OK, I am going to break with convention for this blog and talk business for a bit.
The question of the day..... is the entire planet built on a house of cards?
I ask only half-jokingly.
The last year has been sobering, to say the least. Events that almost no one saw coming have utterly changed the landscape of the US economy and, as a consequence, much of the world's economy. As I have spent more time delving into it to learn what happened, I was disheartened to find out that much of what has happened was so avoidable. If people followed the fundamentals of responsible business, none of it would have happened.
Here are some rules we need to look at again:
RULE NUMBER ONE - Don't lie.
Don't anticipate that housing prices only move upward - forever.
Don't lie about housing prices.
Don't sell someone a house they cannot afford.
Don't buy a house that you cannot pay for.
Quite politicizing every aspect of American life, there is no "right to home ownership".
Don't leverage the heck out of your company and secure the debt around housing prices.
Don't accept former politicians into your corporation's board.
Make sure your auditors don't lie.
For good measure - let's say it again - don't lie.
And... don't tell "half-truths". Those are lies.
Finally, I fear in a few years time we will look back at what is happening now and add a new rule with great urgency:
Never, ever, ever let the goverment prop up the private sector.
Anyway, today had an earth-shattering event occur in the line of work that I am in. Satyam, a giant Hyderabad-based IT services company, fell to ruins. The head of the company, Chairman Ramalinga Raju, admitted that he has been cooking the books for years, and he has overstated profits, overstated outstanding receipts due to the company, understated debt, and just generally avoided the truth wherever he saw it. It is being said that more than $1 billion in non-existent cash was being stated on their books as recently as last month. Yes, that is a billion dollars, not rupees. He missed Rule Number One so many times that it makes your head spin. *Then*, we come to find out that there is a related company that is part of Satyam but named Maytas (Satyam backwards, it's getting weirder, right?) that is involved in..... real estate! And with the recent corrections in Indian real estate and the porous border between business units at Satyam - well, you see where this is headed.
A few interesting things to note.
Satya in Sanskrit means "truth".
Satyam won an award for corporate governance last year.
Now, on a serious note, the attacks in Mumbai and this thing are going to impact the confidence people had in India as a business destination. Neither of these things, especially so close together, can help India's emerging image. The people of India deserve better than this. I think of all of the young people that have been diligently working on their careers for years at this company - now - it's all gone.
Ironically, I write this as I am in Mumbai working on a merger between corporate titans.
Man plans, God laughs.....
