Note to everyone: I express my views with no malice towards anyone. I use harsh language to drive home the gravity of the situation. My harsh language is not to be taken personally. I strongly believe most of us as individuals are good natured and will not cause intentional harm to others. That is another reason I strongly feel we need to get out of the system which breeds crooks out of even the good natured individuals amongst us. If we do not strongly question these when we can, the day is not too far when our right to question will also be taken away in the name of “national interest”.

I am constrained to point out yet another example of government excess. In the name of protecting India’s reputation and in the name of protecting the 50,000  plus employees at Satyam Computers and in the name of protecting the entire Indian IT industry, the government of India has stepped in and taken charge at Satyam Computers. They have disbanded the current board at Satyam Computers and appointed a new board to ensure continuity of operations at Satyam Computers. It is a surprise to me that the government has such a power in the first place. It is worth noting that the shareholders of Satyam Computers were not consulted at all by the government. It is also worth mentioning that all the “spineless industry experts” are praising this government intervention into a private company’s affairs as the best thing since slice bread. By my definition, anyone, whatever reputation he/she has built for himself/herself over the years, who accepts the board position at the government created board at Satyam is a “crumbs picker”. It does not matter they all come with good intentions. They are crumbs pickers because I consider it immoral for the government to intervene in a private company’s affairs. It is another matter that the previous board members, appointed primarily by the founders and approved by the shareholders, were crumbs pickers too. But they at least had the approval of the shareholders even if it is specifically for picking crumbs thrown at them by the founders rather than representing and protecting the shareholders. So it is the shareholders who should pay the price, which they have already done. Having learnt their lessons, the shareholders should get together and decide on how to run Satyam Computers. It is none of government’s business to intervene in the name of protecting the national reputation or Satyam’s employees.

The government’s role should only be to make sure the fraud perpetrated by the founders is investigated impartially and the guilty are brought to book. That’s it. Nothing more. The shareholders who are the rightful owners of Satyam Computers will have the full right to decide the future of Satyam Computers. If they want to run down the company by appointing another set of crumbs pickers to the board and crooks in the management, let them exercise their right.

Why am I so against the government intervention even, in this case, if it appears to be “good for everyone”? Because the same power the government uses for the “good of everyone” would be misused when it suits them. As I said in my last post, “Crooks are taking over this world; How long do we just settle for the crumbs“, when government gets more and more power the biggest of the crooks in the society will end up in the government because that is where it is the most profitable and the risk of getting caught is also minimal. Let me clarify how the same power used by the government for the “good of everyone” can be misused by the crooks who eventually are in the government. The process always goes like the following:

Just think for a moment why everyone is praising the government intervention in Satyam Computers affairs. That is because it is impossible to argue against anyone who is saying that “Satyam’s employees have to be protected at all cost” and that “India’s reputation should be protected at all cost”. These are what I call “motherhood slogans” for obvious reasons. We all know that this “motherhood slogans” are what is successfully employed by almost all crooked politicians to usurp more and more power onto themselves so that they can enrich themselves at the expense of others. So the power to disband a board of a private company and appoint its own board will be misused one day by the crooked politicians to destroy a genuine and honest company probably at the urging of competitive businesses run by crooked businessmen. And these crooked politicians will use all the “motherhood slogans”, like “national reputation or even national security”, at their disposal to destroy an honest business. So, as I keep saying the best way to protect honest people and businesses from crooks is to have a system which automatically makes these crooks powerless where ever they are and whatever they do. And that system is the “true free market” system which by definition would be minimal government and maximum freedom and power in the hands of individual citizens.

The above post was written by Sekar Vembu of Vembu Technologies. Vembu Technologies is a backup software vendor whose product, StoreGrid, powers the online backup services of a large number of service providers across the globe. Besides remote backup, StoreGrid is also used for on premise backups of workstations and servers at various companies & universities.

Just yesterday, I was chatting with our auditor about some money we want to send to our newly opened US subsidiary and the amount of paper work that is involved in India to get that done. It is worth mentioning that it took almost ten days for us to send a mere $6000 as capital investment to our US subsidiary as our bank kept asking for more and more documents from us to satisfy the regulatory authorities – which in this case is the reserve bank of India (RBI). While speaking to him we were discussing the topic of the corporate scams and how the regulations to prevent the scams make it harder for genuine and honest companies to do business in an efficient manner. In that context I made a comment to our auditor on how the current skewed free market system breeds crooks and how it is similar to the way the current democratic setup, which gives lots of power in the hands of the government, breed only crooked politicians to compete for high offices. It is my contention that the need for regulation arises because of the skewed free market system, with government doles and regulations, which is in vogue across the world. In a true free market there will not be a need for government regulators and private citizens, out of necessity, will learn to be vigilant enough not to fall for fraudsters. And this system will automatically discourage crooked and fraudulent behavior. Of course, there will always be crooks in any society but their ability to do big long term damage would be very minimal in a true free market system because their powers are very limited anyway.

This discussion with my auditor was before I heard about the Satyam Computers scam which was revealed yesterday. Within in an hour after my discussion with our auditor I read about the latest corporate fraud by Satyam Computer Services and how some analysts and the media were predictably talking about how these scams can be prevented with more government regulations. One analyst in a news channel even went to the extent of saying that may be private auditors cannot be trusted and that we should appoint government auditors to audit the books of publicly listed companies. These knee-jerk comments and reactions are worse than the scam itself. At least in the scam a few investors lose money, learn their lessons and become extra cautious in the future. We should realize that how much ever regulation you have the crooks will always find a way and it only breeds more and more crooks as it becomes impossible for genuine and honest people to do anything worthwhile. Tougher regulations will only encourage more and more corruption and make the small time crooks aim to become big time crooks, as the only way around the system will be to game the system. Most good and honest people will stay out of doing anything worthwhile and will be forced to settle for the crumbs. There is enough empirical evidence we see in real lives but we all refuse to acknowledge that and think that if you give more power to the government these things will somehow stop. In fact, what happens is the reverse; as the government gets more and more power the crooks actually end up in the government because that is where it is the most profitable and the risk of getting caught is minimal. More regulation also actually gives gullible citizens a false sense of security and they start believing that because there is a regulator overseeing everything, we will all be safe from fraudsters. This actually gives room for bigger fraudsters to emerge. Without regulations and government meddling, private citizens will be more watchful and would ask the tough questions before parting with their money. And that will actually expose smaller fraudsters before they could commit big frauds which can be much more devastating. As I said before, the more the power the government has, more of the bigger crooks will end up in the government and that is much more dangerous as they can cause very long term damage to whole societies.

Why is all this relevant for us as a business? It is relevant for us because all these excessive regulations to prevent fraudsters are actually increasing the cost of doing business for us and it also makes us more inefficient. The crooks anyway find a way through all these mess and game the system. And we end up being the victim because we have no inclination or skills to game the system. That is, most honest businesses would rather remain small than to succeed by hook or crook. It is time we all fought against this so called “more government regulation” menace or else we will all be perpetually cursed to pick up the crumbs left over by these crooks who eventually end up in the government and run our lives.

The above post was written by Sekar Vembu of Vembu Technologies. Vembu Technologies is a backup software vendor whose product, StoreGrid, powers the online backup services of a large number of service providers across the globe. Besides remote backup, StoreGrid is also used for on premise backups of workstations and servers at various companies & universities.

Let’s say there are 100 people in a room and that all of them are going after 10 goods that are being traded. Out of the 10 goods in the room, 2 are essential commodities and the remaining 8 are just luxury. The money that can be used to buy these goods is the Government/Federal Reserve mandated currency, which in the case of the US, is the US Dollar. For whatever reason, most of the 100 people decide not to buy the luxurious goods – for now!

Here’s what happens next…

At the prodding of Nobel Prize winning economists like Paul Krugman, the Fed (feel free to substitute this with your country’s equivalent – its the same everywhere) appears on the scene and decide to, at random, pick 10 people in the room. Actually its not so random but is based on some unarticulated criteria which, for the purpose of brevity, I will not go into. Suffice it to say that people like Bernard Madoff would surely be one of the “chosen 10″. The Fed decides to stuff the chosen 10 with truck-loads of cash (US dollar in this case) so that demand for the 10 goods can be created!

Now, the 10 people who got the ‘new money’ buy some of the goods using the new money and also lend some of the money to, perhaps, another 20 people in the room – so that they can also pitch in to create demand for those useless goods that nobody really needs. Again, let’s not go into the details of how these 20 people are chosen. Amongst these 20 people would be people like Jeffrey Skilling, Bernard Ebbers, Sanjay Kumar, etc. The Government also chooses a couple of people from the ‘most incompetent people amongst the 100′. These people are given the responsibility of monitoring the gang of 30 and helping make the whole charade appear legitimate. This way, everyone’s focus is on how effectively the gang of 30 is being monitored rather than how the gang of 30 got the new money in the first place. Its an old trick; magicians call it ‘misdirection’

Lets now play out what will happen to the 10 goods in question…

There is more money in the hands of the “chosen 30″ and they go and bid for the available goods and, in the process, they ensure that the prices of all these goods (unfortunately, including the essential goods) go up by an order of magnitude. Out of the 70 people ‘left out’ of the new money, many will work for the chosen 30 – producing more of the 10 goods. These ‘workers’ are satisfied with taking the crumbs left over by the ones with the ‘new money’.

However…

Since the prices for all the goods have gone up, most of the ‘ordinary 70′ can’t afford most things! Most of them would be satisfied with working hard for the crumbs. However, people being what they are, some amongst the ‘ordinary 70′ would compete to get into the first or second ‘chosen’ sets! Membership isn’t too difficult and can be obtained by sucking up to them (the chosen ones)- i.e. by directly eating from what’s drooling out of the mouths of the chosen 30 and cleaning their toilets in return – all so that they eventually can become part of the ‘chosen’ gang.

The “smartest” ones like Paul Krugman would become advisers to the chosen 30 and mathematically model the behavior of the 100 people so that they get to buy the goods without actually doing any work at all.

While the above may appear to be an over-simplification, I am absolutely certain that what the US Federal Reserve is doing is almost exactly what I have described!

The Politicians, the intellectuals at the Federal Reserve, the banking system, and the other ‘crooks’ everywhere – they all make us believe that this is “free market”. We also believe it because every one of us can choose to pledge our self respect and aspire to join the gang – provided we have the skills and the inclination to suck up. We also believe it because in the name of democracy we can also elect the crooks whose toilets we want to clean – and then aspire to be one of those crooks. Indeed, its a beautiful “free market” world we are all living in.

It’s left as an exercise to the reader to figure out what would really be a true free market. The clue here is to start with abolishing the Federal Reserve and abolishing the Government’s right to mandate what money people should use and, by extension, taking away from the Government the right to create money out of thin air.

Finally, if we, the ‘ordinary 70′ in the room do not wake up and stop the Federal Reserve from stepping in, there is no question that all of us collectively would eventually play into the hands of the Hitlers and the communists waiting in the next room. And by the way, the process has already started!

The above post was written by Sekar Vembu of Vembu Technologies. Vembu Technologies is a backup software vendor whose product, StoreGrid, powers the online backup services of a large number of service providers across the globe. Besides remote backup, StoreGrid is also used for on premise backups of workstations and servers at various companies & universities.