Different forms of Capitalism

I’ve copied this from the Economist for my reference purposes.

—-

First, state-guided capitalism, in which government tries to guide the market, typically by supporting certain industries that it expects to become “winners”. Second, oligarchic capitalism, in which the bulk of the power and wealth is held by a small group of individuals and families. Third, big-firm capitalism, in which the main economic activities are carried out by established giant enterprises. Fourth, entrepreneurial capitalism, in which a major role is played by small, innovative firms.

The only thing that all four of these models of capitalism have in common is that they recognise the right of private property ownership. Nor is there any single country that has exactly any one of the models described; in most national economies there is some blend of at least two. Moreover, the blend changes over time, and with it, the performance of the economy. Less than two decades after the fall of communism, Russia is already moving rapidly from oligarchic capitalism to an authoritarian state-guided capitalism.

Neither of those two Russian models are the best producers of economic growth, at least in the long run. Oligarchic capitalism is the worst performer; state-guided capitalism can work well for a while, especially when an economy is in catch-up mode, as Japan once was. What works best, argue the authors, is a mix of big-firm capitalism and entrepreneurial capitalism. And this happens to describe America’s economy during the past 20 years, during which time it has reversed its seemingly inevitable long-term decline and delivered a “productivity miracle”.

The possibility of change is at the heart of “Good Capitalism, Bad Capitalism”. The authors are sceptical—for the most part, plausibly—of claims that the growth rates of economies are largely predestined by culture or geography, as books such as “The Wealth and Poverty of Nations” by David Landes or Jared Diamond’s “Guns, Germs and Steel” suggest. There are no quick fixes, but over time the right policies can make a big difference, as can the wrong policies.

The authors argue that continental Europe and Japan, currently dominated by big-firm capitalism, can increase the role of entrepreneurial capitalism—perhaps, ironically, by learning from the incremental approach to reform of the Chinese government. And America, they say, is in danger of stifling its own entrepreneurial capitalism through the same increased regulation and risk-aversion that led to the dominance of big-firm capitalism in America in the 1960s and 1970s. If so, it risks losing its capitalistic crown, not as a result of any external threat, but through its own fault.

NetSuite Going IPO

NetSuite filed for IPO last week

– Losses of 23 million on profit of 67 million…hmmm. I think Salesforce.com was also in red when it went IPO but ofcourse they were pretty much on the break-even point then. I think  it was more like losses of 3 million on revenues of 90+ million. Not bad..maybe a couple of more years to NetSuite

– NetSuite should be able to hit the 100 mill mark this year I believe

– In their S1 filing, its been reported that all data/services run from 1 data centre. WHAT THE FUCK? Isn’t this absolutely suicidal?

– NetSuite has been around since 1998, I think…same time as SalesForce. Why has their growth been much slower? (1) SFDC is all Marketing..top notch..right from the CEO to the website..their marketing screams top-class CRM product. Good stuff (2) CRM is much easier to sell. ERP sell over the phone is not so straightforward. You’re talking about business processes here, damnit. But still.

– I actually believe in the NetSuite model. This is what SMEs should be looking at. ERP+CRM. Not just CRM. In my opinion, this company should have been a slamdunk right from the start. I really wonder why the market acceptance has not been very high. As fas as SAAS goes, I don’t think best-of-breed would work out for SMEs. They’re looking for a ‘complete’ solution. Why NetSuite Why?

– Larry Elison owns 74% of NetSuite. Again, WTF? Anyhoo…

– Microsoft just launched their Dynamics Live CRM or whatever its called. Good competition on the pricing and MS should have good adoption rates. I don’t know how good the product is though. Note: Partner % for MS is 10% while NetSuite offers 30 to 35%. Hmm..

– I don’t think SAAS is suitable to large enterprises..CRM maybe but definitely not ERP. Still very immature and its hard to customize to specific business processes. There’s a reason why they claim short deployment time etc. But for SME’s Oracle or SAP lock-in lacks sense. Too much money is spent on such solutions. Don’t think its worth it.

Stats

Yahoo mail currently has 250 million global users, more than any other online
service (Live.com has 228 million and Gmail has 51 million users).

Digital sales of individual songs this year have risen 54% from a year earlier to 173.4 million, according to Nielsen SoundScan. But that’s nowhere near enough to offset the 20% decline from a year ago in CD sales to 81.5 million units. Overall, sales of all music — digital and physical — are down 10% this year. And even including sales of ringtones, subscription services and other “ancillary” goods, sales are still down 9%

Venture capitalists poured $844 million into Web 2.0 startups last year, according to Ernst & Young and Dow Jones VentureOne. That’s double the $406 million they invested in 2005, and up from the nadir of Web 2.0 investing in 2002, when they put in just $32 million.

VC Firm Number of Web 2.0 deals

Benchmark Capital 13
Draper Fisher Jurvetson 10
Sequoia Capital 9
Omidyar Network 8
Accel Partners 7

Blogged with Flock

India – Economy + Retail Market

– By Purchasing Power Parity, India should overtake Japan and become the world’s 3rd biggest economy after US and China.

– Its Feb 2007 and Inflation is at 6-7% (compared with 2.8% in China) and Credit is growing at an Annual Rate of 30%, double of that of China

– Current Account Deficit is also increasing – a perfect sign of overheating

– Why aren’t  Indians doing anything?  1. Demographic divident – a working population meaning lower birth rates implying structural reforms are not needed. A growing population is good only when the young are educated and can end up with jobs.  (2) India has one of the biggest budget deficits among emerging economies (as much as 8% of GDP). Private Investors are hesitant to put the money because regulators are not independent enough of populist politics to guarantee a decent return.

– Indian economy has chocked up a growth of 8% compared with 6% in 1980s and 1990s and 3.5% before that because of highly interventionist policies

– Total trade of goods and services has jumped to 45% of GDP

– Bank lending to firms and and households has expanded by 30% over the past year. Home mortgages are up by 54%. Lending on commercial property has doubled.

– India’s current account deficit is even more if you exclude the remittances sent by Indians abroad. Deficit is running close to 5% of GDP.

– India has the cushion of $180 billion in forex reserves = 11 months of import and small external debt.

– Unlike China, India is heavily dependent on short-term portfolio capital inflows than longer-term. Short term accounts for 4/5ths of capital inflows in India over the last 3.5 years. This means India is viable to increasing interest rates.

– IMF forecasts budget deficit for central and state governments to fall to 6.2% of GDP in March 2007, below the 10% levels in 2001. This is because of greater fiscal prudence, less tax evasion, rising incomes, economic boom and low interest rates.

– Oil and Power subsidies amount to 1.8% of GDP.

– SEZs may erode future revenues and add to budget deficit.

– Domestic savers provide public borrowing and not foreign capital..but India’s weak position means little room to spend on infra, education and health.

– 60% of India’s labour force is in farming.

– India spends 4% of its GDP on Infra compared with China’s 9%. In $ terms, China spends 7 times more.

– Govt spending on health accounts to only 21% of the total health spending.

– Middle class uses less public services hence a mellow cry for reforms.

– Hope the present growth doesn’t breed complacency on the need for reforms.

– 260 million people still live on less than $1 a day.

India Retail Sector

– Reliance opened 9 shops around Delihi on Jan 30th 2007

– By Feb the total tally was 55 shops in 3 months under the name Reliance Fresh

– Reliance plans to invest 250 billion INR ($5.7 billion) in 5,000 shops. By 2010 it hopes to make $25 billion annually.

– Around 97% of India’s sales are in small family owned shops.

– India has 12 million retailer, second only to agriculture.

Kyoto Protocol

– Kyoto Treaty: By 2012 emission of greenhouse gases to be reduced to the level of 1990.

– Developed nations are the only signatory of this treaty. China, India and other developing nations were exempt from this.

– George Bush came into the office and reneged US involvement with Kyoto on some ludicrous grounds. According to him global warming is not related to carbon dioxide levels in the atmosphere. US is the biggest consumer of fossil fuels btw.

– A valid point that Bush made was about developing countries not being a signatory to Kyoto. Either way, the pillaging of earth continues.

– Earth’s temperature is rising primarily because of three reasons

• Greenhouse effects caused by carbon dioxide in the atmosphere
• Increased deforestation
• Increased urbanisation

– One cool fact. Between 1930s and 1970s, Earth actually cooled down which renders some validity to Bush’s arguement.

– Ray Lane: Carbon Credits Exchange

– The Indian Express: Global Carbon Credits Exchange Market Downswings