whats riskier? having a home or not having one?

While I was on my reading spree during the recession, I had read an interesting bit of research. Richard Florida was talking about home ownership in cities. His hypothesis was that home ownership for a city is good but to a point. He says “This is so ironic, places with the highest levels of home ownership have low rates of growth; they tend to be older, lagging cities with older economic structures; they tend to be less innovative; they tend to have lower levels of human capital, of creative, economic activity; lower wages, lower incomes; and the people there have lower levels of well-being… by having a lower level of homeownership, and that’s around 50 or 55 percent,… actually makes them quite fast and flexible… If you lose your job in Detroit or Cleveland, you own your house: you’re stuck. You can’t even move to another part of Detroit or Cleveland for a job,… If you work in New York or Los Angeles or San Francisco and you lose your job, first thing you can do is downshift to a cheaper apartment, and if you need to move to a new region, when your lease ends, you can up and go”

I have put the larger extract below and the link to the complete interview. I found it interesting at the point. It did make sense. Flexibility is the key to business and hence growth. Housing is just one big strong element of getting stuck. My own firm, when I see it I realize this. As we get bigger we start getting inflexible. I have seen my management justify the bureaucracy, the willingness to accept it, unwillingness to tear down old practices, unwilling to take risk, having multiple levels of approvals and the sort. I guess a lot of it is possibly good. We are of course less tolerant of failure. The cost of failure is possibly too high. So it makes sense to take a few sturdier steps than big bold initiatives. But I also wonder isn’t a bigger firm more resilient to risk. More able to absorb the costs of failure and hence best placed to learn from it.

Smaller growing firms would have people with higher risk taking ability. People who just say ‘chuck it, let’s do it and go ahead’. I used to always say, it’s better to ask for forgiveness then to ask for permission. But suddenly larger firms clamp down on all of this. There are too many satraps to break through. Everyone seems to have his own domain which one is encroaching upon. These domains are nebulous and fluid when the organization is geared towards growth and rigid and unaccommodating when the organization is big. Simple things like the laptop brand is also a big issue. I came from one of the smaller divisions (250 employees) of my firm where I wanted a Dell laptop with a very good display. I got it. Here within the same group another division which has 4,000 plus employees, the Dell laptop which I got transferred with, gets undue attention. Here the official brand is Acer and you can’t get anything else. How was I roaming around with a Dell? Oh god man. All in the name of process.

I think process is good. Some things are important but too much process can screw up any initiative. Within my limited understanding and experience, my belief is that even creative can have a process. You must follow process but have the sense to know that the process is path but you are allowed to forge new paths. Logical behavior and thinking is not a barrier for creative. Just because you use the left side of your brain is no excuse for you to not use the right side as well, and vice versa. I think most of us inherently can use both sides well. It’s when we are suddenly rooted for some reason or the other we start exercising one side. The boring regimented predictable side and are impervious to outside thought and action.

I think the rooting of the brain happens when you start having too much at the table at stake. Typically this means a house. See the house by itself seems like an innocuous thing but over here buying a house would mean pledging the next 20 years of your life in equated monthly installments or EMI for short. Once you have EMI’s running, there is no chance that you are going to take risks. You start growing roots around the place. You start making friends, be familiar with the grocer, the milk man, the watchman… you build your life around your commute and then you are finished as a risk taker. Then having the monthly pay check coming in is very very serious business. Why – because the predictable monthly paycheck ties in very well with the infallible predictability of the EMI.

When I bought my first home it was a very fortuitous time. The EMI was at a fixed interest rate and housing prices very low. They were to just start their sky rocketing orbit. My home price has gone up 5 times since I bought it in 2004. At the time I was still ok with the EMI amount. In the slowdown of 2008, I wasn’t worried, I wasn’t scared. I saw my fixed income balance and I saw my liabilities and I slept in peace. Then I went ahead and bought my second larger house. I haven’t ever slept well if I thought about it. Earlier I would be nonchalant in my attitude. I would be able to call a spade a spade, but now I see myself thinking twice. I still try and push the bar but I am careful not to push it carrying my resignation in my pocket. I have become too big in my own life to fail. I have two EMI’s to feed. Hopefully the second house is ready for possession soon enough which would means that I can rent it and it becomes an income stream from an expense stream.

But there are other issues that stop me from taking risk and hence give me limited mobility. Jispa’s school and Matunga gymkhana around which we have revolved our life. Schooling is a huge issue in Mumbai. With a dearth of good schools and at reasonable price points we can’t afford to take risk with schooling. Jispa’s school is impossible to get into. We don’t know how we got through and it was a stroke of good luck. Once when I was offered a job in Europe in the same company I refused, how would I come back and get my daughter reinstated in the same school. It would have been a four to five year stint but how would I come back and fight again for admissions. As a city if we are unable to provide for or encourage good schooling we wouldn’t be able to attract and retain talent. Cities must also fight for talent in similar fashion. Now I understand the value of the Kendriya Vidyalayas that the government set up all over the country giving a uniform education for its entire government staff that would get transferred. Having schooling that is uniform and predictable for the child and the parent is so critical. And of course the gymkhana. Gymkhanas in Mumbai are elitist and restrictive. They open their doors only to members and memberships are limited and are opened only at intervals. Currently the Matunga Gymkhana is open for membership at a steep one million rupees. What the hell. Where does the average person train his daughter or give his kids a decent healthy lifestyle. So thanks to that not only am I rooted as a risk taker, my risk taking has come down to not moving to anywhere further than two kilometers to where I am currently staying. Else the commute and hence the schedule that Jasmine follows everyday will get awry. Wow. Risk aversion has a new meaning altogether.

No wonder I have noticed that even with the same firm, when we Indian go abroad we get highly politicized. We start playing games and we stop taking all kinds of risk. We only start doing stuff that protects our back side. We lick our boss’s derrières and we eschew all bold action. What if things go wrong? We would have to uproot our families from there and come back, in the middle of the school term that too. I saw this in our offices abroad and I saw this in my dad’s stories of when we were in Dubai. The politics is unbearable.

So I kind of agree with Richard Florida. Home ownership kills risk and mobility. We have a deep rooted desire to own our homes and the EMI’s coming with high cost of homes will kill us and our city. Luckily for Mumbai, the saving grace is that we have made renting slightly easier and relatively less risky. The Enforcement of leave and license agreements which are clear and solid has allowed for investors to give their homes on rent. Earlier the laws were completely in favor of the tenant and renting was akin to selling giving rise to a pagdi system in Mumbai. While we were in Dubai, our home was kept closed and locked rather than let out, as we were afraid we would not get repossession of our home when we needed it. No one really benefits from an asset that is underutilized.

I suddenly started thinking about this because of the conversation I had with Jasmine’s cousin. We are all from part of the baniya sect in the Hindu world order. This means we are essentially traders, businessmen by birth. It is our job to trade and to make profit. To be fast and flexible. He said, “us baniya, we should always be ready for mobility. In fact we baniya’s traditionally never bought houses.” I understood what he meant. If a trader is to thrive he must always be mobile, always ready to move to opportunity. Why else would Jasmine’s maternal grand-dad go all the way to Cochin, in an alien culture, to set up business. Her paternal Granddad came from Gujarat to Mumbai to set shop. My grand dad (maternal) went to Burma (Rangoon) to set shop and then came to Mumbai and set up his business. My Paternal Granddad moved from his home in Savarkundla in Gujarat to Mumbai to study and become a Doctor, after which he moved to Gondal in Gujarat to start his dispensary (it’s a business).

And now Jasmine and I are at loathe to even move three kms from our current home. Sheesh. Obviously we are no more baniyas. We have lost risk taking ability. That doesn’t bode well for our family. Or on the contrary it does. Simple predictable lifestyle. The shift from the hunter to the farmer. Possibly parenting is all that in our city. Growing roots. Staying in and withering away. Possibly we are the 55% giving the chance for the rest of the 45% to go out and push the envelope, take risks and be free.

While I was reading on Richard I came across his concept of ‘creative class’. An extract “Florida says that the Creative Class is a class of workers whose job is to create meaningful new forms (2002). It is composed of scientists and engineers, university professors, poets and architects, and also includes "people in design, education, arts, music and entertainment, whose economic function is to create new ideas, new technology and/or creative content” (Florida, 2002, p. 8). The designs of this group are seen as broadly transferable and useful. Another sector of the Creative Class includes positions that are knowledge intensive; these usually require a high degree of formal education (Florida, 2002). Examples of workers in this sector are health professionals and business managers, who are considered part of the sub-group called Creative Professionals. Their primary job is to think and create new approaches to problems. Creativity is becoming more valued in today’s global society. Employers see creativity as a channel for self-expression and job satisfaction in their employees.”

This creative class I see in the suburbs in Mumbai not in town. Town is old money, high rents, old houses and no buzz. Suburbs have buzz, have restaurants opening and closing at will, new ideas and of course the new age of creative people in design, arts and other stuff, pushing the bar.

I end on a story – once I met a friend of mine after a long time. She is in the creative field and her husband was setting up something in IT. they had bought a flat in the suburbs somewhere. While I was talking to her, she told me that the flat was bought on a home loan and then the price of the house had gone up crazy. Then in the middle of it all they thought of selling their home and pocketing cool ten to fifteen lakhs. (ten lakhs = one million). This they would spend a part of it touring Europe (Spain) and then shift to another house on rent. They would save on the EMI every month and pay a lesser rent, as well as have a sustainable life. At first I was appalled. What shit, sell an asset! Then I realised – you are young only once – have fun. And now I realize, selling their home and moving on rent to a smaller, cheaper place, gave them the flexibility to enjoy and follow their dreams. Being unencumbered by the EMI they could start a business and she could work free-lance. They could do something New and Not Conform to boring conformity. They wanted to be the ‘them 45%’ not the ‘us 55%’. I respect that. As a baniya, I genuinely respect that.

Interview on www.bigthink.com with Richard Florida. Full text here: http://www.bigthink.com/ideas/20243

This is so ironic, places with the highest levels of home ownership have low rates of growth; they tend to be older, lagging cities with older economic structures; they tend to be less innovative; they tend to have lower levels of human capital, of creative, economic activity; lower wages, lower incomes; and the people there have lower levels of well-being.

The ones that have lower home ownership, they’re stronger economies, they’re more innovative, they’re higher wages, higher incomes. And I thought about this and it’s not only that those cities are more expensive, right? Los Angeles and New York and San Francisco and Seattle and Boston, they’re not only more expensive, so obviously fewer people can afford houses. Actually by having a lower level of homeownership, and that’s around 50 or 55 percent, where the big, the cities that have a lot have 80. It actually makes them quite fast and flexible. And I find this really interesting. If you lose your job in Detroit or Cleveland, you own your house: you’re stuck. You can’t even move to another part of Detroit or Cleveland for a job, never mind to a place that might have more economic opportunity on the east or west coast. You’re stuck and you’re stuck with that house and you can’t get rid of it and you have to pay for it.

If you work in New York or Los Angeles or San Francisco and you lose your job, first thing you can do is downshift to a cheaper apartment, and if you need to move to a new region, when your lease ends, you can up and go. So I actually believe, the Urban Land Institute says we’re falling in home ownership. We’re going to come down to about, I think, they think, anywhere to about 62 percent, I think we’re going to go a little lower. I think a nice balance is about 55 percent, with the rest of the people renting. I do think we need to reinvent rental housing, though. I think the kind of rental housing we have now, where you go find a landlord on Craig’s List and you get a place and they don’t fix the windows and the dishwasher breaks and you’re doing it; that’s crazy. I think with all the condos that are vacant, in fact, we’re even seeing this in Miami. And I see this when I go to Miami, it’s actually my cycling route. I cycle down through the city and through the City of Miami, into Key Biscayne. You see all the condo towers that went bankrupt, that were distress sales, now being turned to rental. And what’s interesting is you’re renting from a real rental agency, the housing is nice and high quality, but it’s very affordable, lots of people are streaming back into downtown, empty nesters, young people, people with families, more street-level activity.

I even imagine something more than that, where you could sign up with Acme Rental Company, or XYZ Rental Company, and if your job changes in New York, or San Francisco, Toronto where I live, and you want to be closer to where you work, you can switch apartments. Or if you transfer to the West Coast or the Midwest or wherever it is, San Francisco, Chicago, you can basically be part of that rental company’s units there. Some way, and I think with the excess inventory—according to one analysis, we now in the United States have 8 years, 103 months, of excess housing inventory; well, somebody’s got to do something with that. If companies over the course of the reset in an entrepreneurial fashion begin to roll that up, begin to provide mass rental housing, if you will, and what gives me—I talk to a lot of developers and I speak to developers' forums, I was just at the Urban Land Institute: multi-family housing is one place people are actually profitable in.  

And just to spice up things a bit, here is a video I showed to one kid in office today. She went to Vashi station for the first time in her life and was impressed by it. When it was first constructed and Vashi was still a growing far flung suburb of Mumbai, the station won a lot of rave reviews. So much so that this movie song was also shot on location in the station. The actress is actually in the middle of eh song gyrating on the tracks. Development is always Sexy.

you never know what you can get

It’s always great fun to meet a veteran, from any business and at the same time it’s pretty irritating to meet a cousin (especially wife’s) who you have never ever met, but you have to and exchange pleasantries. So last week I was pretty unexcited at the prospect of meeting one such relative. But since my mom in law doesn’t normally ask me to come and meet, I thought of going nevertheless.

He was Jasmine’s cousin and a veteran in the old coconut oil trade from Cochin. It was quite nice and mentally I ate some humble pie. I judged before I met and if I don’t meet then how would I learn from others. There were a few things that he said that hit me. One of it was when he explained why the middle men in Cochin in the coconut oil business completely died. It seems Jasmine’s grand dad from her mother’s side was a kingpin of sorts in the business. The business died when Marico professionalized and bought directly from the manufacturers. The middle man was bound to die a natural death. He said that three things contributed to the death of the middle man. They were road, mobile telephony and banking. Bang on. These three improvements surely have contributed a large amount to the productivity gains and of course productivity can’t be enhanced without squeezing the middle man.

 14 years ago I worked as a sales guy in rural Guajarati. The mobile telecom boom hadn’t happened and I had to call up the Area sales manager in the evening at his home to get through to him. There was no contact possible when I was on the road and my ASM’s would have no clue what I was up to. I also used it to my advantage in those days by disappearing and fudging reports. I learnt later the power of diligently working and not bunking office. But at the time, I was shuttling between Gujarat and Mumbai, trying to squeeze every second I got by coming home. I wouldn’t recommend slacking off to anyone. But the point is that mobiles would have greatly enhanced our productivity. We would be in touch a lot more with each other in the sales system. I for one would not have gone missing. Though I did not see this one coming, it surely

Roads for sure would help. Rural Gujarat meant a lot of travelling. It was evident that road network needed improvement. I travelled all across the place to encounter bad roads. I travelled in buss, three wheelers, trucks, matadors, scooters and what not. It definitely screwed up my back completely. The lack of a road network would mean that we would not be able to transport goods cheap and fast across the country. Markets would remain inaccessible and the transfer of goods based on price movements would be severely curtailed. Roads are great and having roads is a greater leveler than what I had imagined.

Banking. I had got this one right. I remember my first cheque quite clearly. It was a non MICR cheque. In other words, Ahmedabad did not participate in MICR clearning – that is the cheques did not have the magnetic ink at the bottom. This is the number that helps the RBI in clearing the cheques. I found it highly amusing. Gujarat had a plethora of co-operative banks in every nook and corner. When we collected cheques from the distributor we had a list of approved banks. The thing was that for cash management services we had tied up with a third party provider. We used to have blank cheque leaves signed by the distributor at our end. We would send the stock and write the amount on the cheque and give it to the third party whose job it was to get the money. When I first heard the concept, I was quite confused. Why would you need someone to help you clear the cheque. Our deal was that I would get the money within two or three days of presenting the cheque and the third party would somehow get the clear funds from the banks in question. This is pretty stupid archaic concept. You present a cheque you should get the money, right? It seems there was a huge delay in banks clearing payments. Especially if it was a cooperative bank. Some of my distributors were the heads of the banks themselves and cheques would be held back for two weeks before being released. The third party would give us a list of banks they thought were acceptable and would accept cheques only from them. This was a system that was plagued with obvious difficulties and inefficiencies. During the 2000 dotcom boom, I knew that the banking industry would be able to add percentage points to a nation’s GDP by digitizing all their transactions and records all over India. Access to credit, access to creditworthiness and the ability to effect instant payments would be a huge booster to business and productivity. It had to work.

So banking, telecom and infrastructure were the three buzz words that removed the middle men in India. Well said ‘cousin of Jasmine’. Well said. I agree whole heartedly. Sorry Jasmine. Next time I will come without whining.

finders keepers

Last weekend Jispa had her trials to represent the city for the state meet. Jispa has been training pretty hard over the last one year. This is when she and her coach started to seriously set their eyes on qualifying. She has had some amazing improvements in timings over the year. But she has been unable to br4eak into the top three. Her coach is also realistic about it. He told us that it was pretty difficult as Jispa seriously started only a year back. The other kids had been at it much longer. But his immediate priority was a top six finish at this meet. Jispa managed that in the 50mtrs butterfly (fifth place) and the 50 mtrs free (fourth place). The top 6 go to Pune next month for the state meet. Her coach feels that the exposure and the confidence gained will be good.

The tournaments are held with an age bracket of two years being bunched together. At their age two years is a lot of difference. So in the under 11 category someone aged 10 has little chance of winning. Everyone talks about the disadvantage year and the advantage year. The year gone by was an advantage year for Jispa, and the one coming up is a disadvantage year. Next year she would participate with little chance of winning anything. Her coach was telling Jasmine that Jispa has a lot of potential. He said if she can be so fast with such horrible strokes, just imagine how fast she would be if her strokes is corrected. After June is the off season and this year is her disadvantage year. So the coach will now have time to correct the strokes and movement. I want to go and tell him. He is talking about preparing for the state meet two years hence.  Pretty deep stuff. Stuff that we had no insight into until you go through with it yourself. I am looking forward for the state meet. I want to see what it’s like. How are the facilities and the arrangements? How do swimmers across the state stack up against the Mumbai lads. How they come, what they do and how they behave.

I noticed an interesting things at the meet on Sunday. As Jispa and her contemporaries lined up at the starters block, I saw something that struck me. All the kids at the whistle took the block with a small ritual. They touched their hearts or they touched their heads or made a cross or something. They all looked for divine inspiration. Some supernatural force to come and assist them or mere blessings before the BIG race. Jispa merely took the starters block with no such ritual. We haven’t taught her God Rituals. Now I don’t know if this is a good thing or a bad thing. Definitely I was not going to teach her empty prayer or stupid rituals which have no meaning but at the same time, what I have robbed her of, is an external focus. Something that can help you when you are all alone. I don’t go to temples at all and I don’t recite any prayer, but in times of extreme situations, I do have my conversations. Something that I tell him, come dude, get me through this shit. Or thanks dude, nice one. Or its testing but I will be back, just give me strength to weather this one. I assume this is there because as a child I did believe in God. Today I grow up to question common belief and faith. Shit cannot happen to me just because I don’t pray or good cannot come because I do so. But sometimes, when the going is tough an external voice to talk to in private may be a good thing.  As of now Jispa doesn’t have this God figure in her mind. At least that’s what I think. But instead she has herself to talk to. I have spoken to her about what she thinks. Like the time when the results for the Hindi elocution was to be announced. She talks to herself. I think that internal belief is possibly better than a God belief.

Jispa willy-nilly has become a test case. Not out of my wanting it to become. But it is an interesting study on what a human do would if he were not brought up on a religious diet. What would you do if your dad actively questioned religious belief and God, your mom didn’t teach you to pray but at the same time your grannies took you to the temple? How would you have your conversations? I guess she will rely on her instinct as a human more than her instinct as a religious person. So she will take the starting block stand as a human being free from man constructed beliefs. She will I assume talk to herself. Look at an internally locus of control, an internal voice to guide her. A voice that is not borne by faith taught or not borne out of a faith in opposition to faith taught (like me), but a natural voice that human will have. That I think will be her God. And I hope and Pray that she finds it useful for her and holds her good stead. I Pray I have not robbed her of something important and eternal, but that I have given her something natural, inborn and lasting. I hope she finds her own GOD. Finders keepers.

Jump Jump

This week end Jispa has her top city swimming event. If she does well, she represents Mumbai at the state meet. She seems to be doing well and she has a decent chance of making the cut. At least in a couple of events. The last one year has been a bit tiring for us as regards her swimming. How much do we push? What does she require in nutrition and how do we balance swimming and studies. Her studies are cranking up a notch and Jasmine is feeling the pressure of studies which is getting transferred to Jispa. I don’t really blame anyone. Jispa is a nine year old, aspiring champion and a smart kid. Jasmine is a mother who knows that while swimming is good, studies is probably more important. How do we balance the two? It’s a delicate balance and here I must interfere and calm all the nerves around the house. Sometimes things are on the edge and the atmosphere gets very tense.

Even while swimming, it can get very tense with Jasmine getting dam irritated with Jispa when she suddenly starts swimming awkwardly. Jasmine goes twice a day to the pool, manages the food, the studies, everything and then if Jispa suddenly decides to do silly things, anyone can blow a fuse. My role is very clear in these times. I am lucky to be detached from the system. I am one step away. I can stay out and keep telling jasmine – its ok its ok. At that time, the biggest risk is that I can get the brunt of it.

Parenting is really frustrating at times. It’s impossible to keep your sensibility in check at all times. You never know what’s the next fight that’s around the corner. While swimming Jispa behaves like the champ. She changes into her costumes, adjusts her cap and goggles, takes her start and swims like crazy. As parents, one tends to forget that the tough competitor hides a child. A nine year old child with enough ants in her pants. This came to the fore during the otter’s club meet. The otters club swimming pool has a section which has a diving board. The kids completely freak out on it. Jispa has never been off one. Between events Jasmine told me that Jispa is having fun at the diving boards. I thought should go around and teach her a trick or two. I used to dive off the board as a kid and it was good fun. We used to have fun diving just like that as well. Who needed a board. We tried to perfect dives and I remember we even tried to do a somersault while diving. That was real fun. Especially if you land on your back and get a whack from the water. So I thought it would make sense to knock some non sense into her diving.

I reached there to find Jispa doing this…

So here I was the one trying to teach a kid to be a kid. It’s humbling to know that your kid doesn’t need you to teach her. Later I asked her who taught her and of course, I should have guessed. Her friends. Get a board and a water body, that’s all the kids need to have fun. I can only take credit for the fact that I did not stop their fun.