Should Apple Buy Out Greece?

GOT YOUR ATTENTION, DIDN’T I? But seriously, if it weren’t for this sovereignty business wouldn’t you give it a second thought? Think about it. Apple has enough cash on its balance sheet to acquire a few distressed assets like Greece without even resorting to leverage. Business governance as demonstrated by an Apple could turn around an under performer like Greece in a reasonable time. I say this because I believe it isn’t a lost cause. Just one that is poorly run. It is one of the oldest and strongest brands in the world. And in no time Apple shareholders will get a fair return on their investment. Seems like a plan.

Not quite. This is turf and entitlement. You expect others to bail you out for your sins. Not unlike the “too large to fail” logic proffered for the massive subprime bailout. Everybody had their fun. Everybody knew exactly what they were up to; and lined their pockets till the money ran out. When it did run out and everyone stood exposed, it then became the turn of the hardworking taxpayer to cough up. Because if they didn’t these important institutions would crumble. It’s laughable that someone like Richard Fuld took home $400 million for destroying a 200-year-old legacy like Lehman (please watch the movie Margin Call).

There is this neat piece on the Greek problem doing the rounds on WhatsApp about Mary the bartender. In short, her drunk and unemployed customers were spending less and less and her business was looking poorly. So she has the idea of giving them ledgered credit which they willingly accepted, resulting in a huge upswing in consumption and therefore sales numbers. Her bank structured the debt, creating bonds and selling them on the securities market as Drinkbond and Alcobonds. It all comes apart when the risk manager at the bank decides to call in the debt from the unemployed drunks. To save the bank, the government steps in and bails it out. The bailout comes from taxes. Then the government asks the taxpayers what they think... you know what happens. 
Can Air India ever be privatized? Why not? Because it is the endowment of the entitled. Which politician or bureaucrat in this country would agree to give up the benefits of a free ride like that. But at minus Rs 40,000 crores they expect the taxpayer to continuously cough up for a deliberately ill governed carrier that was once the pride and joy of this country. May JRD’s soul rest in peace. 
Can Air India be given a bailout package with tough conditions attached? You have to be kidding. I have heard of one of our Cleopatras who used to go to her favorite hairdresser in London first class on AI. This is her right, of course. Why should any bailout package rule otherwise. Why would her husband agree to such a bailout?

If India is not a Greece, it’s only because of the millions of tax paying toilers like you who work their shirts off to keep the boys club covered. Think about this: nearly a third of India’s corporate debt stock is in the name of companies that do not have enough profits to cover interest payments. Public sector banks (who hold three fourths of these assets) have a dodgy loan ratio of 12 per cent. Think of what that means in money terms for a lender with a Rs 900,000 crore book size! Too big to fail. But who will underwrite these Titanics?

Whether it’s Greece or India or Air India the story is the same. Sovereignty brings entitlement. Which is always the opposite of governance. Which, in turn, is the opposite of government. 

Apple may not be allowed to buy Greece but a good OS could be the answer to its problems.

The author is president and CKO, EQUiTOR Value Advisory and can be reached at ramesh@equitor.com.


Two Minute Recipe For Resilience

IN THE MIDDLE of last week, my immediate team had pulled out a couple of big rabbits. So we went down to this favourite little Bengali snack joint in Domlur for a chhota celebration. They have a menu which is plastered on the wall. What caught my eye was the status of the much-maligned Maggi on that menu. It didn’t have a cross against it, nor an apology for non-availability. It just said, “Back Soon.”   

Personally, I dislike the stuff, and I couldn’t care less whether it was banned or banished. But that menu did provoke my working instincts. In the many years I have been involved with, or taught brands, I have seldom seen more powerful but quiet evidence of resilience.   

One of the most underrated elements of strong brands is their ability to bounce back. The owner of that shack was no Philip Kotler, I’m certain. But he knew two important things: first, the faithful who gathered every evening at his shop would not accept the absolute demise of their favourite snack, and second, it is too early to write off equity of this history and geography. Imagine walking into a mobile store and finding a notice about Apple phones being banned for high radiation or some such thing. The shop will be boycotted. People don’t want to hear that.   

I’m not a fan of Cadbury’s either. But most of the faithful will not even remember the last crisis it went through. However, when the worm controversy broke a few years ago, surely the management and staff of the company must have had a bad scare. Finally, they roped in the mighty Bachhan to let people know that they are basically good guys who would never mess with your favourite chocolate. Did they need to? 

Singapore Airlines experienced one of their worst nightmares in October 2000 when a 747-400 crashed soon after take off killing almost a 100 people. According to reports, it was a clear case of flouting weather safety norms. But most regular global travelers will not be able to recall an SQ crash. Singapore Airlines crash? Really?    

One of the brands that would stick out of any CV I could write would be ABB. After having worked on that brand for many years we were suddenly faced with a public interest litigation accusing the company of having worked the system to get a big government order. My view even then was to avoid a prolonged battle with the press. Soon enough, the centre of gravity of that crisis shifted to the folk who were managing the deal, veering away from a company with a spotless reputation for cutting-edge capability in electrical engineering.  

 Tata Finance (TFL) faced and conquered a similar crisis in 2002. TFL was accused of a cover-up job with the active collusion of their very reputed audit firm. The public just refused to swallow it.   

Here’s the deal: these are names that have earned a special place in people’s consciousness over a long time. It is then inconceivable to them that these entities are fallible. Why would Maggi deliberately put lead in my snack? How can SQ ever crash? Tata and financial impropriety? Now, I am not arguing the veracity of any of these possibilities. Just pointing out their incredulity to the vote banks.    

Unfortunately, it is only in a crisis that we really recognize this invaluable dimension of brand strength. And that too only after it has blown over. With a sigh of relief we recall the depth of that reputation. For my money, brand resilience is one dimension of a business that truly reflects its long-term value. It is something that deserves our ongoing attention in terms of nurturing and measurement.   

Like a good insurance policy, it not only pays off when required, it also reminds us with every premium that this is something really precious we are protecting.    

The author is president and CKO, EQUiTOR Value Advisory  and can be reached at ramesh@equitor.com

 (This story was published in BW | Businessworld Issue Dated 27-07-2015)