription of all magazines, newspapers etc. I was constantly reading about other people’s opinions but had to not time to figure out my own. This step was like “zero budgeting”, what the Brazilian private equity firm 3G does to its acquiring companies. 
• Next, I cleaned my study room of the all the stuff which was not required and out of date. This included loads of books and piles of papers. Just like our body removes dead cells and the trees get rid of dead wood, I also needed to remove the old to make place for the new.

The next thing in overcoming physical obesity is to reduce the amount of junk food that we consume. In parlance of information obesity, I would call it junk information or noise. When I analyzed what I read or heard or watched, a large portion of that was not relevant to the work at hand. 

Over a period of time, I reduced my exposure to the information that I considered unnecessary. I picked up a few things to read. Now, I read a few things but do them consistently. And doing a few things consistently has helped me more in terms of my knowledge and understanding than before. The ‘less is more’ approach has worked beautifully.

The final step in becoming physically fit is to process the consumed food properly. For the mind, it would be to process the information with full concentration and focus that it needs. The crux of putting our mind into one single thing that we do can be found in this doha of Kabir Das Ji:

जिन खोजा, तिन पाईयां

गहरे पानी बैठ ​

(One who has sought has found. But only by diving deep.)

And it order to go to the depth of things, we have to focus.

How I was losing focus?

• My first weakness was that I would start reading/ working on my computer and would end up drifting to things which might be unrelated to the work at hand. Like, listening to a Ted Talk is informative but it can be destructive if you are in the middle of something and become distracted due to that talk. I now, take print outs of whatever I wish to read and put my computer to rest. I have realized it has led to significant productivity gains, for me.
• I stopped checking my phone and the stock prices incessantly. I removed the mail, google finance and most of the apps from my phone. They all suck our time and mental energy bit by bit every time we check them. The problem is not with the devices, the problem is with our compulsiveness to check them.
• Another point of distraction was multi-tasking. In order to do multiple things at a given time, I ended up doing less number of things each with a poor quality output. So, I decided to work on a template where I forced myself to work on a given thing for an extended period of time without distractions. As Monk Dandapani (very informative videos available on YouTube) says in his talk “If we practice distraction 24/7/365, we become very good at it. Conversely, if we practice focus, over a long period of time, we can become good at that as well.”
• I started picking one thing at a time and learning to give all my attention to it. I would pick up the second thing only once I am done with the first.

How do successful people do it?

When we read about successful people (yogis, investors, philanthropists, musicians, sports persons etc.), we will realize that successful people are minimalist. They are sparse in their wardrobe, they are sparse when they talk, they are sparse in how they spend and they are sparse in how they work. By limiting the amount of things that want their attention, they are able to conserve their precious attention to the few tasks that really matter. And once they decide what they wish to do, they are able to attend to the task with full force. All their eyes, mind, intellect and efforts are devoted to the task at hand.

Gaining focus is not easy, but it’s not difficult either if that becomes our deep driving desire.

Over a last few months, I met a couple of investors who shared their feeling of being anxious all the time and being overloaded with stuff. I shared my own experience with them and also thought of writing a post. So, if you feel you are distracted and want to gain focus, you need to find for yourself where you energies are dissipating and you need to plug those leaks.

Have I attained whatever level of focus I aspire to have? No, but I work to improve on that every day. And I have tasted short periods of deep focus. I can now say with 100% conviction that the taste of focus is so sweet and so enduring that everything else falls pale in comparison.

My mind is relaxed now and I enjoy whatever I do. Focus puts us in the zone and puts us in a sweet spot. I feel, focus is meditation in action.

Wit, wisdom, ethics and cholesterol

I came across a beautiful talk by Padma Bhushan Dr. B M Hegde where he regales the audience with his wit and wisdom.

His talk packs a punch with mantras to live a healthy life, meaning of culture and ethics, ills with modern medicine and how much is too much when it comes to cholesterol.

Link

Thoughts on recent volatility

 

"Condoms aren't completely safe. My friend was wearing one and got hit by a bus". For many years, I couldn't understand the meaning of this quote by Robert Rubin, ex-Secretary of Treasury of United States. It means that while thinking about risk factors- a new and potentially unthinkable lethal risk can emerge from nowhere and take one down. It's the black swan risk or risk of the "unknown unknown".

For the first time, I understood it when Ramalinga Raju of Satyam spoke "Satya" and informed the world about ghost cash in his company and how he had taken everybody for a ride - independent directors included. Coupled with global recession, markets went into a tailspin with this news and a lot of stocks fell down 50-70% in a matter of weeks. There were a lot of companies selling below cash because people stopped believing in cash held by companies.

However, if asked to point with certainty now, the month and year of the Satyam crisis, a lot of us might make a wrong guess. If you are guessing it right now, let me give you the answer : Satyam scandal broke out in January, 2009. So, in  a span of 7 years, market has shrugged off the crisis of confidence in Indian companies and has come out with newer highs. That's just one example- there have been many such global and domestic challenges which surfaced and subsided with time. It point towards another concept that problems get solved as they always have as they always do. So, no matter how grave the issue, it will get solved given enough time.

In the last few days, some major upheavals have happened. The issue of corporate governance at the House of Tatas, election of Mr Trump as the President of US and demonetization of Rs 500 and Rs 1000 notes in India. The black swan or should I say a "fleet of  black swans". 

 

First lets talk about the Tata Group. There are accusations flying thick and fast from both sides. There are many versions of the same story. We don't know and will never know what's the correct version. So, there's no point spending time reading and thinking about that. However, there is lesson to be learnt. Business comes first always and every time, management comes second always and every time.

 

The second issue is about Mr. Trump. The world is in a shock. I think people are more shocked about their own assessment going wrong (of Hillary becoming the President) rather than Trump becoming the President. The world's best experts, commentators, political readers, investors, reporters, big data analysts : all have gone wrong and wrong by a wide margin. That reminds me of Niels Bohr quote "Prediction is very difficult especially if it's about the future". We need to remember this and remind ourselves, whenever in doubt.

I don't think it matters a lot as to who is the President of the United States. The only thing that I think matters is "Is there a President ?". As long as the answer is yes, it's alright. As history teaches us again and again, a bad government is better than no government. So, as long as there is a democratically elected president in the world's largest economy, things will work out fine. Some policies will be good, some would not be so good but things will be okay on a wholesome basis.

 

The third and the most important issue is the demonetization of the existing high currency notes in India. The first effect is that people now are cashless and clueless. Over time, people will have cash in their pockets to spend so that's not a big problem. The second more important thing is that people are clueless. A large part of Indian economy is informal cash economy. Some of the businesses have a mix of A business (formal accounted business) and B business (informal unaccounted business). A large number of businesses are completely in B. There is no trail of money in the whole value chain. Those businesses will be the hardest hit. They don't have much clue whatsoever to dispose off the cash that they already have and also as to when and how will they resume their businesses. As of now, everyone and everything seems shocked and frozen. It may take time for cash and people to come back.

 

We don't know how much time it might take ? It might be a few months or a few quarters or even more. Nobody knows. By the time the dust settles, a lot of businesses might get massively hit and lot of businesses might shine.

 

What do we investors need to do ? One thing we need to do is to focus on the businesses we own and see if the recent events have reduced the strengths of those businesses. The cash flows would surely become volatile given the external factors but if the businesses are inherently strong, the cash flows would come back even if with a delay.

And if businesses are strong and managements are good and we have not bought stocks with debt, we just need to remind ourselves to :

 

(i)  hold on to our nerves

 

     And

         (ii) hold on to our stocks

The Case of Noida Toll Bridge

The following note is a brief summary of the order pronounced by the High Court of Allahabad in matter of Noida Toll Bridge Limited. The emphasis laid on some parts is mine and may not be a part of the judgement. 

Also incorporated in brackets and in italics are my thoughts on some of the arguments/ counter arguments put forth by different parties to the case. My thoughts should not be construed as comments on the judgement. This is an academic exercise to understand reasoning behind the order and risks undermining the contracts, more so when one of the parties is an instrument of the State.

To fully understand and get a grip on the arguments, you should read the complete order at this link.

CASE: Public Interest Litigation (PIL) No.  60214 of 2012

Petitioner: Federation of NOIDA Residents Welfare Association

Respondent No. 1:- NOIDA Toll Bridge Company Ltd

Respondent No. 2:- NOIDA

Respondent No. 9:- IL & FS

Matter at hand: This is a public interest litigation challenging the levy and collection of toll as User fee by NOIDA Toll Bridge Company from the commuters for using the Eight-lane DND Flyway having stretch of 9.2 km. from NOIDA to Delhi.

The Concession Agreement was executed on Nov 12^th, 1997 between the Noida Authority, IL&FS and Noida Toll Bridge Company Limited.

Crux of the case:

1.   Submission of the petitioner :

a) Cost of construction of the project plus reasonable returns (no figure has been supplied for reasonable returns) have been achieved by the Concessionaire. Now, there is no justification for continuing the toll.

b)  Based on the formula in the concession agreement, till 31.3.2016, the total cost of project based on 20% assured returns reached a figure of Rs. 5,000 Crores plus. This amount will go on increasing further in view of the formula adopted in Article 14 of the Concession Agreement to determine the Total cost of project. The Total cost of Project can never be recovered and the bridge will never be free from levy of Toll.

      (Courts will be inclined to take a very strong view on this point. Any project aimed to have a limited life for collection of fee, if transforms itself to a perpetual money collecting machine, courts might not take a kind view. This kind of an agreement is like bonded labour.)  

c)    Various clauses of the Concession Agreement are against the public interest.

d)  There is no cap on the Total Project Cost and O&M expenses which are to be ultimately borne by Users.

e)  No tender was invited before grant of contract for DND Flyover, there was no advertisement, no bidding. It was a clandestine deal that too with the view to benefit a private company at the cost of public. The award of the contract is, therefore, in violation of Article 14 of the Constitution of India.

(This is a charge with very serious ramifications. If the award of contract is in violation of the Constitution, it can be declared null and void. Calculation of returns and shortfall of returns will be out of the picture, then)

f)  Only the cost of actual construction and some reasonable amount towards maintenance of roads can be recovered that too only by the State Government which can charge the toll tax. 

(Only the State Government is allowed to charge the toll tax, and nobody else. That puts the whole agreement allowing Noida Toll Bridge Company to charge user fee bad in law.)

g) The action of NOIDA in awarding the Concession Agreement dated 12.11.1997 in favour of NOIDA Toll Bridge Company i.e. the Concessionaire fails to satisfy the test of reasonableness and public interest as has been laid down by the Apex Court in M/s. Kasturi Lal Lakshmi Reddy vs. State of Jammu & Kashmir.

2.   Submission of NOIDA

NOIDA has admitted in its counter affidavit that Section 14 of the Agreement read with Annexure 'F', i.e. the method of computing total project cost is not in public interest. The Concession Agreement, therefore, is not serving public interest. The unfair, untenable and irrational clauses in the contract make it arbitrary, unjust, opposed to public policy and amenable to judicial review.

 3.  Response of Noida Toll Bridge Company Limited

a)   The present petition is liable to be dismissed on the ground of latches. (From Wikipedia: Laches from Old French laschesse refers to a lack of diligence and activity in making a legal claim)

The petitioners herein did not challenge the project when it commenced rather the residents of NOIDA at that point of time wrote to the Chief Minister and the Government to fast-track the project as there was urgent need for another connectivity between Delhi and NOIDA.

The Steering Committee was chaired by the Secretary of the Ministry of Urban Affairs and Development, Government of India (presently Ministry of Urban Development), however, the Ministry of Urban Development has not been made party in the petition.

The plea of violation of Article 14 of the Constitution of India is not available after so many years.

(These are weak arguments in my view. I believe that there is never a wrong time to do the right thing.)

b)  NOIDA is a signatory to the agreement, it cannot dispute the clauses of the agreement and it is not permissible for NOIDA to challenge the agreement after so many years. 

c)  It is submitted that scope of interference in contractual matters for adjudicating the constitutional validity relating to economic policy matters of State is neither within the domain of the Courts, nor amenable to judicial review.

d) The power to levy the User fee can be traced to Section 6-A of U.P. Industrial Area Development Act, 1976 read with New Okhla Development Area (Levy of Infrastructure Fee) Regulations, 1998 framed under section 19 of the Act, 1976. The validity of these provisions is not subject matter of challenge in the present PIL.

e)  The amount of user fee paid by the commuters is also independent and does not get affected by the increasing value of the total cost of project.

(This again is quite a weak argument. If the term of the agreement gets extended due to shortfalls in returns, the commuters would have to pay to use the bridge and hence it is not independent of total cost of the project. This argument doesn’t have legs to stand.)

f)    Amendment to the terms of the contract is under negotiation between the parties.

g)  “Doctrine of Unconscionable Contract” is not applicable in relation to the Concession Agreement. This doctrine is attracted in a case, where the contracting parties have grossly unequal bargaining power, to the point where free consent may not be presumed on behalf of the weaker party.

h)  In case the concession agreement is considered unconscionable, even by applying the “Doctrine of Severability”, the concession period of 30 years will remain intact.

i)   “Doctrine of Frustration of Contract” shall not apply as it is the case of default of NOIDA itself.

           4.    Comments of the Honourable High Court of Allahabad

a)   Where the public interest is affected, the power of judicial review will be permissible even in contractual matters.

b)   The Government has the freedom in the matters of contract; the decision/action of the Government is to be tested on the touchstone of “Wednesbury principles of unreasonableness”. If there is procedural impropriety, the court would intervene and set right the decision making process.

c)    Under UP Industrial Area Development Act 1976; there was no provision of levying “User Fee” on the date of the Concession Agreement, Nov 12^th 1997. Only the Government could levy toll or User Fee. A private company couldn’t do that. Insertion of Section 6 A to the Act was made through an Amendment to the regulations on 14.08.1998 which is after the execution of the concession agreement i.e. 12.11.1997. There is no retrospective operation of Section 6 A which is specified in law.

 In Zile Singh vs. State of Haryana and others, the Apex Court held in paragraph '13' as under:-

 “It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the Legislature to affect existing rights, it is deemed to be prospective only 'nova constitutio futuris formam imponere debet non praeteritis' __ a new law ought to regulate what is to follow, not the past."

 Hence, sub-delegation of power to levy and thereafter collect the toll/user fee upon a private company under the Concession Agreement is bad.

 (This is an important point. On the date of execution of the concession agreement, the State Government did not have the power to authorise any private player to levy and collect fee. Due to lack of a legal provision to do so, the whole concession agreement then becomes illegal.)

 d)   In Breen v. Amalgamated Engineering Union (1971) 2 QB 175, Lord Denning MR said: "The discretion of a statutory body is never unfettered. It is a discretion which is to be exercised according to law. That means at least this: the statutory body must be guided by relevant considerations and not by irrelevantly. If its decision is influenced by extraneous considerations which it ought not to have taken into account, then the decision cannot stand. No matter that the statutory body may have acted in good faith; nevertheless the decision will be set aside.

e)  Agreement/ Contract itself hit by Article 14 of the constitution of India and therefore, liable to be declared null and void.

 In light of the above arguments more elaborately dealt upon in the order, the High Court pronounced that no user fee can legally be levied/ charged by the Concessionaire and in light of the facts that the concessionaire has already recovered the cost of project in addition to reasonable returns, the Concessionaire cannot collect any user fee from the commuters, hereon.

This is quite a complex situation in my opinion. The whole business and its earnings stream are now overcast. More than returns, the constitutional and legal validity of concession agreement is in question. If the Supreme Court were to uphold the judgement of the Allahabad High Court, the whole business of Noida Toll Bridge stands to get decimated. Only time and the Supreme Court will tell which way the shareholders of Noida Toll are headed.

How Buffett and Ajit Jain together saved Lloyd’s, Pink Floyd and the Queen?

This one statement by Buffett says it all when it comes to brilliance of Ajit Jain- Head of Berkshire Reinsurance. Curious to know more about insurance, reinsurance and Ajit Jain, I studied one of the largest reinsurance deals that Buffett and Jain did : Reinsurance of Lloyd's Equitas.

How Lloyd's came to the point of imploding and taking down with it the Queen and Pink Floyd ? How did Buffett and Jain together saved everybody ? (and made money at the same time)

You can download the note here.