My dear Sir Arvind Kejriwal,
Hope you are doing well.
My name is Alok Kejriwal, and I am a humble digital entrepreneur based out of Mumbai.
Sir, I have been struggling for the past 13 years to make a mark for myself in my industry and while I have certainly not achieved the size and scale of success and fame that you have, I do enjoy my own small universe of friends and supporters.
This mail is not to obviously compare my popularity vs yours' (silly comparison) BUT to ASK you a question about your philosophy of creating such amazing and effective agitation against CORRUPTION.
My Question - Instead of fighting tooth and nail (and losing yesterday's battle) against corruption, have you Dear Sir considered fighting and agitating for INCREASED GDP??
Sir, allow me to explain...
In my Company, let's assume I do a business turnover of Rs 100.00
Also let's assume that my profit margin is 10%
Therefore, I SPEND Rs 90.00 in generating my business turnover.
Obviously this expenditure of Rs 90 is towards salaries, cost of buying services, electricity, rent etc paid to OTHER Indian companies and individuals.
Since you are a very smart man, you will quickly understand that IF a man starts a business of Rs 100 in India, then this is what happens when the people who receive my Rs 90.00 further retain 10% margin and SPEND the rest in making THEIR business run:
Sir, if you notice, the TRICKLE DOWN EFFECT of starting a business with Rs 100.00 turnover results in Rs 875.00 turnover generated by other people down the value chain as they run their business/service.
NOW, coming to a topic closer to you:
LET'S ASSUME THAT THE PERCENTAGE of BRIBE IN EACH BUSINESS TRANSACTION IS 10%
So, of the first Rs 90 I spend, I will have spent Rs 9 in bribes.
In the Rs 875.00 turnover achieved above, the other players in the VALUE chain will also have spent 10% of 875.00 or Rs 87.50 AS BRIBES.
In short, Rs 100.00 turnover GENERATES Rs 875 more turnover, with Rs 87.50 being spent as bribes.
MY QUESTION TO YOU IS - what is MORE IMPORTANT?
Encouraging me to START A BUSINESS of Rs 100.00 that GENERATES further business of Rs 875.00 OR SAVING Rs 9.00 ????
Bear with me for one more minute:
Let's ask ourselves, what stops people from starting businesses (that grows GDP) in India in the first place??
It's the lack of EDUCATION.
So, let's take the case of my Driver.
His son is studying in an English medium school and is quite a bright guy.
I hope that one day he will NOT become another driver BUT someone, like say, an Auto Parts Dealer with a SHOP that sells parts and runs a BUSINESS.
NOW COMES THE QUESTION:
If he HAS TO PAY A SMALL BRIBE TO START HIS SHOP - ISN'T THAT OK - CONSIDERING THAT HE WILL CREATE 8.75 TIMES MORE BUSINESS FOR THE COUNTRY EACH YEAR???
BRIBES ARE PAID ONCE. BUSINESSES RUN FOR EVER!
If my driver asks me for a LOAN to help start his son's business - should I NOT GIVE IT - KNOWING that Rs 9.00 WILL GO IN BRIBES, BUT EACH year he will generate a 8.75 MULTIPLE effect for the country??
Sir, I am businessman, and just using elementary math, note THAT RS 875.00 is BIGGER than Rs 87.50!!
My plea with you is:
Agitate to get more people to START businesses.
TO INCREASE THE GDP OF INDIA
TO CREATE ENTERPRISES
TO CREATE AN ARMY OF ENTREPRENEURS
TO NOT JAIL BHARO
BANK BHARO WITH ENTREPRENEURS!!!
I have tears in my eyes as I write this Sir.
Simply because the biggest and most powerful agitators ever born in this great country... which would be you and Shri Annaji... seem to have MISSED THE REALLY, REALLY, BIG PICTURE.
Ps - special thanks to Asha for her speed editing of this one!
This comment exchange between me and a fellow rodinhooder (part of comments) may also help understand my article:
Comment by Darshan Mujumdar
First of all, very creative attempt to solve the problem at hand than keep beating around the bush. I, however, see a fundamental flaw in your argument. The number Rs. 875 is a notional number, as you are summing the "revenues" while you move down the value chain of your product/service. In effect your model is proving that if our country's earning is Rs. 100 (the revenue generated in your example), then Rs. 87.5 goes in bribe. Note that at each level in the value chain, the REAL earnings are only 10% of the service/product that you sell, so effectively your model depicts that at each level of the value chain, as the money trickles down, 90% goes in the form of bribe, while 10% of the profit or 1% of the revenue remains with the actual producer of the service or goods.
You really need some basic tutoring in economics.
Let me contribute:
- Lets assume I run a Paav Bhaji stall in Mumbai.
I SELL Rs 100 worth of paav bahji to customers PER DAY
FIRST - who pays me? Nearby employees of office buildings etc - who have EARNED SALARY and spend small moneys to eat every day. So that is where I get Rs. 100 from. ( not important in this discussion).
Now, from the Rs 100 I earn, I SPEND RS 90 per day.
Where does the Rs 90 get spent per day?
- Vegetables & Food vendors - Rs 70
- Helper - Plates, disposables etc - Rs 11
- HAFTA - BRIBE TO POLICE WALA - Rs 9 (10%)
- TOTAL = Rs 90
- Profit retained = Rs 10
GROSS TOTAL = Rs 100 = Original sales.
Now, lets look at ONE OF THE ELEMENTS of my Rs 90 spent - the Rs 70 spent on the vegetable and food vendor.
The Rs 70 I SPEND is EARNED by Wholesale vegetable guys who have small shops that BUY from the Village market suppliers etc. So get this right - My Rs 70 spend is Rs 70 Sales for this guy.
This person in turns spend Rs 63 (90% of his cost) daily on:
Lets assume - Rs 50 - paid to village agent who gets him vegetables, Rs 7 to a Hamaal (coolie) who carries the goods for him and Rs 6 (10%) BRIBES - to the police wala who lets the vegetable seller conduct his business.
As per the economic model I have maintained, the Vegetable vendor keeps 10% of his sale or Rs 7 as profit for himself.
Now, lets do totals for JUST ALOK and Vegetable Vendor
Alok's sales - Rs 100, Bribe paid - Rs 9
Vegetable sales wala - Sales - Rs 70 - bribe paid - Rs 7
(The same could be calculate for plate supplier, hamaal etc)
TOTAL SALES just between 2 people = Rs 100+ Rs 70 = Rs 170
BRIBES PAID - Rs 9 + Rs 6 = Rs 15 ( less than 10% here)
Therefore, as the Original 100 trickles down, it creates momentum value since what I spend is someone's earning etc etc
IF I REFUSE TO SPEND RS 9 on the first Bribe - I DONT SELL Rs 100 of Paav Bhaji, the Vegetable Vendor doesn't get Rs 70 etc etc etc....
DOES THIS MAKE SENSE???
Now comes the FUN!!
The 2 police walas who take bribes - Rs 9 and Rs 6 = Rs 15 ACTUALLY FURTHER SPEND MONEY ON EATING PAAV BHAJI FROM MY NEIGHBOR, thereby again increasing the cash circulation!!! (source of money which I did not care to cover because if I ever said that bribes are good for the economy, then I would be killed).
I would like you to look up a famous man called Keynes and what he said about 'digging holes in the ground'.... that will really strike a point.
Your friendly, neighborhood economist:
Update - 30-8-2012
I just cant help smiling to myself.
In the post above, just below the maths, this is what I had written:
"Sir, if you notice, the TRICKLE DOWN EFFECT of starting a business with Rs 100.00 turnover results in Rs 875.00 turnover generated by other people down the value chain as they run their business/service. "
Just read this in the Times of India Today:
Some blessings from a Senior Economist!
Prof. Pinaki was not quoted by me 'randomly' - he was quoted by me to prove that corruption INDEED DECREASES AUTOMATICALLY when GDP increases - something that i been screaming in my post.
Check the PPT and Prof. Pinaki's graph as under:
You can definitely start by encouraging corruption and bribery with in your company. Set an example how businesses can flourish by embracing corruption.
As a result we would often get to see this:
Alok: It has been two months since I ask you to develop this game, and it hasn't even started yet?
Developer: Not so easy old man, It will cost you Rs. 200,000 more or I am gonna sell all your source codes to EvenMoreCompetitor.com for Rs. 500,000.
Manager: I am not going to let you release this unless I get my cut!
Investor: I am going to freeze all your accounts, unless I get my kickbacks for this month.
So we should all pay bribes to our employees to do the job they are hired for?
Alok's premise is flawed, a search on google for "corruption is good for economic growth":
provides multiple results. I found this result: http://www.imf.org/external/pubs/ft/issues6/index.htm
An excerpt from the preface reads as follows:
"...Second, the paper presents recent evidence on the extent to which corruption affects investment and economic growth and on how it influences governments in choosing what to spend their money on. It finds that corruption discourages investment, limits economic growth, and alters the composition of government spending, often to the detriment of future economic growth."
Another paper reads as follows in the first para itself:
"...We utilize the economic freedom index to examine if corruption can facilitate growth by allowing entrepreneurs to avoid inefficient policies and regulations when economic freedom is limited. Using regression analysis, we find that corruption is growth enhancing when economic freedom is most limited but the beneficial impact of corruption decreases as economic freedom increases. Not all areas of economic freedom affect the corruption-growth relationship equally. In particular, we find that when we analyze individual areas of economic freedom the beneficial effect of corruption disappears most quickly when the size of government and the extent of regulation decrease. "
The second excerpt refers to the license raj when economic freedom was lower.
Alok does not seem to understand that corruption is governed by greed and greed knows no bounds. Petty corruption does not stay petty. PERIOD.
I don't think people get the point.
I say - move ahead. If corruption is an irritant, get used to it to move ahead.
In the USA, corruption is not in the streets with cops but in washington where gun laws are abused.
As long as 2 people on earth do not have the same lifestyle, there will be corruption.
Now, Anna Hazare says - DONT pay. STOP
If indeed a magical spell was cast on India and no one paid any bribes for a day, our factories, our services, our ports, our offices would SHUT DOWN
Is that viable?
Isn't it better to trace the economic history of all developed countries and see how they had MASS corruption and they lifted out of it JUST BY ECONOMIC PROGRES!
Where and who was the Anna Hazare of Germany, UK, USA, France??
Are those countries poorer than India???
Your writing was creative worth clap but not worth praise.Advocating for bribe goes against Business ethics which every entrepreneur should have
I like this!
So, as gaming entrepreneur who has started up a business in India from scratch and has cumulatively paid 14 years * 12 = 168 months * 100 employees average = 17,000 months of salaries to Indians is BAD!??
Oh, so making Games that entertain people is bad?
Entertainment is bad I see?
You suggest we become Taliban??
Oh you may not know - Games is bigger than Hollywood as a business. USA is not a market to benchmark against?
Let me see what you do:
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Carefully chosen products.100% Authentic Supplies.Stringent quality control before dispatch.Full refund or store credit? Your choice.A customer service team that loves to interact and is hungry to serve. We are always waiting for your call:
We believe your observations, interactions and experiences make you special. At Rooja, we strive to create such experiences in every interaction you choose to have with us.
So selling strictly imported goods !! to Indians is good for the GDP?!
Hmmmmm - paying 17,000 man months of salaries to Indians for sweat, toil and blood expended in India is BAD - while making Indians pay for imported goods bought into India by Forex is GOOD!!??
I don't think anyone would question your achievements. But promoting things like Corruption and Malpractices does not indicate a sensible growth for a strong country. It will come down someday, people inside the business or country will start eating each other, because they have no morals. This is what happening in country. When leaders involved in corruption, everyone thinks its their birthright to do it.
What if people in your own company are doing malpractices under your nose - will you allow it?
Or your Gatekeeper taking bribes from your customers or vendors without your consent?
My dear friend,
Don't confuse morals, personal beliefs and what is a general suggestion to make a country progress as one item!
Consider these 2 notes written by me that exist on this site itself - here http://therodinhoods.com/forum/topics/is-it-possible-to-do-business
A couple of years ago, a labor inspector arrived in our office to check our provident fund records. To his utter disappointment, he found that everything was perfect and hence there was no scope for a bribe.
He still insisted on a ‘gift’. When we refused, he did the unthinkable – he sat down on the visitor’s sofa and refused to move. Not just the first day but 3 days in a row!
On the 4th day, tired of having an ugly, smelly owl in our pristine office, we paid him some cash and bid him a happy departure.
I found it practical to bend my ethics a bit in return for the sake of sanity and the healthy atmosphere of the office!
Moral? There is a time to be practical and there is a time to be headstrong when it comes to resolving problems in business as much as in personal life
Take Back the currency Notes of 1000 and 500 (Will pulls out billions of Black Money)
and 90% problem will be solved
Mr. Kejriwal, I don't know who you are, I don't know what you have done and I honestly have no clue why all these people follow you.. :P.
I am a nobody, with nothing to show for achievement in my life, certainly someone with just average intelligence. You do seem to be a smart guy, what with all that mathematics and economics thrown in, but I wonder why would you be so ignorant about things.Did you take into picture that not everyone might have same acumen/panache for doing intelligent things?? Some of us mere mortals actually have to slug it out to make ends meet??
Any perspective of human rights? Ethics? human nature? kucch bhi human??
Again.. I might not be able to argue with you, I am man of limited education, experience and confidence. Even I understand that theory of by hook or by crook does not bode well in long term for a society/civilization/culture.
If you really do what you preach, I wonder what kind of people would like to do business with you, in the end its all gonna be about money for you, I would keep watching my back for the day you would screw me. Unfortunately in real world, life has much more to it than money.. I call it the Human Factor.
Hello Alok sir,
I have read your article on Arvind Kejriwal but there are some calculations and some thoughts which are perplexing me so just want to share on this forum. The level of corruption/bribe in business you have calculated is a percentage of profit or revenue and the overall impact is rise in GDP. But what about the corruption level in mega events or deals. Last 2-3 years, our politics is rocked with scams running in lakhs of crores and does a common man business able to justify that corruption level. For eg, Adarsh, commonwealth, 2G and the latest Coalgate, the figures are so huge that they dnt justify the 10% profit, 9% bribe model. I am a working person and today I am in doubt to what purpose my tax is being used???? Plus I live in Guwahati and when I see the pathetic condition of roads, drainage, water supply and other areas, I get curious to know what way the State Government spending is being done??
Hey, You got a really nice view point. But, I would like to add something(If I am not wrong)!!
Take the case of pao bhaji wala, If he do not have to give Rs 9 as bribe, his cost price decreases. He can sell his pao bhaji for Rs95 which he was earlier selling for Rs 100. So eventually the person(s) buying from him can save 5%. An yes now the pao bhaji wala, he saves Rs 4 more... Out of which he keeps Rs 2 and distribute other Rs2 to his vendors and labours.
In all this what happened... Costumer saved 5%, Pao Bhaaji Waala earnded Rs12(which was earlier 10) i.e. 20% extra and so does the labour under the Pao Bhaaji Wala... All this can lead to higher consumption of Pao Bhaji because of reduced price.
What you see here, 'Savings' increased, 'Profit' increased, Wages increased but 'Price' decreased!!!
According to Wikipedia : Income Approach GDP is "" sum total of incomes of individuals living in a country during 1 year .""
SO GDP Increases!!! Thats what you, me and we want!!!
I think what he is doing is also very important because you are doing that Entrepreneur part. For us both the Kejriwal's are equally important.