Make in India

India is an outlier in terms of economic development. Traditional economic theory suggests that in the beginning all economies are dominated by agriculture. As the economy develops, manufacturing becomes the predominant sector. Further up in the stage of development comes services. The linear development is the model for all countries, including China. The one exception is India.

India has never been a manufacturing economy and has leapfrogged to becoming a service economy. A full 55% of India's economy is the service sector. This is all fine, but for one problem. Where are the jobs for the teeming millions of Indians going to come from ? You need a big manufacturing base to absorb the youth coming into the job market every year. India has to create 12 m new jobs every year. Hence the Make in India need.

India actually has a huge competitive advantage now - it is actually cheaper as a manufacturing destination than China. China has become expensive, but retains its predominant position simply because there is no real alternative at that scale. Countries like Vietnam or Bangladesh are small. The only big competitor is India. 

Achieving real manufacturing scale and , thereby jobs, will need concerted action over 20 years. Mere slogans will, of course, achieve nothing. This has to be backed up by proper policy action.

What is needed to be done ?  Quite a lot actually, but let us begin with three things that do not need to be done

- Tax incentives to manufacturing. This is the soft option, but must not be done. Neither is it necessary nor is it equitable to do so.

- Lowering interest rates. All the pressure on the RBI governor is self serving bullshit. No serious company makes investment decisions based on short term interest rate

- Diluting labour laws. Actually this is hardly needed. Labour laws, other than when factories are closed, are actually sensible, fair and progressive in India today. It is better than, say, in France. We should not dilute labour laws and allow the Rambo manufacturing that  happened in China.

The key elements that need to be tackled are

- Amending the Land Acquisition Act. The last Act completely swung the other way and as it stands now it is almost impossible to acquire land to set up a factory. The government, realising this, is acting through an ordinance

- Infrastructure - Ports, Roads, Railways and Power. This will take time, but must be done largely by the government, although partnership with the private sector will also be key.

- Single window clearance from the government. All clearances within 3 months for setting up a factory.  Doesn't matter if a mistake or two is made.

- Remove all caps on foreign investment in manufacturing. Who cares where the money is coming from as long as jobs are created. 

- Rein in Ramamritham. If possible chop him into bits and throw him into the sea. You just have to drive through Sriperumbudur, on the outskirts of Madras to see the havoc Income Tax Ramamritham has caused. Shut factories - Nokia, Foxconn ...... Any industrialist who now starts a factory without a cast iron defence against Ramamritham is an idiot.

- Enforce contacts and the rule of law speedily. Perhaps even a separate judicial process for business matters. One of the sad facts in India is that despite the rule of law, contracts, especially with the government, are practically unenforceable.

- Make India, one India. Each state competes with others to create bottlenecks and roadblocks, because of the preponderance of local Ramamrithams. National laws, such as the GST are an imperative. The Centre cannot dictate this, but should simply go ahead with the willing states and leave the outliers either to join the bandwagon or suffer.

- Stay the course. Create the framework and then don't change it for a decade at least. Let a thousand flowers bloom !

None of this is even politically contentious in a major way. Start and build  momentum. Investments will come. Money will be found. A juggernaut, once started, cannot be stopped - there is already the example of the IT industry.

Motor ahead, India.

The Pathetic and Paltry Time Magazine Assignment Rate & Rights Grabs

What's good for the goose is clearly not good for the gander. "Purchase" is not "license." According to Time's own website (here) " We license Time Inc.�s peerless content, brands and products to partners in new businesses and emerging markets."

DEFINITION: Peerless
adjective 1. having no equal; matchless; unrivaled. Synonyms: unmatched, unequaled; unique, unsurpassed. * source: Peerless, at Dictionary.com

Yet, that "peerless content" which Time wants contributors to produce is not something that they are purchasing like a computer or plane ticket. The software they pay a fee to license from Microsoft and Adobe, while seemingly purchased, is not, it's licensed. They may have "purchased" a physical CD of the software, but they do not have ownership of the software to use across multiple platforms unless they obtain a broader license to the work, and pay an appropriate additional fee.

As reported in PDN Pulse (here), Karen Myers, who is Time's UK�s Director of Corporate Communications, said �...Contributors need to bear in mind that commercial realities dictate that we will be using the content that we purchase in many different ways..." yet Time's website Terms & Conditions (here) make it abundantly clear (regarding the intellectual property on their website) they "own, solely and exclusively, all rights, title and interest in and to the Web Site, all the content (including, for example, audio, photographs, illustrations, graphics, other visuals, video, copy, text, software, titles, Shockwave files, etc.)."

Time UK has been, and it will remain, licensing content from contributors. They will not be "purchasing" ownership of it any more than I can take that Norman Rockwell I want to buy and (once I do) make posters and lithographs off of it. Yet that is what Time UK (and as has been suggested by others, this is a trial balloon for US contracts) wants to do.

This smacks of what occurred in the late 1990's, when Time unceremoniously foisted upon contractors, contributors, and freelancers, a new egregious contract. Many of the seasoned team of photographers, stood their ground and refused to sign, only to be replaced by those who looked up to them as standard bearers - "peerless" photographers, to coin Time's characterization. The "new team" stepped in to fill the void, crumbling what ground those photographers were standing on. You can, no doubt, see those who were undercut by the newcomers sitting back and saying "what goes around comes around..." and not missing a wink of sleep as the downward spiral continues.

(Continued after the Jump)

How Far Down Is That Spiral Going?

In 1980, the Time Magazine contract indicated a rate of $350, and in about 1990 it was $450. In 2000 and on through to about 2011, it's $500. It's about $550 in 2014.

In 1980, $350 was worth, well, let's set that as the baseline, and say $350 is worth $350.

Would the 1980 photographers taken an assignment for the "Peerless" Time Magazine for $191? No, they would not.

Here's how Time Inc's (NYSE: TIME) assignment rates have worked, throughout the years.

First is the middle line, which tracks the rate as paid. The top line is the rate had it kept up with inflation alone. The bottom line is the buying power of that rate, over time.

How did we arrive at these numbers? The US Department of Labor has a calculator (here) that allows you to compare buying power, over time. It's a fact that essentially everything increases in cost over time. That loaf of bread in 1980 was about $0.50 and now it's $1.50. Gas? Of course - more expensive too. As such, your ability to buy something has been reduced, over time, unless you get a "cost of living adjustment" in your income stream.

If Time were paying an assignment rate of $1,000.00 it would have just kept up with inflation relative to their previous $350 assignment rate from 1980.

Has their per-page ad rate gone up? Yes.

Have their employees received cost-of-living salary increases? Yes.

Where is the equity in paying those that produce that peerless content that brings in readers? Absent.

Know that if you're a photographer now that accepted the $500 back 10-15 years or so ago (when it should have been about $750), you were undermining the photographers who tried to take a stand for better pay then. Now, when you try to take a stand, make no mistake about it, there will be photographers who will fill the void, and you can join the ranks of past Time Magazine contributors saying "what goes around, comes around - trust me, I have experienced the financial pain that proves it."

You either stand together, or fail separately. Your choice.

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Related:
The REAL 'New Frugality'-Time Style, 7/25/09

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The bonanza / disaster of 2014

As the year draws to a close it is customary to review the year gone by. What do you think was the most significant event of 2014 ? Some would say Ukraine. A few might vote for Ebola. Still others might say ISIS. What about the missing Malaysian Airlines plane ? Others might say the Indian elections. Many in my part of the world might even say Lingaa :)

In my opinion however, the most significant happening of 2014 was the steep fall in the price of oil. In June 2014, Brent crude stood at $110 a barrel. Today it is at $ 60. This has profound ramifications on both the economics and politics of the world.

Because of the world's dependence on oil as the primary source of energy, there has been a massive transfer of wealth over the last decade or two from the poor to the rich. Most of the world's nations are oil importers. A few, blessed by sheer geographical luck are oil exporters. Wealth has gushed from the former to the latter for years now.

With the step decline in the price of oil, the tide has turned. The oil exporters are facing economic disaster. The hardest hit is Russia - a kleptocracy that has frittered away the oil boom years, now suffering from the twin effects of falling oil prices and the sanctions over Ukraine.  The rouble has crashed and they have been caught pissing in to the wind  (apologies to this blogger !). Next in line is Venezuela, another country that wasted the good years. Iran is yet another sufferer. Even mighty Saudi Arabia is vulnerable. The following chart shows the lot that is in trouble.

The rest of the world is a winner. Inflation, world over, has come down. Global GDP may raise by 0.5% or so, purely on account of oil price. The US and China are the biggest beneficiaries. In fact the booming shale gas production in the US, coupled with weak economic growth globally has caused the fall in price of oil. As an aside, the tree huggers in the UK and elsewhere in Europe who have been blocking every move to frack in Europe must be forced to pay $110 a barrel for oil and not benefit from the effect of the shale gas revolution in the US.

Poor countries across the world have benefited from lower oil prices and have been able to curb inflation. India is the biggest beneficiary of them all. Inflation in India has steeply fallen solely on account of oil prices. Petroleum subsidy has fallen so much that the government has raised taxes on petroleum products and at the same time decontrolled diesel prices without a squeak from the public. The fiscal situation would have been a far greater disaster but for the unexpected bonanza. 

Oil prices will probably recover, but are unlikely to go back to three figures in the near term. That might have larger consequences. Inflation can be held in check. Funding to the Islamic jihadists, which has largely flown from oil money is likely to be constrained. Russia is unlikely to repeat its misadventures as in Ukraine. The oil producers such as Venezuela and Nigeria, who are most affected will be forced to adopt more sensible economic policies which can only benefit them in the long run. All in all, we can ring in the new year with a feel good factor.

PS : This blogger owes an apology for going AWOL for 2 months and is deeply thankful to his readers who have all been very kind and encouraged him to "come back"

Dumb Hookers and Photographers

How much money are you losing when you're not paid when the services are rendered, or even on time?

There's an old saying:

"even the dumbest hooker knows they get paid up-front."

Setting aside the disparagement some of the purveyors of the oldest profession in the world, the sentiment of being paid up-front is obviously a time-honed position.

Consider this - A common credit card has a 17% interest rate on charges.

Why Interest?

Q: Why do people charge an interest rate? A: It's "the cost of money." The concept is - if a financial institution loans you money to buy a house, they're not able to use that same money to invest in stocks or other investments that will, over time, increase in value. Therefore, when a bank loans you $300,000 with 30 years to pay it back at 5% interest, and with you paying a monthly mortgage of $1,654, at the end of 30 years, they will have earned $229,910 in interest and you will have paid a total of $595,639 for that house.

If you were to buy $10,000 in photo equipment, and not pay it off in a year, you would have to pay $1,838.92 in interest if the interest was "compounded monthly" as compared to $1,852.58 if the interest was "compounded daily." As such, the difference between "compounded monthly" and "compounded daily" is $13.66. How does that work? What happens is that "compounded daily" means that on day 1 you owe $10,000.00. At the end of day 1, approximately $4.66 in interest is accrued, and so on day 2 you owe $10,004.66. Compounded monthly, you wouldn't owe any interest until the end of the month, but then you would owe $141.67 in interest.

(Continued after the Jump)

Now, consider the value of your own money - that which you earned. If you earned $5,000 for an assignment, and you get paid that money up front, you could, in theory, immediately invest it in one of the safer investments - bonds - with a 4% return. So, at the end of the year, it would have $5,204 in value. Thus, it should be painfully obvious that if that client waited a year to pay you, you would have lost the ability to make that investment, thus, losing $204. Simple math tells you that if they waited 6 months, you'd have lost $102, and in 90 days, you'd have lost $51.

So, when that client tells you "we pay in 90 days" what they're saying to you is "I know your bill is $5,000, but we're going to pay you in 90 days, and you'll have lost $51 in earning value during that time, so you'll only have earned $4,949.00."

Consider that most clients and vendors should be on a 30 day pay cycle, that same $5,000 has a per-month value of $17.00. That's like a client disavowing a parking garage expense or a two-person fast food meal, "just because�"

Here's the rub - when you incur a $5,000 expense your credit card company wants it paid back in 30 days, or you pay interest. $70.83 at 17%. Where's your $70.83 when a client doesn't pay you in 30 days?

So, on that $1,000 assignment, where's your $14.17 when that client doesn't pay in 30 days?

It compounds. If you're a photographer that does three $500 a week assignments, that's a gross revenue of $78,000. That's 156 assignments a year. The difference between getting paid in 30 days versus in 60 days is, at $7.08 an assignment, an $1,104.48 loss in the power of your money, or doing just over two of those assignments for free.

There are many "standard" payment cycles, all built into your business model and what works for you.

Most wedding photographers take a deposit when the contract is signed and the full amount a week before the wedding, or upon delivery of the proofs (I'd recommend a week before the wedding.)

Many commercial photographers expect a deposit when the contract is signed (so they can start booking air/hotels and incurring other expenses on the clients' behalf) and the balance due on receipt of final images (but before first usage of said images).

Other photographers are on a 14-day, 21-day, or 30-day schedule. Some require clients to pay on the spot with credit cards.

In the end, it's important to recognize the value of your money, and get it as soon as possible.

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