Wednesday, June 29, 2011

Should Ratan Tata advise Mukesh Ambani about how to use his wealth?

A couple of days ago famous industrialist Ratan Tata commented about the lavish life style of another billionaire business tycoon Mukesh Ambani quoting his 27 storied Mumbai house viz., Antilla. Tata said that Mukesh Ambani's house Antilla represents the rich Indian's lack of empathy for the poor. His remarks: "The person who lives in there should be concerned about what he sees around him and [asking] can he make a difference. If he is not, then it's sad because this country needs people to allocate some of their enormous wealth to finding ways of mitigating the hardship that people have." 

Is Ratan Tata right in his remarks or is he misguided in his judgements? Is he aware about the role of an entrepreneur in an economy or is he ignorant of this basic economic fact? Or is his remarks has some underlying assumptions which make those remarks perfectly apt for Mukesh's lifestyle? Let me deal with these questions one by one. I take two scenarios to carry out my analysis. In first scenario we assume that Mukesh Ambani is an honest entrepreneur and his profit comes from the market competition. In second scenario we assume that, Mukesh is not an honest entrepreneur and his profit comes from his business ties with government officials and his manipulation of the system of State. We see the implications of Ratan Tata's remarks under both these scenarios.

Scene 1: Mukesh is an honest entrepreneur
I first make an assertion and then go onto prove it. If Mukesh is an honest entrepreneur then his profit - which he earned in the market competition - is absolutely legitimate, and if he don't desire to do a philanthropist work then that is his voluntary choice. Ratan Tata has no right whatsoever to advise Mukesh about allocating his honestly hard earned wealth amongst the poor people or to comment on his lavish lifestyle.

As Ludwig von Mises explained, the only way in which an entrepreneur can make profit in the market competition is by serving and fulfilling the most urgent wants of his customers in the best possible way, and that best possible way is of providing top quality goods at the lowest possible price. Only those entrepreneurs succeed and make profit in the market process who can ascertain and fulfill the subjective wants of customers in the best way compared to his counterparts. 

By producing and selling top quality goods at a lowest possible price successful entrepreneurs allow even the very poor people to buy his products. By allowing them to buy his products he lifts their standard of living; he lifts them out of their poverty even without raising their nominal meager income. That happens because with the falling prices in the market with the same amount of nominal income people can now buy more goods and services i.e., their real income rises. And no sane person will deny that this is the real way of increasing prosperity in the society; this is the true way of eliminating poverty and lifting the standard of living of millions of poor people. 

Philanthropy, about which Ratan Tata is advising Mukesh, will only help poor people in a very short run i.e., for the urgent immediate consumption purposes. Such help to poor people will actually harm them in the long run by making them dependent on such easy free money. It will not cultivate any habit of hard work and independent living in those people. Redistributing the income will only exacerbate the problem of poverty because human nature is such that most people will always prefer the free goods. Such allocation of rich peoples' income will make everyone of us poor too because rich people play an important role of providing essential savings for the economy. And without savings it is impossible to sustain a labor population in present time which is involved in production of intermediate capital goods. And without capital goods it is impossible to increase the future production of final consumption goods, and without that progress (so-called growth) is not possible. Capitalist class - which includes people coming from all strata of society, and not just rich - plays a pivotal role of supplying this saving. If they are forced to allocate their saving to poor people, who will mostly use it for immediate consumption, then society and economy cannot progress and without progress everyone of us will be poor one day for sure.

And people should not forget another vital economic truth that, honest entrepreneur do not become rich by exploiting the public, but they are made rich by their consumers i.e., the same public. Consumers voluntarily buy the products sold by such sellers because they prefer their products over other sellers. And in this process they give their portion of income to these entrepreneurs making them rich in turn. Profit is a signal that the businessman is fulfilling the most urgent wants of his consumers in a best possible way, and that's why he is rich. On the other hand those entrepreneurs who make losses are not fulfilling consumers' wants properly and so they remain poor in turn by going broke! (to deeply understand the beautiful system of profit & loss I will advise my readers to read Mises' wonderful book, Profit and Loss).     
 
So, if Mukesh is an honest entrepreneur then he has all the rights to keep and use his profit in whatever way he wants to. 

Scene 2: Mukesh is a dishonest entrepreneur
But, if Mukesh Ambani is a dishonest entrepreneur and his profit comes solely from his friendships with the government bureaucrats and politicians then he has no right whatsoever on his wealth. Profit generated by such dishonest political maneuvering is immoral. In a system of government such businessmen are working not to serve their consumers but only to serve the politicians and bureaucrats who help them in restricting the market competition. They actively lobby government so to establish their monopolies in the market. Through these monopolies then they fleece the consumers. And because their profit depends on exploiting the political system they don't care about their consumers. In fact they go to any length to harm their consumers for making such illegitimate and immoral profits. 

This type of system is historically known as 'fascism' and sadly in today's world most of the businessmen, especially the big business houses are making their fat profits by this way only.

If Mukesh Ambani (also Ratan Tata and all others) is doing his business in cahoot with the government officials then his profit is illegitimate. If one day India becomes truly a free country then he should be stripped of his illegal profits (property) and should be convicted and punished for his crimes against the people. He and all such dishonest business tycoons should be incarcerated, may be hanged.       

Conclusion
Looking at these economic facts, if Tata and Mukesh both are honest businessmen and they really want to help people of this country then instead of  allocating their profit to the poor people they should use that capital in producing top quality goods at the lowest possible price. They should try to provide as many economic goods as possible to people of India through market competition. Tata and Mukesh both can profit by serving the needs of poor people. There exists a thriving market even in remotest rural poor areas of the world as C. K. Prahalad has shown. All capable entrepreneurs (existing and new ones) should provide top quality private schools, hospitals, private roads, electricity, water works, sanitation, home etc. goods in these areas at the lowest possible price. That will be the best possible moral way of making a difference in poor peoples' lives; that is the only way in which these entrepreneurs can help the poor in mitigating their hardships. Allocation/redistribution of wealth will only result in misery for all of us.   

1 comments:


kapil69 said...
it's not about being honest/dishonest? it's about show-off lavish life style in a locality which is deprived & it doesn't make sense at all. Every entrepreneur can't be like Bill Gates, i agree & there is no need to be. Ambani can purchase Al Burj or anything like that, nobody will ever comment on that.

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Sunday, October 07, 2007

COBIT FOUNDATION EXAM

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COBIT E-learning FAQs
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The IT Service Mastery Programme is a unique, 8 module series of high value advice, techniques and guidance on how to be successful with your ITSM and ITIL Programmes.
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Wednesday, July 25, 2007

COBIT 4.1 is Available! for free download

COBIT's success as an increasingly internationally accepted set of guidance materials for IT governance has resulted in the creation of a growing family of publications and products designed to assist in the implementation of effective IT governance throughout an enterprise.
A complimentary PDF download of COBIT 4.1 is available from the following hotlink. Use your existing ISACA login or register for free to download the PDF when prompted to do so.
COBIT 4.1 Executive Summary
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The following links provide additional information:
COBIT 4.1 Brochure (PDF,221K)
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How COBIT 4.1 changed from 4.0
Webcast - Changes from Third Edition
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Online COBIT Foundation Course and Exam now available. More Information.
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COBIT Overview
Successful organizations understand the benefits of information technology (IT) and use this knowledge to drive their shareholders’ value. They recognize the critical dependence of many business processes on IT, the need to comply with increasing regulatory compliance demands and the benefits of managing risk effectively. To aid organizations in successfully meeting today’s business challenges, the IT Governance Institute® (ITGI) has published version COBIT® 4.1.
COBIT is an IT governance framework and supporting toolset that allows managers to bridge the gap between control requirements, technical issues and business risks. COBIT enables clear policy development and good practice for IT control throughout organizations. COBIT emphasizes regulatory compliance, helps organizations to increase the value attained from IT, enables alignment and simplifies implementation of the COBIT framework.
COBIT 4.1 can be used to enhance work already done based upon earlier versions; it does not invalidate that previous work. When major activities are planned for IT governance initiatives, or when an overhaul of the enterprise control framework is anticipated, it is recommended to start fresh with the most recent version of COBIT.

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Saturday, May 19, 2007

FAQ's

What is the purpose of COBIT?
Who is using COBIT?
Who are the process owners?
Why was the orientation of COBIT focused on the process rather than functions or applications?
How robust are the business requirements?
What is the overall quality of COBIT, and were any process owners/executives part of the expert review?
What is the future direction of COBIT?
How did ISACA/ITGI decide on the list of primary references?
Can I use COBIT as a statement of criteria for specific audit conclusions?
Are the control objectives meant to be a minimum level of control or best practice?
What about the absence of platform-specific controls?
Where are the application controls?
Why is there overlap within the control objectives?
Are the control objectives linked to the IT Assurance Guide and to what degree?
Why are there no risk statements with the control objectives?
What training is available for the use of COBIT?
Who in my organization should go to the training?
What is the level of training required?
In what way can I suggest to IT management that it use COBIT?
Is the COBIT framework superior to the other accepted control models?
What is the quickest and best way to sell COBIT to IT managers?
Since COBIT currently does not address associated business risks, but rather the more proactive control statements to be achieved, is there any consideration being given to address the perceived need of risk identification?
Has the COBIT framework been accepted by CIOs?
How are the management guidelines integrated into the COBIT framework?
The COBIT framework states that the COBIT maturity models are derived from the SEI Capability Maturity Model (CMM). What is the actual relationship between COBIT and CMM?
Do I need to meet an exact level when assessing a process using COBIT's maturity models, and does this differ from the original CMM approach?
COBIT has three dimensions of maturity. What do they mean?
How do you perform a COBIT-based maturity assessment?
How prescriptive are the COBIT maturity models and supporting guidance, and how does this compare to the CMM/CMMI approach?
The CMMI maturity levels appear to be different to the COBIT maturity levels. Is this true?
Is it really possible to benchmark my maturity levels with other organizations if the maturity assessments are not very precisely measured?
Are COBIT's maturity models useful to organizations that have already adopted CMMI?

http://www.isaca.org/Content/NavigationMenu/Members_and_Leaders/COBIT6/FAQ6/COBIT_FAQ.htm




COBIT Overview
Successful organizations understand the benefits of information technology (IT) and use this knowledge to drive their shareholders’ value. They recognize the critical dependence of many business processes on IT, the need to comply with increasing regulatory compliance demands and the benefits of managing risk effectively. To aid organizations in successfully meeting today’s business challenges, the IT Governance Institute® (ITGI) has published version COBIT® 4.1.
COBIT is an IT governance framework and supporting toolset that allows managers to bridge the gap between control requirements, technical issues and business risks. COBIT enables clear policy development and good practice for IT control throughout organizations. COBIT emphasizes regulatory compliance, helps organizations to increase the value attained from IT, enables alignment and simplifies implementation of the COBIT framework.
COBIT 4.1 can be used to enhance work already done based upon earlier versions; it does not invalidate that previous work. When major activities are planned for IT governance initiatives, or when an overhaul of the enterprise control framework is anticipated, it is recommended to start fresh with the most recent version of COBIT.

http://www.isaca.org/Template.cfm?Section=COBIT6&Template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=55&ContentID=7981

Friday, April 07, 2006

COBIT Framework

COBIT
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The Control Objectives for Information and related Technology (COBIT) is a set of best practices (framework) for information (IT) management created by the Information Systems Audit and Control Association (ISACA), and the IT Governance Institute (ITGI) in 1992.
COBIT provides managers, auditors, and IT users with a set of generally accepted measures, indicators, processes and best practices to assist them in maximizing the benefits derived through the use of information technology and developing appropriate IT governance and control in a company.
The first edition was published in 1996; the second edition in 1998; the third edition in 2000 (the on-line edition became available in 2003); and the fourth edition in December 2005. It has more recently found favour due to the passage of the Sarbanes-Oxley Act.
In its 4th edition, COBIT has 34 high level objectives that cover 318 control objectives categorized in four domains: Plan and Organize, Acquire and Implement, Deliver and Support, and Monitor and Evaluate.
Be aware: The summary below is partly aligned to COBIT version 4.0 (which provides major changes compared to the former COBIT Version 3.2).
The COBIT mission is “to research, develop, publicize and promote an authoritative, up-to-date, international set of generally accepted information technology control objectives for day-to-day use by business managers and auditors.” Managers, auditors, and users benefit from the development of COBIT because it helps them understand their IT systems and decide the level of security and control that is necessary to protect their companies’ assets through the development of an IT governance model.
Recently, ISACA has released Val IT, which correlates the COBIT processes to senior management processes required to get good value from IT investments.

http://en.wikipedia.org/wiki/COBIT



COBIT is an IT governance framework and supporting toolset that allows managers to bridge the gap between control requirements, technical issues and business risks. COBIT enables clear policy development and good practice for IT control throughout organizations. ITGI’s latest version— COBIT® 4.0—emphasizes regulatory compliance, helps organizations to increase the value attained from IT, enables alignment and simplifies implementation of the COBIT framework. It does not invalidate work done based on earlier versions of COBIT but instead can be used to enhance work already done based upon those earlier versions. When major activities are planned for IT governance initiatives, or when an overhaul of the enterprise control framework is anticipated, it is recommended to start fresh with COBIT 4.0. COBIT 4.0 presents activities in a more streamlined and practical manner so continuous improvement in IT governance is easier than ever to achieve.



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