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Sunday, October 24, 2021

Weekend reading links

1. Even after nearly a decade, Uber continues to lose money, $6.8 bn of net loss last year. It's also facing regulatory headwinds like higher payments and protections for drivers and caps on commissions charged on restaurants. Reflecting these troubles, its share price hovers at its 2019 listing price. 

2. India's market regulators are doing what has not been done by regulators elsewhere. First the SEBI delicensed Brickwork Ratings and barred two executives of CARE for ratings related malpractices. Now the RBI has barred Haribhakti & Co from undertaking any type of audit assignments in central bank regulated entities for two years. This is the fist such debarment under Section 45 MAA of the RBI Act of 1934. The auditor audited SREI Infrastructure Finance Ltd and SREI Equipment Leasing, the Boards of both which have been superseded by RBI on governance concerns, including insider trading, and defaults in meeting payment obligations. Both are being taken for insolvency proceedings. 

See this and this on the problems at SREI.

3. Interesting data on the profile of India's unicorns, of whom there have been 33 this year till date.

Underlining the plenitude of capital available in the market, there was just one unicorn with a revenue multiple of less than 10 out of the 25 startups which turned unicorn this year for which data are available.

In 19 of the unicorns of this year for which data is available, there were just 8 with founders equity more than 25%. In fact, for a group of 50 startups, including those from 2021, the medial holding of founders is just 15%. 

Finally, the roll call of foreign investors in these 2021 unicorns.

4. Fascinating account in FT of the  rise and fall of former Austrian Chancellor and People's Party leader  Sebastian Kurz. Kurz, 35 now, won one of Austria's biggest ever electoral victories in September 2019, with 37.5% of vote for People's Party. But a scandal involving use of tax payer money to bribe media organisations into providing positive coverage has forced him to quit as Chancellor. He's now facing the heat of an investigation which threatens to unveil other more damaging deeds. Prosecutors and opposition accuse him of a Kurz system, a network of patronage connecting the Chancellory to the country's economic, political, and media systems. 

5. Saudi Arabia labour market facts of the day,

In just four years, the participation of women in the labour force has almost doubled to 33 per cent... For five years after Prince Mohammed launched his Vision 2030 reform plan, unemployment hovered stubbornly above 12 per cent, with youth joblessness at more than 30 per cent... Almost 2m foreign workers have left the kingdom since 2017 as the government raised tariffs on them and their dependants... expatriates, which account for about a third of the kingdom’s 33m population...Foreigners still account for about 77 per cent of private sector jobs. In retail, for example, where nationals now dominate the customer-facing side of many outlets, Saudis still only represent 28 per cent of the total workforce of 640,000.

6. Tim Harford has a nice summary on the now abandoned Ease of Doing Business rankings,

Doing Business was a victim of its own success. There are two types of statistics in the world: the ones that politicians ignore and the ones that politicians want to manipulate. The demands for manipulation will never go away, but the answer is not to cancel the gathering of statistics. It is to defend the independence of the statisticians.

One could also add that the statistical method should undergo constant improvement to account for emergent deficiencies. 

7. Jens Wiedmann, the hawkish long-standing President of Bundesbank announced his resignation early this week. During his decade long career and the Bundesbank and in the ECB's Governing Council, Wiedmann had been the voice of dissent against ECB's extended monetary accommodation. He played the role of the orthodox central banker, cautioning against inflation and monetary profligacy, and also against central banks venturing into areas like preventing climate change. This FT editorial has a good summary

Weidmann’s hawkish views, in keeping with many in his country and the reputation of the Bundesbank, meant he was often in the minority and would be passed over to become the next ECB president in favour of Christine Lagarde, with no prior experience of central banking. Still, to his considerable credit, he was a team player, often defending the ECB against unreasoned criticism in his home country. Critically, he rejected the potentially explosive assertion of the constitutional court that the ECB’s quantitative easing programme represented monetary financing...
Either way, Weidmann’s career showed that there was ultimately nothing for the eurozone’s institutions to fear from forceful dissent. Even while it annoyed Draghi, disagreement between members of the ECB’s governing board, which includes the head of the national central banks, did not prevent the ECB from acting decisively in moments of crisis. If anything, a loud voice reflecting the views of more hawkish member states, often in the north, helps build consensus and ensure that the institution — protected from political influence by international treaty — truly reflects the views of all it serves.

Wiedmann's role in the ECB is a great example of why strong and mature institutions need credible dissenting voices. 

It can be said that Weidmann's dissent contributed to keeping the ECB honest in its internal deliberations on continuing its monetary accommodation, and may even have enhanced the credibility of ECB's decisions than would otherwise have been. 

8. Justin Fox has a good article which examines the impact of Covid 19 in Sweden in light of the country's relatively relaxed pandemic policies. On both Covid 19 casualties and economic performance, the country appears to have done no better or worse than others, making it difficult to draw any definitive conclusions.

It's also a good pointer to the difficulty of drawing generalisable enough headline lessons about specific approaches on any such issue. As the article shows with several different statistics, it's always possible to selectively quote statistics to claim success or failure. 

9. Equity funding available for startups globally has soared this year.

Reflecting this, the number of unicorns too have risen.

This says it all,

There are now almost 850 unicorns — startups valued at more than $1 billion — more than 50% higher than this time a year ago.

10. Interesting McKinsey graphic which highlights the disconnect between employees and employers on labour market attrition - why employees leave and what employers think is the real reason.

11. The Economist has an article on Samsung as it grapples with its priorities in the rapidly changing market. Samsung's low valuation, apart from it being listed only in Korea, has to do with it not being a western firm. In terms of real value creation and long-term prospects, it's had to see how Apple can even compare with Samsung. 

12. Livemint reports on how Covid 19 has been a devastating blow for the Rs 1 trillion low-cost private schools in India. 

Of these 400,000-plus private schools, a bulk—over 320,000—are actually affordable private schools (those that charge a fee of less than ₹2,000 per month). School entrepreneurs claim that tens of thousands of these budget schools have now either permanently shut or are on the verge of shutting down... Contrary to the popular perception of a private school as an institution that’s all about high fees, swanky buildings and a ready physical-digital infrastructure that could take care of any eventuality, the low-cost budget school is often run with bare minimum facilities... According to Central Square Foundation, at least 90 million children—or 75% of all private school students—are enrolled in private unaided schools. And around 70% of the students in private schools pay less than ₹1,000 per month in fees and 45% pay less than ₹500 per month in India, according to the Union ministry of statistics... The National Independent Schools Alliance estimates that in the aftermath of the coronavirus outbreak, private budget schools will be facing an annual loss of ₹77,000 crore... low-cost private school teachers are now earning as little as ₹5,000-10,000 a month. Post pandemic, teacher salaries have dropped steeply—between 30-65%—and there is no surety that the salary will be credited by the end of the month.

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