U, V or W- What Shape The Economic Recovery Will Look Like ?

28 06 2009

Recession is passé now. So it seems. If one looks at the recovery in the stock markets the world over. It looks like recession was a 2008 event and 2009 is well ready for a recovery. The BSE Sensex in India has moved from 8200 on March 9th to nearly 14500 now. A growth of over 80%. Many stocks have doubled and some have even tripled in this period.  

Does this mean that the bad news is behind us? Is the recession over? Will the real economy go back to the heady days of 2006-07 or early 2008? On that the opinions are varied.

One simple method to predict the shape of the recovery is the shape of the curve based on the shape of the alphabet. The most optimistic of the economists and analysts predict a V-shaped recovery, in which the lowest point can be considered as Nov-Dec 2008. The optimistic analysts prognosticate that there is still pain left; hence the current recovery from March onwards is just a bear-market rally. The markets will go down again and only in 2010 will the real bull market start again, hence the shape shall be a W. The pessimists indicate that the stock markets are out of touch with the real economy and the real economy will revive very gradually over the next 18 months. The shape of the curve is hence a U. The doomsday analysts say there will be no recovery at all for a long-long time like the way the Japanese economy went through in the 90s, hence the shape of the curve will be like an L.

Jamie Dimon, the CEO of J P Morgan in an interview to TOI  says, he is unsure what shape the recovery will be. He says :

Of course, the world went through a deep recession—call it a Great Recession—and it was much worse in the US or Europe than in China or India. But I think the world is on course to stabilisation. You see it in consumer spending, business plans, confidence levels, inventory balances, purchasing indices. Sectors like housing in the US are still getting worse, but at a much slower pace. So we’re actually seeing a global bottoming out. But I don’t think anyone knows whether the recovery will be V, or U, or W-shaped. I’m not going to spend a lot of time guessing on that.”

Maybe Dimon does not have time to guess the shape of the recovery. Without using any tools or surveys, my instinct tells me that this rally is unreal, but the market and the economies will bounce back. I am betting on a W shaped recovery.

What letter are you betting on?

– G. Mohan


Aditya Puri: A Good Banker, a Not-so-good Boss

3 06 2009


Little is known about HDFC Bank and the people behind it. It is a highly successful and profitable new generation bank in the private sector. It came alongside ICICI Bank and at several points in time, the market capitalization of HDFC Bank has been higher than that of ICICI Bank and SBI.


Since inception Aditya Puri has been the MD of HDFC Bank and has been steering the bank, through times, good and bad, successfully. The bank has been growing 30% year-on-year for the last 15 years and has one of the lowest NPAs in the business. In spite of the absence of home loans ( as it is the preserve of its promoter HDFC Ltd) , the bank has a strong retail business. HDFC Bank and Aditya Puri have got legions of awards for this success.


The media is yet to put up the spotlight on  Aditya Puri as a person and his managerial style. Today’s Business Standard carries an interesting piece on him titled ‘ A Lifelong Pursuit of Leisure’ Given below are excerpts from interview, which gives an insight into the persona and the managerial style of Aditya Puri:


“The man, who has just been voted India’s best CEO in Finance Asia magazine’s annual poll of investors and analysts, says his management mantra has been inspired by a cartoon he saw in one foreign newspaper. One half of the cartoon showed the boss neck-deep in work while others outside were having a whale of a time. The other half showed the boss taking a nap while others were all glued to their computers.


“I am sure you know which half of the cartoon is my favourite,” the HDFC Bank MD and CEO says, ordering a lassi. Puri must be the only CEO in the world who doesn’t carry a mobile or laptop; leaves office at 5:30 pm sharp; doesn’t work on weekends, giving him enough time to grow exotic vegetables & fruits at his Lonavla farmhouse; takes at least one long annual leave; and skips networking dinners to pursue other interests such as listening to music and reading.

He has recently added one more must to his daily routine: Talking non-stop to his 10-month-old grandson whenever he is around. “Both of us understand each other’s language perfectly,” Puri says with a hearty laugh   

He may not carry his laptop or mobile, but he comes across as quite a hands-on man and a control freak.


Despite the distance he keeps from back-breaking work, Puri says he knows exactly what is happening at each of the bank’s 1,400-plus branches. “If there is an over-withdrawal of cash at some branch, the information reaches me within an hour — wherever I am. For that, you don’t need cell phones; you only need to put proper systems in place.”

Aditya Puri clearly values his leisure, but not necessarily that of his employees. I have heard from a cousin who used to work for HDFC Bank for several years in the accounts department. He used to have a 12 hour work schedule for large part of his year. Add to that 3 hours of commute in Mumbai and there was no life left at all. During accounts closing every quarter he would not come home for seven days at a stretch. He used to pack off his wife and kid to his in-laws’ house during accounts closing time. He was short of hands in his department and there was a lot of churn also, yet to manage costs, there were never enough people to do the work. If he would crib about this, he was clearly indicated by no less than Aditya Puri that if he was unable to cope, he had the option to leave. After his health got worse with all the stress, he decided to change his employer.


Aditya Puri has managed to strike a great work-life balance, but cares little for his people’s work-life balance. Because, if they also have a great work-life balance, then the company performance will suffer and Mr Puri cannot get those awards and rising stock prices. Mr Puri recently indicated in an interview, that he was not averse to getting another five-year term.


Contrast this with Jim Goodnight, the CEO of SAS Institute, an US based software company in the data mining and data warehousing business, revered all across the globe. Fast Company describes Mr. Goodnight’s highly successful management style as :


“Jim Goodnight is not a guy who notices management fads or worries much about outside criticism. He lives the way he wants his employees to live. He goes home around 5 p.m. (at which point SAS’s automated switchboard starts answering the phone, “Most of SAS Institute is closed at this time . . .”). He refrains from checking email when he’s away from the office.”


Both Mr. Puri and Mr. Goodnight value their leisure and understand work-life balance. Yet, the difference cannot be more striking when it comes to their policies for the employees.


Mr Puri’s arrogance also shows when he says “Besides, I have reached a stage in life where I don’t have to network any longer; people need to network with me.” Probably here, he is taking a dig at his boss Deepak Parekh who is well-known for his networking skills. I would always have more respect for a person like Deepak Parekh, who uses his network and knowledge to contribute to India (UTI, Satyam etc)  rather than an Aditya Puri, who values his leisure so much and yet wants to hold on to the top job, to enjoy the perks and privileges that come with it.


Would you work for a workaholic boss, who does not understand work-life balance and expects his employees to emulate him or would you work for a manager like Aditya Puri who manages his own work-life balance so beautifully, but cares two -hoots for his people’s work-life balance? Both are bad choices, but at least the former boss cannot be accused of double standards.


Now tell  me, would you give your best for a boss like Mr. Goodnight or Mr. Puri?


–   G. Mohan

%d bloggers like this: