Shashi Tharoor states that Christianity is the fastest growing religion in India

It is a mystery why bankers earn so much

John Gapper in The FT

In the libel suit he brought in 1878 against John Ruskin, the Victorian painter James McNeill Whistler was asked under cross-examination how he justified charging 200 guineas for a painting of a London firework display that took him two days to finish. “I ask it for the knowledge of a lifetime,” Whistler declared. 

Investment bankers explain their bonuses in the same manner, although the rewards for mergers and acquisitions advisers are rather greater than for most painters. Goldman Sachs will be paid $58m by 21st Century Fox for its advice on Fox’s planned $71bn asset sale to Walt Disney (and the bank stands to gain another $47m for financing the remainder of Fox). 

They are remarkable paydays — today’s dealmaking boom is the most rewarding time in history to be a global M&A banker. It is especially lucrative for those in the top league of advisers who run many auctions. An individual with the ability to shepherd nervous boards of directors past the pitfalls and a reputation for squeezing the best prices can name his or her fee. 

But what exactly do they do for the money? When asked this question, they turn sheepish and talk vaguely about the art of persuasion rather than the science of valuation. The secret to a bulging “success fee” is less to obtain the best possible deal than to make the chief executive and the board believe they got it. That is not the same thing, particularly in the long term. 

The M&A adviser’s job has three qualities that put its practitioners in a powerful bargaining position over their own pay. First, the stakes are very high. One former banker compares it to a surgeon explaining his or her charges as a patient is being wheeled into the operating theatre. The latter needs to have the best possible professional and is in no position to quibble. 

Going through an M&A auction can feel like being operated upon for directors who have not experienced it before. Shareholders and the media lurk, ready to condemn any slip-up (the latter risk is why public relations consultants get paid so much as well). There is plenty of subterfuge and bargaining over details, any of which could unexpectedly prove fatal to the outcome. 

Second, advisers are paid with other people’s money. That is especially true when a company is being sold — the overall price including the fees is going to be picked up by the acquirer, so what difference does a few million make? Even when the client is an acquirer, boards of directors whose personal reputations are at stake are not digging into their own pockets to pay. 

Through one end of the telescope, the fees even look small. The average fee for selling a company worth between $10bn and $25bn is about 0.3 per cent, and can cover years of unpaid work. Bankers claim they are cheap compared with property brokers, who may charge several percentage points for selling a house. As ever, the best way to make money is to be around a lot of it. 

Third, M&A advice is a black box. There is plenty of technical skill in structuring a transaction such as using acquisitions to change tax domiciles. That is bundled with access to the bank’s contacts with potential bidders in various countries and presented as a whole by one adviser to the board. The senior banker’s tone of voice conveys a mixture of financial advice, human judgment and comfort. 

The last is the most valuable. In theory, M&A advice could be unbundled into different tasks, and more of the technical work done by machines, but boardrooms only have space for a few people. They are crowded enough by companies’ baffling habit of hiring several banks to advise on big deals and paying them $20m each, which one adviser calls “ludicrous”. 

The fee rises exponentially for an adviser in the room where a deal happens. This accounts for the prosperity of advisory boutiques such as Centerview Partners and Evercore, founded by corporate financiers who built their reputations at banks including UBS and Lehman Brothers. The power of a global advisory elite is exemplified by tiny and highly rewarded banking “kiosks” such as Robey Warshaw. 

Global investment banks sniff at the ability of a few experienced individuals to charge similar fees to them, without bearing the same costs. “The boutiques are full of guys cashing in at the end of their careers and they get a bit of a free ride,” says one adviser at a big bank. In the M&A business, relationships have enduring value. 

But hiring the best cosmetic surgeon in the world does not make cosmetic surgery a good idea. Deals can be brilliantly executed at the time without adding to a company’s long-term value and many are unwound — often with the help of the same advisers — when a chief executive leaves. “Companies pay far too much to advisers. It’s really not worth it,” says Peter Zink Secher, co-author of The M&A Formula. 

The success fees of advisers should be more closely tied to whether the deal succeeds long after it has closed and they have moved on to the next one. Whistler won his libel suit against Ruskin for having accused him of “flinging a pot of paint in the public’s face”, but was only awarded damages of a farthing. Even artists can push their luck.

Mullah vs Allah

There’s nothing the Modi government can do if the opposition doesn’t want him to

Jawed Naqvi in The Dawn

INDIA’S opposition parties must quickly deal with two problems ahead of the next election. One stems from an irrational fear of Prime Minister Modi, of what tricks he might have up his sleeve and so forth to outsmart the opposition in 2019. This problem is rooted in low self-belief and a battered self-esteem, which by habit doubts the hugely positive ground reality.

The other problem the opposition must overcome is the addiction of some, not all, to the gambling casino that a group of croupiers has turned Indian elections into. The croupiers use everything they have — tantric amulets, charms, horoscopes and the inviolable right to throw the dice — to turn their political quarries into addicts and junkies. The croupiers took a call one day that Narasimha Rao would save the country. They were applauded by punters like Harshad Mehta and cheered by the gang that destroyed a dilapidated mosque to change the discourse from issues important to the people.

The croupiers took the view another day that Sonia Gandhi was a foreigner hence not entitled to lead India. Then they decided that Modi was just right for the country. The casino runners have already reaped more than they invested in the 2014 campaign. And yet, the croupiers run the establishment, which currently is a right-wing establishment. Sadly for them though, the soul of India resides on the left. This is not lazy ideological bumpf but the plain truth, beyond the grasp of TV channels and social media.

What constitutes India’s left and right? If anyone’s agenda is to stop the suicides of farmers they cannot be right wing. If the agenda is to stop the loot of the banks, which were nationalised to prevent them from looting the people, farmers mostly, it cannot be right wing. The constitution in its spirit is a leftist document. It harnessed the spirit of socialism and secularism even before the two words were added in the preamble. Defend it and you are through.

So what’s the antidote to the right-wing establishment the croupiers favour?

A recent answer, a compelling one, may lie in New York. The primary defeat last week of top-ranking House Democrat Joe Crowley at the hands of a 28-year-old political rookie named Alexandria Ocasio-Cortez can be and has been replicated in India. It started in recent memory with Arvind Kejriwal and flourished with Jignesh Mewani and Hardik Patel. It can only consolidate into a great force if Rahul Gandhi and H.D. Kumarswamy forget about seat arrangements and focus on saving the country from an obscurantist establishment. Ocasio-Cortez defied the croupiers, and Indian opposition parties can easily replicate her feat.

We are told that Modi has imposed his rule in blood-drenched Kashmir to influence the course of the coming elections. That’s the fear the best of my liberal and leftist friends have expressed. Will there be a televised stand-off on the borders? Anyone can see the steady evidence to the contrary — from Churchill to Manmohan Singh — that wars don’t win elections while peace often fetches electoral dividends. With all the images of body bags flashed on TV during the Kargil collision, Atal Behari Vajpayee barely scraped through in the 1999 polls, leaving his claims of military victory somewhat undermined.

Vajpayee’s BJP secured 23.8 per cent of the vote, pointedly below its 25.5pc in 1998. Worse, it suffered its biggest setback in electorally crucial Uttar Pradesh. The BJP won only 29 of the state’s 85 parliamentary seats, down from the 57 seats it won in the pre-Kargil contest of 1998.

In the United States, Bush Jr gained an embarrassingly narrow lead over John Kerry despite the claims of victory in Iraq and Afghanistan. Besides, Vajpayee never explained what president Clinton meant when he claimed in an address to the Indian parliament that it was the US that saved the day for India by pummelling Pakistan with a diplomatic démarche served on an utterly perplexed Nawaz Sharif.

Row back in time. While Vajpayee’s vote percentage had dropped despite televised jingoism, in Pakistan, the Kargil goof-up required a military coup to mask the embarrassing endgame. And those who have won popular support since were parties who promised peace with India. It was the same with the Mumbai terror strike. In 2009, shortly after the carnage, amid calls for revenge, Manmohan Singh won his second consecutive term without lifting a finger. It was the Indian people’s less-discussed endorsement of his understated, phlegmatic response to Pakistan. This the croupiers and their in-house media will not discuss.

Instead, the blue-turbaned prime minister headed off to Sharm al-Sheikh to agree on a comprehensive path to peace with his difficult and troubled western neighbour. When Singh lost in 2014 after 10 years in office, it was on account of a weakened control on his own coalition partners.

Therefore, editorial writers and worried experts who warn of a Modi plot in the recent events in Kashmir need to calm down. There’s nothing the Modi government can do to win in 2019 if the opposition doesn’t want him to. The ground reality in India has changed from the day he defeated a divided opposition.

The coming together of arch rivals Mayawati and Akhilesh Yadav in Uttar Pradesh has shown that the opposition holds all the aces. Even in Srinagar, if the National Conference and Peoples Democratic Party can bury the hatchet and invite the Hurriyat to work out a durable end to the self-wounding bloodbath, there is nothing that Modi or his hawkish advisers can do to take the initiative from them. The blood of innocent lives will not go waste if Kashmir can find a solution that undermines the croupiers and elevates the chances for a battered and abused region to join the global quest for peace and justice.

An Insignificant Man - Arvind Kejriwal

Would basic incomes or basic jobs be better when robots take over?

Tim Harford in The Financial Times


We all seem to be worried about the robots taking over these days — and they don’t need to take all the jobs to be horrendously disruptive. A situation where 30 to 40 per cent of the working age population was economically useless would be tough enough. They might be taxi drivers replaced by a self-driving car, hedge fund managers replaced by an algorithm, or financial journalists replaced by a chatbot on Instagram. 

By “economically useless” I mean people unable to secure work at anything approaching a living wage. For all their value as citizens, friends, parents, and their intrinsic worth as human beings, they would simply have no role in the economic system. 

I’m not sure how likely this is — I would bet against it happening soon — but it is never too early to prepare for what might be a utopia, or a catastrophe. And an intriguing debate has broken out over how to look after disadvantaged workers both now and in this robot future. 

Should everyone be given free money? Or should everyone receive the guarantee of a decently-paid job? Various non-profits, polemicists and even Silicon Valley types have thrown their weight behind the “free money” idea in the form of a universal basic income, while US senators including Bernie Sanders, Elizabeth Warren, Cory Booker and Kirsten Gillibrand have been pushing for trials of a jobs guarantee. 

Basic income or basic jobs? There are countless details for the policy wonks to argue over, but what interests me at the moment is the psychology. In a world of mass technological unemployment, would either of these two remedies make us happy? 

Author Rutger Bregman describes a basic income in glowing terms, as “venture capital for everyone”. He sees the cash as liberation from abusive working conditions, and a potential launch pad to creative and fulfilling projects. 

Yet the economist Edward Glaeser views a basic income as a “horror” for the recipients. “You’re telling them their lives are not going to be ones of contribution,” he remarked in a recent interview with the EconTalk podcast. “Their lives aren’t going to be producing a product that anyone values.” 

Surely both of them have a point. A similar disagreement exists regarding the psychological effect of a basic jobs guarantee, with advocates emphasising the dignity of work, while sceptics fear a Sisyphean exercise in punching the clock to do a fake job. 

So what does the evidence suggest? Neither a jobs guarantee nor a basic income has been tried at scale in a modern economy, so we are forced to make educated guesses. 

We know that joblessness makes us miserable. In the words of Warwick university economist Andrew Oswald: “There is overwhelming statistical evidence that involuntary unemployment produces extreme unhappiness.” 

What’s more, adds Prof Oswald, most of this unhappiness seems to be because of a loss of prestige, identity or self-worth. Money is only a small part of it. This suggests that the advocates of a jobs guarantee may be on to something. 

In this context, it’s worth noting two recent studies of lottery winners in the Netherlands and Sweden, both of which find that big winners tend to scale back their hours rather than quitting their jobs. We seem to find something in our jobs worth holding on to. 

Yet many of the trappings of work frustrate us. Researchers led by Daniel Kahneman and Alan Krueger asked people to reflect on the emotions they felt as they recalled episodes in the previous day. The most negative episodes were the evening commute, the morning commute, and work itself. Things were better if people got to chat to colleagues while working, but (unsurprisingly) they were worse for low status jobs, or jobs for which people felt overqualified. None of which suggests that people will enjoy working on a guaranteed-job scheme. 

Psychologists have found that we like and benefit from feeling in control. That is a mark in favour of a universal basic income: being unconditional, it is likely to enhance our feelings of control. The money would be ours, by right, to do with as we wish. A job guarantee might work the other way: it makes money conditional on punching the clock. 

On the other hand (again!), we like to keep busy. Harvard researchers Matthew Killingsworth and Daniel Gilbert have found that “a wandering mind is an unhappy mind”. And social contact is generally good for our wellbeing. Maybe guaranteed jobs would help keep us active and socially connected.

The truth is, we don’t really know. I would hesitate to pronounce with confidence about which policy might ultimately be better for our wellbeing. It is good to see that the more thoughtful advocates of either policy — or both policies simultaneously — are asking for large-scale trials to learn more. 

Meanwhile, I am confident that we would all benefit from an economy that creates real jobs which are sociable, engaging, and decently paid. Grand reforms of the welfare system notwithstanding, none of us should be giving up on making work work better.

Protect the NHS – but don’t protect it to death

Harry Quilter-Pinner in The Guardian

 

The NHS, as portrayed at the opening of the 2012 London Olympics. Photograph: Julian Simmonds/REX/Shutterstock




Dancing doctors, uniform-clad nurses and children jumping on hospital beds. There are very few countries that would include a celebration of their healthcare system in the opening ceremony of the Olympic Games. But this was the sight that greeted the millions who tuned in at the start of London 2012. After all, as former chancellor Nigel Lawson said: “The NHS is the closest thing the English people have to a religion.”

Now the country will once again celebrate the NHS, as it turns 70. And so we should. Across the globe, 400 million people still don’t have access to essential healthcare services. Thanks to the NHS, no one in the UK faces this injustice. It is there for us all – regardless of race, sexuality, gender or financial means – at our times of greatest need.

But we must also take this opportunity to stop and reflect. How good is the NHS? What do we want for its future? And what do we need to do to make it better?

A new report attempts to answer some of these tricky questions. It shows that, despite the rhetoric, in many ways the NHS is deeply average. In the authors’ words “the NHS performs neither as well as its supporters sometimes claim nor as badly as its critics often allege”. Shockingly, it finds that if you suffer from cancer, a heart attack or a stroke in the UK, you are more likely to die early than in other developed countries. 

This reality jars with a national perception of the NHS as world leading. Some will jump on this as an opportunity to call for radical change: perhaps a shift to a social – or even a private – insurance model. This would be a mistake. Fundamentally, the NHS is sound: its “free at the point of need” principle ensures that getting ill doesn’t mean getting poor. Moreover, there is strong evidence that it is more efficient than its marketised equivalents in the US and Switzerland.

Money is part of the answer as to why the NHS underperforms, compared with other systems. We spend less on healthcare than most other countries of a similar size and income level: just 9.7% of GDP compared with around 11% in both Germany and France. It should not come as a surprise that with average levels of funding come average levels of care. Theresa May’s recent “birthday present” – a long-term funding settlement for the NHS worth an additional £20bn a year by 2023 – will start to address this, though many predict that it will not be enough in the context of a growing and ageing population.

But money alone is not the solution: the NHS also suffers from a lack of reform. In places where the NHS has embraced best practice it is undoubtedly world leading. Stroke care is a good example. In 2010, London went from 34 hospitals treating stroke sufferers to just eight new centres of excellence. This has resulted in 400 lives saved per year across the capital. There have been attempts to replicate this nationwide. But in too many areas these changes, which involve consolidating services into fewer, more specialist centres, have been opposed by both the public and politicians. 

There are similar debates about moves to embrace new technologies in the NHS. The evidence is clear that artificial intelligence and robotics could fundamentally transform health and care. The government recently announced funding to help save 30,000 lives a year through technology-enabled diagnosis of cancers. But all too often, people see data-sharing as a breach of privacy and the rise of robotics in the NHS as an attempt to cut costs.

In some ways, this reluctance to embrace change is unsurprising. We all have a strong emotional and cultural attachment to the NHS. We are understandably protective of it. And many see the NHS as the last vestige of an endangered postwar consensus. They are fearful that it will go the same way as the rest of the welfare state, becoming watered down, outsourced and underfunded.

But in looking to protect the NHS there is a real risk that we end up “killing it with kindness”. All change is not bad change. As Lord Darzi’s recent review of the NHS has made clear, “high-quality care is a constantly moving target: to stand still is to fall back”. This would not only be a travesty for those who suffer as a result; it would also fuel the arguments its critics. When the great reformer, William Beveridge, proposed the creation of the NHS during the second world war, he was focused not on protecting existing achievements but on embracing the future. On its 70th birthday, it is vital that we do the same again.