Mar 29, 2011

Litter Begets Litter

“We must dare to think about unthinkable things
because when things become unthinkable,
thinking stops and action becomes mindless.”
--J. William Fulbright

Littering is universal  phenomenon (we have had enough of those bashing Indians' littering habits).The US for example owes $11 billion to litter cleanup costs( and others), many other societies suffer from this menace too! But the questions that haunt us are:

Why people litter? How to prevent it?

I think people litter to dispose things they don't need. If there is a better way to do that, people need to be told about it explicitly. But, anti-litter campaigns spend more time complaining than finding interesting ways of telling people not to litter or perhaps thank folks for not littering. Setting causal relation (littering makes the place littered and untidy) and giving positive reinforcement can be surprisingly effective. Have you seen the ad for encouraging blood donation? The little girl thanks a stranger for donating blood - when the stranger says he never donated blood, she just tells him to do so in future. Now, that's a darn simple and memorable communication.

Sometimes our frustration makes us ignore the easiest and the most effective of solutions.

Change in such collective habits occur when habits of a critical number of people change. And then, clean places repel littering behaviour of others.

While commuting in Delhi metro, people hold the urge to litter and wait till get out of the metro station. Clean stations of the metro subconsciously discourages littering.

Cleaner the surroundings, less people are likely to litter. So lets cleanup, not complain.!

Mar 23, 2011

Risk Aversion & Fallacy of Assured Benefits

"The quest for certainty blocks the search for meaning.
Uncertainty is the very condition to impel man to unfold his powers."
-Erich Fromm

A study on risk aversive attitudes of farmers in Tanzania (Rosenzweig and Binswanger 1993) shows the impact of choosing 'safer' crops: 20% lesser income.

Similar study on Ethiopian farmer's attitude towards using fertilizers shows the lengths people go to avoid risk, they could have produced 8% more, had they used fertilizers.

In a paper entitled Consumption Risk, Technology Adoption and Poverty Traps, authors (Stefan Dercon and Luc Christiaensen) conclude at one point, risk (avoidance) is  a cause of perpetuating poverty. It seems many folks would rather be stuck in poverty than risk using fertilizers, try new equipment or other, better crops with higher yields.

Now, let us not conclude that risk aversion is limited to farmers of Ethiopia and Tanzania.

Many savvy investors invest in debt instruments because they are considered more 'secure' than equity - despite long term data proving otherwise (Beating the Street - Peter Lynch).

Unit linked investments give sub-optimal returns yet, millions of dollars are poured into these instruments. Most insurance endowment plans in India don’t provide good returns (about 6-8 % CAGR) while well managed mutual funds manage to get 15% CAGR, almost double returns - that apparently doesn't bother a majority of people buying insurance and paying hefty premiums (they are actually contributing to the salary budget of inefficient insurance monoliths). Not surprisingly these traps (oops, schemes) don’t have favorable exit options, lest investors wake up and run away.

That is A LOT to pay for risk protection! Taking measured risks can make people (be it poor farmers or richer urban investors) richer - with far reaching consequences on economies.

Risk avoidance has little to do with education or sophistication (sophisticated urban folks are just more sophisticated in their risk aversion than peasants). Making optimal choices and avoiding poverty traps is actually to do with taking measured risks, making intelligent choices and avoiding comfortable yet sub-optimal choices.

Mar 22, 2011

Quality Certifications - What Changes Within?

"Enlightenment is not imagining figure of light but making the darkness conscious."
~Carl Jung~

If someone asks, "what changes if we are certified?"

Often the most suitable answer will be, "not much!" With Certification, nothing changes about the way things are done - believing the certification as a badge of competence is being amazingly naive.

Most firms will neither be better or worse off without the long list of ISO certifications that they have. That is why, they are taken for granted -  few would bother to frame them hang them up the wall. Certification is a ritual that you ought to be done with (and a damn expensive one at that). It is as if, ISO created this revenue model to help create and sustain host of auditing firms. It is a hidden factory with no meaningful value addition to majority of its customer firms.

This works like medical care: patients pays for diagnosis which tell whether they are healthy - here customers demand truth. But that is not how ISO certification works. The firms pay external auditors do so to get certified not to be given the bad news of disqualification. The model of certification is hopelessly flawed - brilliant people at International Standards Organization (ISO) miss this silly point altogether, or so they pretend.

The game of certification audit is start with, auditors play tough and then start frowning upon some missing processes and then at the end of the day, certify the firm anyway. Neither auditors can afford to loose their client by telling the truth, nor the client is bothered to take it the hard way. It's a win-win for both and little changes within.

Oh by the way, customer organizations pay for the hotel, boarding and entertainment of their auditors - now, who would bite the hand that pays for kind hospitality!

Can this be fixed? I think so! More about that in the next post.