The success and failure of Coupling, this blog and the Benjarong Conference

One of the few sitcoms that has remotely managed to hold my attention is Coupling, the series on BBC. I don’t think it runs “live” any more, and even when it did, the quality of the episodes fell off sharply in season three, and even more sharply in season four. Episodes of those two seasons simply cannot compare to the episodes of the earlier seasons. In possibly related news, a number of blog readers and commentators mentioned to me that they saw a sharp fall in quality in posts on this blog sometime in late 2009. None of them have told me that the blog has made any “comeback” of sorts. And given this theory, it is unlikely to.

Back in March 2009, there was a meeting of six great minds at Benjarong Restaurant on Ulsoor Road, which has come to be known as the Benjarong Conference. The main topic of discussion that evening was about chick-hunting, and more so in the controlled environment of South Indian Brahmin arranged marriages. The conference was a grand success in terms of the quality of discussion, and left lasting impressions on the minds of the participants. Kodhi, who is going to be arranged married later this year, mentions that over two years on, it was the proceedings of this conference that helped him make his decision.

The main attraction of Coupling, for me, was the theories that the character Jeff used to propound. Starting in Episode One of Season One, where he comes up with the concept of “Unflushable” as his best friend Steve repeatedly tries to dump his girlfriend Jane, and fails. And in subsequent episodes, when the three male leads (Steve, Patrick and Jeff) meet at the bar, Jeff always has a theory to explain why things happen the way they happen. Masterful theories, at a similar intellectual level that was exhibited at the Benjarong Conference. Jeff has a theory for everything, except that he is unable to implement his own theories and get hooked up. And what happens in Season Three? He gets hooked up (to his boss, as it happens)! And starts falling off the social radar, and even when he is there at the bar, he is incapable of coming up with theories like he used to. And in Season Four, he disappears from the show altogether, thus robbing it of its main attraction.

Four of the six participants at the Benjarong conference were single, with three of those having never been in a relationship. The two that were married were married less than a month, and one of them had met his wife not too long before. The conference drew its strength from this “singularity”. Single people, especially those that have never been in a relationship, have a unique knack of being able to dispassionately talk about relationships. The problem once you get committed, as readers of this blog might have noticed, is that there is now one person that you can’t disrespect when you talk or write. So every time you concoct a theory, you have to pass it through a filter, about whether your WAG will find it distasteful (most singletons’ theories on relationships have a distasteful component, as a rule). Soon, this muddles your thinking on these theories so much that you stop coming up with them altogether.

One of the pillars of strength of this blog between 2006 and 2009 was the dispassionate treatment of relationships. Then, in late 2009, fortunately for myself and unfortunately for my readers, I met Priyanka, with whom I have subsequently established a long term gene-propagating (no we haven’t started propagating, yet) relationship. And on came the “distaste filter”. And off went the quality of my posts on relationships. A large section of the readership of this blog knew me as a gossip-monger, and they would now be sorely disappointed to not find such juicy material on this blog any more. The only good relationship posts subsequent to that, you might notice, would have been on the back of some little domestic fights, which would have led to temporary suspension of the distaste filter.

Sometimes, though not in public forums, I do get my old distasteful sense back. Not so recently, I was counselling my little sister-in-law about relationship issues. After thoroughly examining her case history and then situation (examining case history and diagnosis is her domain. She’s studying to be a doc), I recommended to her that the solution for her then relationship woes was to get herself a Petromax. While it did help that my wife and her parents weren’t around then, the tough part was to convince her that it was a serious well-researched piece of advice. Maybe I should have packaged it less distastefully. And maybe it is time to accept that the distaste filter in my case is on permanently, and I’ll never be able to spout theories like I used to. And my dear blog reader, it is time you accept that, too, and stop holding this blog against its pre-2010 standards.

IPOs Revisited

I’ve commented earlier on this blog about investment bankers shafting companies that want to raise money from the market, by pricing the IPO too low. While a large share price appreciation on the day of listing might be “successful” from the point of view of the IPO investors, it’s anything but that from the point of view of the issuing companies.

The IPO pricing issue is in the news again now, with LinkedIn listing at close to 100% appreciation of its IPO price. The IPO was sold to investors at $45 a share, and within minutes of listing it was trading at close to $90. I haven’t really followed the trajectory of the stock after that, but assume it’s still closer to $90 than to $45.

Unlike in the Makemytrip case (maybe that got ignored since it’s an Indian company and not many commentators know about it), the LinkedIn IPO has got a lot of footage among both the mainstream media and the blogosphere. There have been views on both sides – that the i-banks shafted LinkedIn, and that this appreciation is only part of the price discovery mechanism, so it’s fair.

One of my favourite financial commentators Felix Salmon has written a rather large piece on this, in which he quotes some of the other prominent commentators also. After giving a summary of all the views, Salmon says that LinkedIn investors haven’t really lost out too much due to the way the IPO has been priced (I’ve reproduced a quote here but I’d encourage you to go read Salmon’s article in full):

But the fact is that if I own 1% of LinkedIn, and I just saw the company getting valued on the stock market at a valuation of $9 billion or so, then I’m just ecstatic that my stake is worth $90 million, and that I haven’t sold any shares below that level. The main interest that I have in an IPO like this is as a price-discovery mechanism, rather than as a cash-raising mechanism. As TED says, LinkedIn has no particular need for any cash at all, let alone $300 million; if it had an extra $200 million in the bank, earning some fraction of 1% per annum, that wouldn’t increase the value of my stake by any measurable amount, because it wouldn’t affect the share price at all.

Now, let us look at this in another way. Currently Salmon seems to be looking at it from the point of view of the client going up to the bank and saying “I want to sell 100,000 shares in my company. Sell it at the best price you can”. Intuitively, this is not how things are supposed to work. At least, if the client is sensible, he would rather go the bank and say “I want to raise 5 million dollars. Raise it by diluting my current shareholders by as little as possible”.

Now you can see why the existing shareholders can be shafted. Suppose I owned one share of LinkedIn, out of a total 100 shares outstanding. Suppose I wanted to raise 9000 rupees. The banker valued the current value at $4500, and thus priced the IPO at $45 a share, thus making me end up with 1/300 of the company.

However, in hindsight, we know that the broad market values the company at $90 a share, implying that before the IPO the company was worth $9000. If the banker had realized this, he would have sold only 100 fresh shares of the company, rather than 200. The balance sheet would have looked exactly the same as it does now, with the difference that I would have owned 1/200 of the company then, rather than 1/300 now!

1/200 and 1/300 seem like small numbers without much difference, but if you understand that the total value of LinkedIn is $9 billion (approx) and if you think about pre-IPO shareholders who held much larger stakes, you know who has been shafted.

I’m not passing a comment here on whether the bankers were devious or incompetent, but I guess in terms of clients wanting to give them future business, both are enough grounds for disqualification.

Making BRTS work

(yet another post that is a few days late, but what the hell)

In the recently delivered Karnataka State Budget, the government has budgeted funds for developing a Bus Rapid Transit System (BRTS) in Bangalore, in order to supplement the Metro and help ease the city’s traffic woes. The problem is that it’s a small amount that’s been released and the budget states “for providing BRTS between Hebbal and Silk Board”.

Commentators (including some traffic experts like MN Sreehari (not able to find the Deccan Herald link on this topic) ) have criticized the move, claiming it is going to once again choke the outer ring roads which have now been set free because of the efforts to make it signal-free. So the commentators have used this as an argument against the BRTS.

On the contrary, I argue that we need more, and not less, BRTS. The whole purpose of an integrated urban rapid-transport system is to encourage people to leave their cars at home and instead use public transport. And for that to happen, really good quality public transport has to be available in all areas (with autorickshaws providing last-mile service). Else there is no real incentive for people to abandon their cars.

The problem with initiatives like the Metro is that it takes way too long to construct. The cost involved in terms of intermediate inconvenience and lead time are enormous. Which is a major point in favour of systems such as the BRTS. So what needs to be done is that the BRTS needs to be introduced on several routes simultaneously, thus bringing a larger area of the city under the integrated public transport system.

The network effects here are huge, and the more the portion of the city that is served by high-quality public transport, the more the incentive for people to not use their cars. On the contrary, introduction of BRTS along one or two lines benefits few and causes inconvenience to a really large portion of the population (all users of the BRTSed routes).

We have already seen in Delhi the impact of a badly-implemented BRT scheme (along one road in South Delhi, if I’m not wrong; deeply unpopular and resented). I’m surprised the guys in Bangalore haven’t learnt from that.