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Doctors pursuing Management Courses for better career prospects

There are many doctors around the world who are seeking admission into management courses. They are applying for different management programmes from various reputed institutes. The various universities are there in order to gain the professional and personal expertise which is most needed when it come to treating a patient.

This course simply enables the doctors to behave more professionally. It is not required to say that doctor’s professional attitude is only about getting personal with the patients. They can understand patients and can build a rapport with them. It will help them treating well and healing their pain and get them cured. Doctors really need to be caring towards their patients so that they can treat them well.

There are many executive programs related to management which are formulated for doctors and for them who are practicing this medical profession. Many doctors have pursued these programs and got benefit out of this and today they are doing their work with more proficiency and with more professionalism.

When we are thinking of any doctor doing MBA, it may feel us very astonished and we might again think how stupid the person is! What is the requirement of doing so? Because this is not sound to us a very conventional thing. Today in the reality it has enough implications. Doctors need to know many more skills which they can simply gain by doing a MBA course.

There are many things required to run a firm including health care one. Hence to manage well you need to have managerial skills so that you earn profit in your business. After all money always matter. To run a successful health care firm requires knowledge in finance and accenting as well along with planning and execution.

Specialists have a mixture of alternatives in concentrating on administration courses. They can select to utilize the customary and more regular self-study and at work preparing choices. They could additionally go to gatherings, workshops, and preparing projects offered by restorative affiliations and organizations. Short-course, Continuing Medical Education programs on business and administration are additionally accessible.

To test sufficiency in managerial parts, medical practitioners could first expect low maintenance. Basic regulatory obligations are in their individual healing facilities or centers. They can also uncover their specialty in performing administration obligations. They could proceed onward and take part in transient workshops or classes led by doctor’s facilities, medicinal associations, schools or colleges, and business or administration firms and schools. A while later, specialists could then study administration courses or consume formal instruction in a school or college of their decision, then again graduate studies program. These degrees or courses could be acquired full-time on-yard, low maintenance on-grounds, or in an official arrangement wherein people have a set number of classes for every month. After completing the management course a doctor easily go for their own business. He may associate with a hospital besides he can run his own business with more profit. This can happen only by the knowledge of management course.

The sad state of the policy on FDI in retail

[Update: An alternate interpretation of the real estate issue has been added]

This was a good wake up call back to reality after all the dreaming about the possibility of 100% FDI going all the way to convertibility on the capital account. No! The Indian government is not going to do the economically sensible thing. It will insist on putting spokes in the wheel and hurdles in the path of the eager investor.

It will burden the capitalist with burdens so big that he will begin to wonder if all the hoopla about the humongous Indian market is worth it at all. It will get down to telling the capitalist how to run his business and where to put his money. It will dictate what goods he may sell, where he may source his goods from and therefore at what cost, thus throwing all business strategies of the capitalist out of the window.

The simple case of mandatory investment in real estate

This is from the newspaper article cited today.

Senior executives and representatives of these companies met government officials in New Delhi this week to lobby for concessions. These included relaxing the local sourcing conditions, making investment in real estate part of the mandatory $50-million investment that foreign retail companies have to make in back-end infrastructure, as well as lowering the minimum investment figure itself.

The hallmark of a real estate bubble is that property prices go completely out of sync with rental prices of the same property. For instance, when a plot of vacant land that would get a bare rental price of Rs. 3 lakh p.a. has a market price of Rs. 1 crore or more, the market is betting that the prevailing expectation on interest rates is around 3%. This is simply because the market price of the land is nothing more than the discounted present value of all future rental income flows against that property. Given that land rentals are best seen as rentals in perpetuity, the discounted present value of all future rental income flows is nothing but the sum to infinity of a Geometric Progression with
• initial term (a) = Rental Price of land/(1+i/100) (Year 1 rental comes at the end of the year in the basic model)
• common factor (r) = 1/(1+i/100)

Market price of land = {Rental Price/(1+i/100)}/{1–(1/1+i/100) or

Market price of land = Rental Price/(i/100)

So a market price of Rs. 1 crore given a rental price of Rs. 3 lakh implies an expectation that

i = (3 lakh/1 crore)*100 or 3%

A 3% nominal rate of interest when price inflation is estimated anywhere from 6% (based on WPI) to 11% (based on CPI) means negative expectation on real interest rate. If ever you could say B-U-B-B-L-E, it is under such circumstances.

So, given that there is indeed a bubble in real estate, it is eminently possible that a multinational that specialises in the business of retail and is focused on keeping costs as low as possible as part of its business strategy would clearly have reasons to prefer leasing to buying, especially if it can get the requisite security of tenure. If, on the other hand, it is forced to invest in Real Estate, there is clearly less capital left to invest in other aspects of the business. In this manner, government actually gets to tell the retail chain where to put their capital.

A company whose core competence is running a chain of retail supermarkets through leased real estate would hardly consider it its core competence to make profits through real estate plays. By forcing the retail chain to play the real estate game, government is actually dictating their business strategy. Someone tell me what sense this makes!

[Update] – It may also be interpreted that these retail chains are asking to be allowed to include their real estate investments as part of the mandatory $50 million that they have to invest in back end infrastructure. If this interpretation were correct, then all they are trying to do is to free themselves from other mandatory investments and leave themselves free to make the rest of the investments most in keeping with their business plans. Not allowing them to do so, however, will still remain another way of dictating investment terms to the investing capitalist. I fail to see how this makes sense at all.[Update ends]

30% mandatory local sourcing hurts the Indian consumer

The policy on FDI in retail includes a mandatory requirement of 30% local sourcing. If the retailer prefers to source from suppliers in other countries, it implies that suppliers in this country are overall less efficient and involve greater cost for the retailer. Protecting local industry in this manner automatically implies hurting the local consumer burdening him with higher costs. In the name of protecting the Indian manufacturer, this policy hurts the Indian consumer.

To make matters worse, it is a classic case of Bastiat’s dictum of the seen vs the unseen. The employment that is created in the lines of production favoured by the policy is very visible and is seen. The employment destroyed in the industries that are disfavoured because the consumer now has less disposable income and is therefore unable to spend on those is unseen and can never be known or estimated, though it is very real.

The most one can say is that the spending caused by the policy is forced upon the consumer while the unseen spending that the customer would have engaged in would have been volitional and would hence have left him better off. That he would be better off is a logical necessity as the very use of force indicates that the option being forced is valued less by the consumer for if it weren’t, the force wouldn’t be needed in the first place. Thus, in economic terms, the policy of forced local sourcing leaves the Indian consumer worse off.

Time to review the policy

If the government wants to do something good for Indians in general, it needs to reconsider its policy on FDI in retail and allow foreign capitalists to invest as they wish to and stop dictating terms to them.

Orwellian Nightmares

In his epic book, 1984, George Orwell lays out in all its gory detail, the entire philosophy behind the Statist machinery that has taken control of our lives and uses us (all people) as pawns in the games Big Brother plays. The most striking (to me) aspect of the book is the concept of “NEWSPEAK” that he introduces. What makes this striking concept scary is that we are living through this process of concept destruction through language destruction, albeit in a slow and gradual process of the same, but are completely oblivious to it. All around us, concepts are being mutilated and destroyed and we, the people who are affected by it, remain mute spectators because we do not understand either what’s happening or its implications for us.

To understand what I mean, let me delve a little into 1984 and NEWSPEAK. What is NEWSPEAK? It is a language developed by the State machinery to regulate the thoughts that people can have. But how can control on language control the thoughts people can have? Here is how.

Language is the most fundamental tool of concept formation. As human beings, we are able to hold an extraordinary volume of concepts interlinked in extremely complex ways. The tool that makes this feat possible is language.

The fundamental building blocks of language are words. Words are labels for concepts that we hold in our mind. Concepts themselves are of different types. The most fundamental concepts of all are concepts of “existents” or distinct things that exist. When we talk of the “table”, “car” or “tree”, we  are referring to things that exist. We come to be aware of their existence through our sensory apparatus. This awareness is processed by our cognitive apparatus and converted into concepts stored in our mind.

The second level of concepts is abstractions. Abstractions are not things that “exist” but are identified by us as attributes of existents. For instance, “length”, “weight”, “volume”, “area”, “colour”, “texture” and various other attributes of things do not exist. It is we who, in our effort to form concepts of existents, identify these attributes, associate them with existents and thus form concepts of these attributes. “Length” does not “exist”. An existent possesses a certain length, i.e., the existent exists in a region defined by the end-points A and B where the “distance” between A and B is the length of the “existent”.

The third level of concepts is abstractions from abstractions. For instance, when you say “The rope has a length of 10 m”, the “10 m” or the measurement of the “length” is an attribute of the attribute “length” of the “existent”, the rope.

An important point to note is that abstraction can proceed in two broad directions.

  1. Differentiating existents and previous level abstractions from each other to form narrower concepts
  2. Integrating existents and previous level abstractions into broader, encompassing concepts

An even more important point is that higher level abstractions are formed from concepts of existents or lower level abstractions. The first level abstractions are themselves formed by abstracting from concepts of existents. This means that for any abstraction, there exists a train of abstractions that one can work through backwards till we eventually reach the concept of an existent which we may call the “referent” of the abstraction. All abstractions have meaning only in relation to this existent. They have no independent existence beyond the existents themselves.

This multilayered, interlinked complex of concepts is what we call our “knowledge”. We hold all our knowledge in the form of words, each of which refers to a concept and the concept in turn automatically denotes all the attributes we have associated with that concept in the process of forming it or later.

Any set of concepts will be united in some respect. For instance, the concepts “table”, “cars” and “telephone”, while fundamentally standing for existents that are clearly distinguished from each other, are all “existents”. They are all particular units of the broader category “existence” or all that exists. At the same time, every concept is distinct from every other concept in at least 1 respect for otherwise it would be superfluous to even hold a distinct concept in our mind and give it a name. For instance, different shades of a colour, say red, are different from each other. There exist many names such as magenta, red, pink, crimson, etc., all of which refer to different shades of red. Feelings and emotions, for instance, may exist in different degrees. “Anger” and “Rage” are different degrees of a particular emotion.

Thus, we see that our ability to form a wide variety of concepts and hold an extensive body of knowledge in our mind is critically dependent on suitable words to use to identify and refer to these concepts.

How is all this that I have said about language and words relevant to Orwell’s 1984? Very simply, the book is set in a (fictional) period where totalitarian dictatorships have taken over the entire world. Now, these totalitarian regimes are, as per the story, extremely sophisticated tyrannies. They are tyrannies unleashed not by individuals but by a “Party” which subscribes to a certain ideology.

The goal of the Party is to stratify society permanently into 3 classes – the rulers or the Inner Party (themselves, ~5% of the population), the machinery or the Outer Party (~15% of the population) and the mass of people who don’t matter who are called the Proles.

One of the most important goals of the Party is to reduce the population to a state where no individual is capable of even thinking negatively about the Party or Big Brother (the personification of the Party). This goal is sought to be achieved by the Party through the destruction of language. This is the role of Newspeak in 1984.

In NEWSPEAK, the only words allowed are words denoting concepts of existents and those concepts of abstractions that are either neutral or can be used only in praise of the Party. If entire generations grow up learning NEWSPEAK, it is possible to have the entire population incapable of being hostile to the State and in fact loving it wholeheartedly.

How is all this relevant to us today? Simply put, we are slowly but steadily lurching towards the Orwellian nightmare through systematic destruction of concepts. To give you a feel for it, let me take a simple example from my favourite field of study, Economics.

All of us are familiar with the economic concept inflation. Ask any moderately educated person “What is inflation?” and the answer would be “The steady rise in prices”. But how many of us know that the concept “inflation” once stood for something very different?

As recently as the early 1900’s, the term inflation stood for an increase in the money supply or the quantity of money in circulation. Starting with this definition, economic theory then goes on to explain the effect of inflation on prices of economic goods. The effect can be summarized as below.

  1. If the supply and demand of a good were changing such that the price of the good has a tendency to remain stable, inflation would cause its price to rise
  2. If the supply and demand of a good were changing such that the price of the good has a tendency to rise, inflation would cause its price to rise even faster
  3. If the supply and demand of a good were changing such that the price of the good has a tendency to fall, inflation would cause its price to fall less, remain stable or even rise

Summarising the above even more succinctly, one can say that the effect of inflation is to keep prices higher than they would have been in the absence of inflation.

Economic theory also explains that inflation, when carried out through the banking system and its machinery of credit expansion, has far more deleterious effects on the economy as a whole and on the well-being of every citizen. At a basic level, it creates a situation where those closer to the source of the inflation are benefited by impoverishing those further away from the source of inflation.

At a deeper level, however, this inflation, working in conjunction with its equally dangerous twin, credit expansion beyond the available pool of real savings, causes the dreaded economic phenomenon called the Economic Depression. All of us understand that economic depressions cause untold human misery. What many of us fail to realize is that inflation by the banking system is at the heart of the creation of the boom-bust cycle of which the Depression is only the bust phase.

Armed with this understanding, it becomes very easy for anyone at all to answer the question “Who is responsible for the misery caused by rising prices and, more importantly, for all the suffering wrought by the boom-bust cycle?”

The answer is, very simply, “Whoever is responsible for the inflation is responsible for all this human misery”. But then, who IS responsible for inflation? Who or what causes inflation? This answer too, in today’s world, is very simple. There are 3 entities.

  1. Government
  2. Central Banks
  3. The entire banking system

Thus, the original definition of inflation combined with economic reasoning permits ordinary people to identify those responsible for their suffering and to direct their anger at them. Interestingly, the list includes the very entities that are today masquerading as the saviours of the people.

On the other hand, if we start with the definition of inflation as “the steady rise in prices”, economic reasoning is utterly incapable of explaining what causes this inflation. The only explanations we get are

  1. Demand-Pull – A perfect example of question-begging
  2. Cost-Push – A perfect example of circular reasoning given that the “input costs that are supposed to be responsible for the “inflation” are themselves prices and their rising price is itself part of that very “inflation”
  3. Structural inflation – A perfect example of abdication of academic responsibility

Incidentally, this nonsense is what is taught at most B-Schools (including the top ones) and prestigious university economics courses.

The important point to note is that with the revised (I should say mutilated) definition of inflation, it becomes impossible for people to point their finger at the real culprits and bay for their blood. In fact, it becomes possible for the culprits themselves to, like the thief in the parable, point fingers at someone else and shout “Thief! Thief!” to avoid getting caught. The best example of this is the standard finger-pointing at “greedy speculators” and “evil hoarders” every time uncontrollable and rapid price rise becomes a serious political issue threatening the survival of the then government.

Who is responsible for this switch in definitions? Could I say “The Inner Party”? All I wish to say to the reader is “Wake up and smell the coffee”.

Understanding Uncertainty & Risk

Are you a risk taker? Or a risk avoider? Do you like to bet all you have (All in as they say in poker) for a big payoff, or do you like to play safe and actively seek to avoid risk? Most of us lie somewhere in the beginning.

If risk is only about avoiding uncertainty, then it is no brainer of a choice. There is a lot of risk and nothing to gain in walking blindfolded across NH5. However in most cases risk is tied to return and when we reduce risk we also reduce return. How do we make such choices? Lets play a simple game.

We spin a coin. If it is heads we win Rs 100 If it is tails we win nothing. Simple math tells us that the expected value is Rs 50. Call this game 1

In Game 2, you win Rs 50 if it is Heads, and Rs 30 if it is Tails. The expected value is Rs 40, which is less than game 1.

But if given a choice, which game would you like to play? Game 1 has a higher expected value. However Game 2 is more attractive to the risk averse.

If you think you would choose Game 1, (after all it is a small sum) what if I add a few zeroes to the figures? Now take a look at the Table below

Option A (prob & Payoff) Exp Value Option B (prob & Payoff) Exp Value
20% of 400 80% of 300 320 20% of 700 80% of 100 220
40% of 400 60% of 300 340 40% of 700 60% of 100 340
50% of 400 50% of 300 350 50% of 700 50% of 100 400
60% of 400 40% of 300 360 60% of 700 40% of 100 460
80% of 400 20% of 300 380 80% of 700 20% of 100 580
100% of 400 0% of 300 400 100% of 700 0% of 100 700

It is obvious that in the first row, you are better off with Option A. As you go down the table, Option B starts looking better and better. In the last row, clearly option B is Rs 700 straight into your pocket. However the key is where do you make the switch from Option A to Option B.

Probability dictates that Option B is better from row 3 onwards. However the worst-case scenario in Option A is better, you are assured of a min amount of Rs 350. In Option B, you have a chance that you will end up with only Rs 100. What would you choose? Most of us are risk averse and would choose option A.

On the other hand, the best-case scenario in option A is a mere 400 compared to Rs 700 in option B. A risk taker would probably take option B, even in row 2 and maybe row 1 also. So do you focus on the best case or the worst case?

Nothing wrong, of course in being risk averse. We need to understand our comfort level with risk and make economic choices accordingly. The more risk averse we are the more we are willing to give up to reduce variations in outcome.

The level of risk that one is willing to assume is also dependent on the environment. However, in some situations, people are risk averse to the point of being irrational.

For example, in an experiment, participants were asked how much they were willing to pay for a lottery ticket which has two prizes – a 50% chance of winning $50 and a 50% chance of winning $100. Obviously, it was expected that people would pay between $50 and $100 (the expected value being $ 75). Stunningly the average bid was $16 with a median of $5.

Crazy, as the minimum you would win was $50. However what we understand from this and similar experiments are that people simply dislike uncertainty.

Say, you are running a restaurant, which can seat 200 people during lunch hour. The average customers that you get are also 200, which is perfect. Or is it? One must also consider variance. Suppose you get as few as 100 customers a day and as many as 300 a day. When you get 100 you lose revenue as most of the costs like rent, salaries etc are the same. When you get 300 customers, you have to turn away 100, which is lost revenue and also creates ill will among customers.

Different businesses have different capacities (and strategies) for absorbing risk. However most of us would prefer steady predictable revenue like a salary. That is why most of us are willing to forgo a higher average – a higher expected value – in exchange for a steadier payout

We understand the desire of students (and parents) to get a secure government job even if it doesn’t pay as much as a private sector alternative. It is difficult for us to even imagine the number of people who sit for an SBI PO or Clerical exam, way more than the number of people who sit for the CAT or even the IIT JEE.

What are the ways of reducing this uncertainty?

  • Avoid risk altogether (eg: Stick to Bank FD’s & Govt Securities)
  • Reduce risk by pooling the risk (spreading the risk)
  • Reduce risk by increasing our knowledge about the situation
  • Transfer the risk to someone else (Insurance)

Avoiding risk altogether is a bad idea, as it leads to significant loss of opportunity. By staying off the roads for life you bring the risk of dying in an accident down to zero but clearly by paying a huge cost.

Rahul Reddy

Director Vanguard Bschool