Chance: Get Out of… Debt

Stardate: 11024.6

The last few days made me feel like I was in CERN’s LHC, racing at near light speeds, meeting challenges head-on, smashing them to bits in soundless but resplendent encounters!  The rush of solving problems is addictive but the pace can sometimes take a toll.  So, it appears that in the world of colliders, the fast and furious conjure up loaves of bread or bird feathers simply to take a break from it all!  In the world of polymath’s, recreational cooking can help slow the pace some; aah the scent of pesto and garlic in hot olive oil!!  Had a great time whipping up (and consuming) some spicy pesto shrimp!!!  (Note: Ordinarily Henna doesn’t care for shrimp but this stuff is more than amenable to her – I think she just likes the idea of a man cooking for her while she is on conference calls… She takes this Women’s Development thing very seriously ;-D)

One of the many rabbits – umm particles – that I have been chasing thanks to the considerable motivational drive from my esteemed colleague HS Shajahan Merchant is the Debt Particle.  From an AKEPB perspective, our discussions were centered around leveraging Saleemah Ahmed‘s team to lay out, in simple terms, some strategies that both early career professionals (read: college debt, for which you may want to also investigate income based repayment) and mid-career professionals could follow to mitigate debt service burdens in the short-term and the overall size of personal debt that they may be carrying in the long-run.  Hopefully, by the end of this month, we should have a little card that provides quick pointers on getting out of (or at least reducing the burden of) undesired debt.  Over the last few months, Saleemah’s team has been hard at work helping folks with debt management, so it made sense to ask them to create a quick checklist – a “Get Out of Debt” (as in Monopoly) card.

Now, we don’t need a collider to tell us that there are both Debt Particles and Anti-Particles.  Debt can be good; the kind that fuels growth.  Without instruments such as student loans, home loans, business loans, bonds, and so forth, our socio-economic engine would slow down to an excruciating crawl.  In fact, it could lead to social injustices such as the imprisonment of the marginalized in deep wells of poverty and despair with not even a spark of hope for a way out.  On the other hand, debt can also be bad; the kind that [shaky or illusory] growth fuels.  Ninja loans anyone?

Carrying the particle analogy further, debt can be said to have mass, charge, and spin.  Mass is obvious, the amount of debt carried.  Charge, the debt service of course!  Now for spin.  This one requires a little twist to grasp.  The spin is essentially the credit score (or credit rating for bonds).  The better your credit score, the easier your access to cheaper credit – let’s call this spin “up”.  “Down” spin is truly vicious.  When you get in a credit crisis, your credit score drops (down spin), reducing access to credit and increasing your debt service.  Which in turn would effect an increased need for debt, leading subsequently, to a further reduction in credit score; down spin could become self-perpetuating forming a downward spiral of despair.

The good news is that solutions exist.  Solutions exist regardless of whether you hold Debt Particles or Antiparticles, regardless also of the mass, charge, and spin of those particles.  Now, I’m not saying that it will be easy.  Nor am I saying that this should encourage irresponsible behavior.  On the contrary.  My position remains that regardless of the economic landscape, excercise prudence in managing the mass, charge, and spin of the Debt Particles and resist the lure of Debt Antiparticles!!

PS: The “Get Out of Debt” card is still WIP.  We will bring the compilation to you soon, perhaps in another forum – perhaps even in person!  In the interim, feel free to help by sending me ideas that we should include on the “Get Out of Debt” card – while I go back to my particle smashing!

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The Leaning Tower: Global Infrastructure

Stardate: 11022.7

First, Navroz Mubarak!  May the new year bring peace, prosperity, opportunity, and profit for all!  ;-D  It has been a while since my last post where I started my discussion of the WEF Global Risks report for 2010.  I had indicated that I would follow-up with two additional posts on the matter.  Well, here’s one.  Enjoy!

While discussing the appendicular skeleton in an audiobook on human anatomy, the lecturer caught my attention by noting a remarkable (and often taken for granted) attribute of our intra-structure; as the human body grows, the bones on one side of the our bodies grow evenly with respect to those on the other, without any direct measurement or communication mechanism!  The left femur and the right femur grow pretty much at the same pace keeping the overall body in balance!  In a few cases, however, bones on one side of the body grow faster than their counterparts on the other side impeding the individual’s motor abilities.

The Present:

While this condition is rare in skeletons, it is NOT uncommon in the economies of developing – and sometimes even developed – nations; where development in one socio-economic aspect significantly outpaces others.  The WEF report cites examples of villages in Africa and South America that lack basic infrastructure needs, such as running water and sanitation, situated alongside state-of-the-art highways and port facilities.  These imbalances, and the risks they pose, are no longer a matter merely of academic discourse or limited to esoteric economic debate.  Similar ideas are increasingly being portrayed via classical pop-culture vehicles; recall images of world-class call centers juxtaposed with feeble transportation infrastructure from Slumdog Millionaire!

The Past:

Drawing from the hundreds of encounters I have had with (now Late) Dr. Spellman’s guns-and-butter graphs from my undergraduate economics classes, some of this skewed development could be attributed to the undesirable side effects of comparative advantage among nations.  However, let’s not be quick to exculpate other dubious – not malicious perhaps, but certainly irresponsible – contributors, including (1) hypermyopic mining of resources and markets by quarterly-report driven initiatives, (2) weak or absent government oversight, (3) corruption, and so on.

Key observations from the WEF Report:

  • Challenge: To address infrastructure needs with a vision for sustainable and resource-efficient approach to projects (hmmm… sounds like a page out of the AKF handbook)
  • Last decade saw the rise of public-private partnerships on large infrastructure projects (I’m thinking PartnershipsInAction)
  • Must establish and share best practices, expert knowledge, and enabling technologies across frontiers
  • Infrastructure levels must be achieved in economically and environmentally sustainable manner (more green: wallet and planet)
  • Agriculture and food security related infrastructure concerns:
    • 1 Billion people went hungry in 2009
    • World population is increasing with roughly 75% of the world’s poor living in rural areas
    • Population growth leads to higher demands, not just for food but, also for water and energy required to produce and transport that food

The Future:

In many forecasting models, the recent past is used to estimate the immediate future.  So, where do we go from here?  Now that we recognize where we are and what got us here, what steps can we take to treat this condition?  Here are some initial thoughts that come to mind:

1. Countries of Opportunity: Developing nations are increasingly becoming countries of real opportunity.  Both, as a market for goods and services, and a source of talent and natural resources.  Going forward, we need to abandon the locust-approach to multinational ventures, which may yield profits in the short-term but is ultimately self-defeating for everyone – including the locust.  Instead, all parties should approach the venture as partners, seeking a truly win-win opportunity over the long-haul.  Let’s take that one step further.  Let’s start the dialog on what we can do collectively to make more and more countries, countries of real opportunity.  Imagine the potential of turning a deficit-oriented view of the developing world into an asset-oriented one where we take proactive measures on continuously nurturing new opportunity!

2. Green: Any discussion including “long-haul” should not ignore consequences on the environment.  We need a planet on which to pursue economic opportunity.

3. Civil Society: The Aga Khan Foundation was certainly avant-garde in recognizing the condition of skewed development and in systematically promoting, over the last 40 years, public-private partnerships to further sustainable development.  In the future, it is my estimate that organizations such as the Foundation and the broader civil society will continue to play a significant role in furthering sustainable and balanced development.  Governments and private enterprises alone cannot – and should not – be burdened with this task.  Sustainable development is our collective responsibility and we need to step up to it! 😀

4. Knowledge: Access to education – good education – must be made universal.  Further, we should facilitate the sharing of best practices, expert knowledge, tools, and technology.  Here again, the attitude should be of partnership, we should seek to learn from each other.

5. Addressing Corruption: Another classic example of the locust mindset, corruption, must be addressed.  Of course, this malaise would start somewhat self-correcting with the improvement of socio-economic conditions which would result from countries becoming countries of opportunity!  But, that does not mean that we allow corruption to impede progress in the interim!

A self-proclaimed econoptimist, I believe that we will move in this direction.  Our approach may be gradual at first, due to this Global Short Leg Syndrome.  But as we recover, we will develop better motor control, picking up the pace toward sustainable development!