1. Know your audience: This goes almost without saying. I do mention it because some advertisements I’ve heard seem to miss this basic point. If your podcast has a largely international appeal, for example, an advertising pitch that highlights “all American” as the potential benefit of consuming the product is missing the point.
2. Know how your audience listens to your podcast: While the podcast format derives a large part of its popularity due to the freedom it affords users in terms of how and when they listen to your podcast, a quick survey might give you an overall picture of consumption milieu. This could give you crucial insights into what kind of products that you can effectively advertise. One fiction podcast, for example, realized that a large portion of its audience listens to its podcast at bedtime and made a concerted pitch to sell fuzzy headphones that you can wear when you sleep.
3. Keep the advertisement relevant to your podcast and, if possible, to the particular episode: While this seems very basic too, I’ve seen many business podcasts miss this! An automobile advertisement that talks about style and comfort is not exactly the thing you would like to sell in a podcast that is talking about green-tech or clean-tech.
4. Know just-tolerable-length: Remember, most of your audience is listening to your podcast on an audio player that can easily skip ahead. If you make a advertisement small, then there is a good chance that the annoyance of skipping ahead is greater than having to listen to the ad itself. If you make it too small, your advertisement may not be effective. The key is to realize how small, exactly your pitch must be. The exact length that an ad should be is what I call just tolerable length. This is going to depend a lot on the factors I’ve listed above. If your advertisement is relevant, humorous or informative, people may be willing to spend more time listening to it than otherwise.

In conclusion, remember that in this medium, the listener has a lot of freedom. Hence, all the principles that apply in traditional advertising may not apply and you need to be creative to get your message across.

To further complicate matters in podcast advertising, the metrics that are applicable to mainstream media such as TV and radio may not be very useful here, both because it is very hard to measure them and because may not be amenable to meaningful interpretation. On the other hand, advertising metrics of the web also are not relevant to this media. It appears to me as thought this medium is amenable more to niche marketing with direct measurements of results rather than to build awareness or top of the mind recall.

In most companies, the IT department also handles telcom assets.  I also see that most big companies tend to outsource their IT needs. These companies also usually have water-tight SLAs with their service providers. Hence outsourcing merely their telecommunications requirements may not make sense for such companies.

For smaller and medium sized companies, however, outsourcing IT may not be feasible or even necessary. In such situations, does it make sense to outsource the telecom management? Telecom asset management can be a chore for most companies (unless they are service providers). This is not just due to plethora of devices a mid size company would need to service their telecom needs, but also due to the pain of having to keep the devices updated (having to deal software versions of various devices etc.). Given these factors an intermediary like an outsourced telecom management firm akin to outsourced IT firm may be of some value.

Correlation & causation

The incident is funny to us because we realize that the correlation between the elderly gentleman’s mouse gestures and the video buffering is spurious. We also realize that one does not cause another. In other words, we clearly understand that, in this case, correlation does not imply any causation. Any confusion between the two can be a genesis of a new superstition.

We are exceedingly good pattern recognizers! We see them everywhere. We see faces in clouds, letters in tree barks and whatnot. Not to say that this is bad, though: all our accumulated knowledge is mostly about patterns, how things & people behave.

So why is it we tend to overgeneralize and find more patterns than there seem to be? Why do we develop superstitions? Why do we mistake correlation for causation? After all, it is not very rational, for it is true that small correlation exists between almost any two sets of data.

One poignant example of this is in the stock market where we rely so much on patterns to help us make money. The commentary for Ben Graham’s “The intelligent investor” succinctly warned us of perils of doing so :

If you look at a large quantity of data long enough, a huge number of patterns will emerge—if only by chance. By random luck alone, the companies that produce above-average stock returns will have plenty of things in common. But unless those factors cause the stocks to outperform, they can’t be used to predict future returns.

Wired to be superstitious

Research seems to suggest that we are wired to be an overgeneralizing, superstitious species.  The idea is surprisingly simple. Pardon my use of a simplistic analogy to demonstrate the logic. Imagine there are two people, one who overgeneralizes and sees a lion in the grass when there is none and another who doesn’t overgeneralize and sees a lion only when it is truly staring down at him. It is more likely that the former will survive to reproduce than the latter. Hence, over the eons, we have evolved to overgeneralize.

Science to rescue

While it may be true that being superstitious is better when the there is a large cost for missing something with a relatively small cost of getting it wrong, in our current lifestyles as comfortable denizens of concrete jungles trying to live off the gullibility of others, superstition is more of a hindrance. How do we go about reducing its effect?

I think we can do so by using scientific method, in general. The beliefs we want to adopt should be falsifiable. We need to test those beliefs in a strictly empirical (observation and experiments) and skeptical (with proper controls ) fashion to ascertain their validity.

Philosophical underpinnings

The philosophical underpinning of the whole argument, however, rests on a principle called Occam’s razor. It is a principle of parsimony which can be simply stated as “when you have two competing theories that make exactly the same predictions, the simpler one is the better” or as Einstein is often quoted “Everything should be made as simple as possible, but not simpler”. I’d like to conclude with a question to my readers. What makes Occam’s razor tenable?

Global telecom giant Alcatel-Lucent is likely to sell its research and development (R&D) centers in India. CNBC-TV18 learns that it has approached three IT firms for a possible buy. These include Wipro, Infosys and Cognizant. The combined value of arm is expected at Rs 250 crore, informed a source.

Of course, the news was immediately denied by official sources, which claim that R&D is “strategic asset” to drive “innovation”.

Core competence?

What is strategic? There is one notion, that of core competence, which says that something is strategic if you can do it better than anyone else and is hard for your competition to copy. For most parts of R&D, which could be routine maintenence, routine development of software etc., service companies are better suited. They can use their scale to drive efficiency in these parts. Billing rates of IT services companies, which could be seen as one measure of efficiency, have shown flat to downward trend. This demonstrates their ability, in general, to drive efficiency.

Business critical?

Could it be that R&D is critical to the business of Alcatel-Lucent? Criticality of component does not, by itself, drive a make decision. Forged components that go into making engine parts, for example, are critical to the performance of automobiles, but they are outsourced anyway. The decision here would be driven by the knowledge that this critical component is not a differentiator in the marketplace (i.e., all auto manufacturers need it) and that there is an external party that can aggregate all this demand and operate more efficiently.

Driver of innovation?

Could it be that R&D is strategic because it is the only way to drive innovation, without which there would be a disadvantage to Alcatel-Lucent at the marketplace? On the face of it, this argument holds water. But, we need to ask ourselves: what amount of R&D that takes place in-house actually drives innovation? A lot of maintenance activities and routine development of product software is also grouped under R&D, there is a case to be made that this would be done much more efficiently by services companies. A case could be made to separate out only innovation driving R&D (mostly, bell-labs) from other parts.

New paradigms

Of course, the notion of what is “core” and what can be outsourced is continuously being changed. For example, Bharti has now outsourced most of its network. This would have been sacrilegious some time ago.

There could be a notion of semi-core developing here. Something that is critical to the business, yet not a differentiator. If any such sale does materialize, it would be interesting to see how IT services companies could aggregate work from various such semi-core activities that keeps their clients satisfied that they are not being put to a disadvantage while also driving efficiency.

Elegant simplicity

One of the most widely criticized assumption is also the one that brings elegant simplicity to the subject. The assumption is that we are rational maximisers. That is to say for each one of us maximizes something which economics usually only vaguely labels as “utility”. In theory, utility could be anything, even subjective. Indeed, its roots probably lies in the idea that utility is a proxy for happiness. This is evidenced by the quote “the greatest happiness for the greatest number of people” which is the heart of utilitarianism.

The problem with subjectivity

As with all things subjective, happiness is a very hard thing to measure.  People’s ratings of their own happiness, for example, can be significantly influenced by asking them priming questions.  In one study researchers affected self-assessment of subjects’ happiness by asking them questions about their dating lives before they rated their own happiness.

Even if it were easy to measure, given the proliferation of self help books and gurus, I doubt if we are really happiness maximizers; but I digress.

The homo economicus

Given the difficulty of dealing with subjective definitions of “utility”, most of economics assumes utility to be money or its equivalents. Herein lies the problem – most of us are NOT rational money-maximizers! Paul Krugman in his recent essay titled “How Did Economists Get It So Wrong?” called it “mistaking beauty for truth”. While the assumption makes for beautiful models, it is simply not true.

Study after study has shown that we value the risk of small losses higher than equivalent gains. We value things we own higher than we would have if we didn’t own them. We feel the need to reciprocate any favors bestowed upon us. Even with games like the ultimatum game, people have been shown to incur a cost to themselves to punish others who they think are unjust.

These and more studies on human behavior are littered with evidence for our irrationality. Of course, you won’t find a lot of people (economists excluded) claiming that we are perfectly rational.  This criticism has lead to a caricature of human beings as seen by economists into a separate species called homo economicus.

Economic growth as panacea

These behavioral problems with economics are well known. In fact there are fields of study called behavioral economics  and behavioral finance. Why, then, am I waxing about it? Well, for one, all of us seem to have accepted economic indicators such as GDP and GDP growth rate as the prime measures of well-being. Policy is decided to promote economic growth, we target growth numbers; indeed, we view economic growth as an almost-panacea to all our problems. Don’t get me wrong, I am neither a Luddite nor a communist. However, I do see some problems with this worldview.

Lifting masses out of poverty

We often hear this phrase, that economic growth lifts X million people out of poverty. I am not sure if systematic evidence exists for this. In a very well written article about the ills of pure free market capitalism called “Beyond Selfishness”, Henry Mintzberg, Robert Simons and Kunal Basu argue that growth has actually increased the income disparity in the US. They argue that, in real terms, the lowest class may actually be worse off after growth and that the richest are disproportionately better off. In other words, a gross 8% GDP growth may conceal 125% growth to the ultra-rich and -2% “growth” to the ultra poor.

Of course, some disparity is to be expected. In economics, most of this would be attributed to “productivity”. The argument is probably correct. But the reasoning stops abruptly at productivity. What causes such drastic differences in productivity? Some of it may be attributable to industriousness and inherent abilities of people, but a lot would probably be attributable to opportunity.

Relativity

Another problem with economic growth is that, while a homo economics would be happy if his assets grew in absolute terms, a homo sapien would only be happy if he is better than the homo sapien sitting on the next tree branch! Again, don’t get me wrong, I am not saying absolute growth is not good. I am merely suggesting that, possibly, rat race, lack of leisure time etc., that are hallmarks of our time are probably a result of our mindless pursuit of higher productivity.

But what about happiness?

Our beautiful neighbor up north, Bhutan, has come up with a nice concept christened Gross national happiness. King Jigme Singye Wangchuck , who abdicated his throne to create democracy in Bhutan came up with this concept. Although this suffers from the problem of being vague, it seems like a neat start.

The question remains, while the imaginary homo economicus may be ecstatic at our unwavering focus on growth, what about us, ordinary mortals?

In simple terms, India’s stance is “climate change? Ain’t my problem!”.

It is our problem!

But, the fact remains that climate change is eminently “our problem”.  Here are some reasons why it is:

1. The issue of poverty is  linked with subsistence farming and rural communities. 68% of land under cultivation in India is rain fed.  There is some evidence to so support the claim that climate change is making monsoons more erratic and is increasing the severity extreme events. 
2. What is the effect of climate change on the gangetic plain that is home to some 500 million people? The Himalayan glaciers that feed the mighty rivers are retreating at the rate of 10-15 meters a year, the effect of which could be massive flooding followed by drought events.
3. In general, agricultural production in India of rice and wheat is projected to drop between a massive 40% to 52% if temperatures were to rise by 2.5  to 4.9 degrees centigrade.
4. In particular, rice is very vulnerable to climate change. Rice is a very important staple crop in India.  It is estimated the rice production will fall 10% for every degree rise in temperature. 
5. Sea level rise is another climate change induced menace that India can ill afford. Apart from ecological destruction of important natural resources such as sundarbans, it can disrupt coastal economies by flooding, damages by extreme events and intrusion of saltwater in freshwater and groundwater resources. 
6. Sea water acidification and general temperature increase puts stress on marine ecosystems causing events such as coral bleaching. India should be concerned about the sustainability of the fisheries resources that it depends on.

These are big problems that will affect us no matter who puts up more carbon dioxide in atmosphere.  We share the planet with all the people whose unsustainable lives have “caused the problem” and we aren’t “helping” even if we keep well below the global per-capita average!

There is an upside, an opportunity.

A saner position for India is to acknowledge this global problem and demand that the developed world help us cope.

If we are going to move to  a carbon neutral economy sooner or later,  does huge investments in carbon tainted infrastructure make sense?

Let us look at one sector responsible for carbon emissions – power sector.  There are several things in this sector that are unique to India.  Our losses in transmission and distribution, for example, stood at 33% in 2005 , in other words we have a very inefficient grid. We also have a huge power theft problem. I guess this is partly motivated by our ethic that stealing from government is okay. Moreover, considerable section of our country still remains off-grid.

On the flip side, India as also very well endowed with natural energy resources such as sunlight and wind. We receive about 5,000 trillion kWh/year in solar energy. All these make up for a case that creatively funded (with some subsidies from developed countries), community run (because, while stealing from government is okay in our culture, stealing from our neighbors is most certainly not), off grid electricity generation near the place of consumption could solve multiple problems by creating sustainable (both economically and ecologically) energy infrastructure and eliminating inefficiency of  centralized grid.

India also has huge potential in terms of carbon sequestration, for example, using the Terra Preta or Biochar method. This method involves converting biomass that is agricultural byproduct into charcoal and using it to fertilize soil, thereby also achieving sequestration of carbon. This could potential be paid for by some sort of carbon trading scheme, providing triple benefits to farmers involved – provide an additional source of income, increase soil fertility and also reduce global warming!

With regards to our policy, we could act like a stubborn child and refuse to move ahead. We could demand for our share of “right to pollute” on a per-capita basis and slam the west for ruining the world before we could. The saner option, however, remains that we recognize the need to change and do it in a way that is both politically savvy and economically advantageous for us in the long run, which inevitably involves keeping our growth sustainable ecologically.

The case I am interested in is that of telecom industry. Telecom industry is seeing commoditization of its services. Broadband connections, for example, compete on price per bytes moved. Only the most efficient bit-movers would win such a game. Voice operators compete on price per minute. While this seems a little more flexible than the price per byte owing to the fact that bytes required to carry a minute of voice may vary on quality of service and compression, it seems unlikely that operators aren’t already on efficient horizon in these technical aspects. Only mobile-VAS services seem to escape this price-per-unit of bandwidth paradigm. Mobile VAS in India has so far been a small percentage of operators’ revenues.

Does this mean telecom industry (has/was always/)will become a “infrastructure” industry with only cost-leadership positions being sustainable? Does this mean the operating-margins (EBITA) of companies like AirTel (37% in Q3-09) and Cisco (28% in FY-08) will show a downward trend, notwithstanding the unique positions and contexts these firms currently find themselves in? I’d like to see the views of my readers who, in my opinion, tend to be smart and well-informed.