Being a Billionaire: Warren Buffett

Being a Billionaire: Warren Buffett

Posted by: on Nov 7, 2014 | No Comments

“The free market’s the best mechanism ever devised to put resources to their most efficient and productive use…”

~ Warren Buffett, to President Barack Obama

Discovering Ayn Rand: American Novelist and Philosopher

Discovering Ayn Rand: American Novelist and Philosopher

Posted by: on Aug 13, 2014 | No Comments

“The question isn’t who is going to let me; it’s who is going to stop me.”

~ Ayn Rand

Ayn Rand is best known for her novels, The Fountainhead (1943) and Atlas Shrugged (1957).

Reaganomics: The Life and Economics of Ronald Reagan

Reaganomics: The Life and Economics of Ronald Reagan

Posted by: on Jul 16, 2014 | No Comments

“The American dream is not that every man must be level with every other man. The American dream is that every man must be free to become whatever God intends he should become.”

~ Ronald Reagan

Democracy after Capitalism or Capitalism after Democracy?

Posted by: on Apr 4, 2012 | One Comment

Democracy after Capitalism or Capitalism after Democracy? Does the order really matter? This is a question I have always wondered about. Democracy and capitalism have always been thought in the same light. Irrespective of the order, the very coexistence of these concepts has been a vital cog in the wheel of development of the West. However, to consider their order irrelevant will be a bit of ignorance. Why do I think so? Read what’s next…

 

So, in case of Democracy and Capitalism, is there a favorable order? To explain my body of thought, I’ve explained an example each from the two possible scenarios.

 

CASE STUDY-1: Democracy after Capitalism

 

I’ll cite the example of the birth of capitalism in USA. Being a British colony prior to its independence, America was an obvious witness to feudalism. As many economists believe, feudalism was somewhat of a precursor to Capitalism in its rawest nascent form. Capitalism found its roots in the US as early as the late 1600s. All was well till the implementation of The Stamp Act in 1763, which forced Americans to pay hefty taxes on all legal and financial transactions. The growing influence of independent industrialists meant that the Act was to be met with stiff opposition. The Boston Tea Party followed in 1773 and three years later, in 1776, after the successful American Revolution, the United States of America was declared an independent democratic country with the unison of 13 states.

 

To surmise, the birth and growth of Capitalism led to the independence and, subsequently, democratization of America (as it was then called).

 

CASE STUDY – 2: Capitalism after Democracy

 

I can think of no better example than India to elaborate on. Being one of the richest economies in the Middle Ages, India was the cynosure of all colonial powers for the resources she provided. In fact, it isn’t a surprise that ours is a country that was under foreign rule for decades. More than 70 years since we were declared a sovereign, secular, democratic, republic nation, we are yet to establish a capitalist, free-market driven economy that is independent and not answerable to the government. What we have seen is Crony Capitalism that has hindered economic growth; the prime reason we are still stuck in the third world. Crony Capitalism refers to what we have seen in Indonesia, Thailand, Nepal, Egypt, Iraq and now in India. Government through its regulations, licenses and approval processes decides the winners and losers. In a free market, it is how well you serve your customers that form the basis of Capitalism. In India, it is how well you serve your political masters, which decides the fate of your business.

 

My point here is in stark contrast to the one in the previous case. We experienced Capitalism (not in its true forms) long after we had democracy.

 

Coming back to the initial question, how does it matter if Capitalism precedes Democracy or vice-versa? Well, it does. In the former case, it was the rise of capitalists that brought about the American Revolution. By the time America got independent (read turned democratic), the economy was already in fast forward mode, thanks in no small part to the capitalist nature of it.

 

India’s primary problem is that even though it was, and still is, a democratic country; the government interfered, and still does, with running the economy. I’d even say that ours is a rather Confused Economy; as has been evident in our growth since we have turned a Democracy. At the risk of sounding repetitive, I’d still reiterate that a free market is what our economy needs to run on its own feet again. Till then, its Democracy -1; Capitalism-0.

 

US Casino Industry Generates $125 Bn in 2010

Posted by: on Mar 1, 2012 | 2 Comments

The Unites States is still reeling under the pressure of a slowdown, they say. The casino industry seems to be telling us a different story altogether. Last year, the US casino industry and industries that depend on them generated $125 billion, according to a report published earlier this month by the American Gaming Association. Casino revenues in 2010 equalled 1% of the nation’s total gross domestic product.

 

“There is no doubt the commercial casino industry is a significant and vital part of our nation’s economy,” said Frank J. Fahrenkopf, Jr (president and CEO of the American Gaming Association). “The industry generates and supports economic activity that stretches far beyond the communities that host casinos,” he added.

 

The American Gaming Association study also revealed that the $125 billion in spending was generated by 566 casinos across 22 states. The industry was also responsible for nearly 820,000 jobs in the US last year.

 

Of the total $125 billion in spending generated, direct consumer casino spending accounted for $50 billion as well as approximately 350,000 jobs. The remaining 470,000 jobs and $76 billion in revenues were accounted for by indirect spending. About a third of the spending was generated by non-gambling sources, such as food sales, entertainment and hotels.

 

The casino industry employs people in various ways. For instance, people are employed for conducting table games like blackjack, roulette, baccarat and red dog. Others employed are gambling cashiers, machine technicians, managers, etc. Some people are employed to keep a tab on cheating and unruly behaviour. The casino industry also generates support jobs in the local hotel industry, employing people in food and beverage preparation, housekeeping, building and maintenance, sales and marketing, etc. There are people who work in industries that manufacture equipment for the casino industry.

 

Apart from creating employment in the country and of course contributing to the GDP, casinos and related industries also added $25 billion to the US government’s coffers via taxes. Direct spending generated taxes of almost $16 billion, the rest being contributed by indirect activity. This actually took the industry’s effective tax rate to 32%, which is more than the total tax burden economy-wide (which stood at 27%).

 

With these advantages to reap, shouldn’t the Indian government poise itself for economic growth and a surge in tourism by encouraging the casino industry?

 

For Years India has lost gaming revenue to casinos in Sri Lanka, Nepal, and Mauritius and more recently to newly opened mega casinos in Macau and Singapore. The Macau and Singapore gaming industry has overtaken Las Vegas as the biggest casino revenue generator in the US.

 

History of Gambling in the United States

Posted by: on Feb 7, 2012 | 2 Comments

A report of the American Gaming Association stated that 483 commercial casinos in the US gathered revenues of $34.6 billion in 2010. Nevada casinos boasted of $10.4 billion of the total revenue in the same year. Do these figures make you wonder about how and when gambling started in the US?

 

Professor I. Nelson Rose, an authority on gambling laws, divided the American gambling into three phases:

 

1600s to mid 1800s – The First Phase

 

Gambling was practiced even by the first settlers of the British-American colonies. It was present in the form of lotteries. From time to time, the 13 original colonies organized lotteries to raise revenues for the purpose of improving schools and universities. The organization of lotteries emerged as a civic responsibility. In fact, some of the nation’s most prestigious institutions – Harvard, Princeton and Yale – were established with the help of these lotteries.

 

George Washington and Benjamin Franklin were prominent sponsors of lotteries dedicated to public works assignment. Lotteries continued to be popular in the 19th century. In 1823, a private lottery was approved by the Congress for beautifying Washington DC. This era also witnessed wagers on horse racing and the development of casinos (in the form of taverns and roadhouses).

 

By the end of 1800, gambling was legitimized in the lower Mississippi Valley. However, during this period, gambling was also attacked on moral and religious grounds. Moreover, there were a large number of lottery scandals that fanned the air of opposition. In 1833, NY, Massachusetts and Pennsylvania brought an end to legal lotteries. By 1860, only three states – Kentucky, Missouri and Delaware – continued to allow lotteries.

 

This period (1840 – 1860) was also the heydays of the riverboat gamblers. Professional gamblers shifted from their bases in towns to riverboats. As opposed to the modern riverboat gambling or floating casinos, the riverboats in that era were not casinos. Passengers gambled amongst themselves in an informal way.

 

By the end of 1800, riverboat gambling also met its demise with the introduction of the railroad and the outbreak of the American Civil War (1861–1865). However, the end of the first phase did not put an end to illegal gambling.

 

Mid 1800s to early 1900s – The Second Phase

 

This phase was spurred by the boom in mining and the expansion of the west frontier. The gold rush brought miners to California and also boosted the amount as well as the types of gambling. San Francisco became the gambling centre in the US during this era. In fact, gambling became so popular that a 15 x 25 canvas tent cost $40,000 on a yearly basis and the advance had to be paid in gold dust! Gambling was at a pinnacle in California between 1849 and 1855. The 1850s also saw gambling establishments getting authorized for the purpose of raising money. As settlers moved beyond California, so did gambling.

 

Post 1855, public opinion turned against gambling and the Legislature enacted laws targeting professional gamblers. San Francisco saw professional gamblers being lynched in 1856. In 1860, the Legislature banned banking games. In 1885, gaming was made illegal. In 1891, the penalty for playing and operating the game became the same.

 

However, the prohibition on gambling did not stop it from happening; instead drove it underground. Despite the statutes against gambling, 1895 saw the invention of the slot machine. The machine got outlawed only in 1911. Nevada oscillated between authorizing and banning games. Lotteries also made a comeback during the same period since there was a need to rebuild the nation ravaged by war. The Louisiana Lottery was the most prominent venture of the 1860s.

 

Gaming scandals led to the imposition of more federal legislation on lotteries. The Louisiana Lottery was abolished in 1895 and it was revealed that the promoters of the Lottery made huge ill-gotten profits. It was not just lotteries but even horse racing was found to be plagued by fraudulent activities. By 1910, almost all types of gambling were made illegal in the US.

 

Early 1930s to 21th century – The Third Phase

 

The Great Depression which began in 1929 gave a huge boost to gaming. In 1931, Massachusetts legalized bingo in order to help charities and churches raise money. By 1950s, 11 states had legalized bingo. Wagers in horse races also made a comeback. In the 1930s, 21 US states re-introduced race tracks.

 

The Nevada Legislature, in a bid to promote tourism, legalized almost all types of gambling in 1931. Nevada had an already-booming, albeit illegal, gambling industry. In fact, the move to legalizing gambling was due to the concern that prohibition on gambling could not be enforced and illegal gambling was corrupting the concept of law enforcement.

 

The gaming industry in Nevada was helped by the fact that Los Angeles made gambling businesses illegal. The gambling establishments in Los Angeles were mostly run by criminals who simply moved to Nevada to put their skills to use.

 

Lotteries also resurged during this period. One of the most prominent forms of lotteries was the Irish sweepstakes which began in 1930 with the intent of raising money for Irish hospitals. The illegal ‘number’ game also became quite popular and grossed $20 million in Chicago during the 1970s. In 1971, New Jersey launched its first successful modern lottery.

 

The third phase has not ended. The previous two phases were brought to an end by scandals and issues concerning morals. Will this phase too come to an end? Can gambling again become illegal across the United States?

 

What will happen, we don not know. What should happen is clear. Gambling is being legalized in many parts of the world. Most recently Singapore legalized gambling in form of two casinos. Both are doing well and in 2010-11, raised Singapore’s GDP by 15%.

 

India just has to recognize that with gambling legal in neighboring Nepal, Sri Lanka and a bit further in Singapore, Macau, Mauritius, Cambodia and Philippines, it would do well to allow gaming to spread across the country. Prohibitions are not shocking, it merely results in the activity going underground and what purpose does it serve?

 

History of Casinos and Gambling in Nevada

Posted by: on Feb 3, 2012 | No Comments

Did you know that gambling in Las Vegas is intricately linked with the Hoover Dam? July 3, 1930 saw President Hoover signing the bill for the establishment of the Boulder Dam (now known as the Hoover Dam). In 1931, when the construction work began, 5,128 workers were sent to Vegas. Very soon the population surged to 25,000. This rapid rise in the population of males from across the country led to the growth of a market for entertainment. The presence of mafia gang leaders, Mormon financers and people with entrepreneurial dreams fanned the development of the entertainment market.

 

The Transformation of a Dry Desert into the Gambling Mecca of the World

 

This market, consisting of showgirl theatres and casinos, catered primarily to dam workers. The Nevada state legislature realized that gaming is a profitable business and in 1931 legalized it. The gambling industry in Vegas, at that point of time, was small but well established. The first license for gambling was given to the Northern Club. Soon, several other casinos, such as the Apache Hotel and the Las Vegas Club, got their license. Since most of these casinos were in the Fremont Street, it became the first street in Vegas to get paved. Vegas also saw its first traffic lights in 1931.

 

When casinos started mushrooming, nobody would have ever guessed that Vegas could develop into a gambling Mecca of the world as it was quite an inhospitable region. Las Vegas was hot and dry and a few slot machines drew some cowboys and visitors from the military bases to the region. It was definitely not a place that one would visit during vacations. At that time, Las Vegas was recognized only for the illegal activities carried out by Al Capone. Although it was Al Capone who started some of the gambling sites, the construction of the first casino is credited to Mafia Bugsy Siegel and Meyer Lansky.

 

It was only after World War II (1939 – 1945) that people started looking to Vegas as a possible gambling destination. December 26, 1946 witnessed the opening of the renowned Flamingo. This hotel casino had run into trouble during its early days. However, due to pressure from Mafia groups, it was finally opened in 1946. Las Vegas had not begun receiving tourism interest yet. Therefore, in order to cover the cost of the casino, Bugsy Siegel took funds from the pension amount of unions owned by the Mafia gangs. Flamingo failed to make profits during its initial days. Siegel was murdered and Lansky took over the reins.

 

Soon after this, casinos were jointly operated by Mormon elders and the Mafias. The Mormon financers facilitated political legitimacy, while the criminals offered unreported income. The crime hotels became well known gambling hubs. Despite the common knowledge that the casino resort owners belonged to dubious backgrounds, 1954 saw more than eight million people visiting Vegas. The casinos made revenue of $200 million that year! At this point of time, the attraction for gambling was doubled by the performance of stars, such as Abbott and Costello, Elvis Presley and Carol Channing, in intimate settings, as well as gourmet buffets.

 

Gaming in Las Vegas took off within a year. The Flamingo made many times more than its investment. The success of the Flamingo caused an explosion in the number of gambling hubs across Vegas. The dawn of the 1960s saw the rise of the Desert Inn, Fremont, Golden Nugget, Stardust, Hacienda, Riviera and the Stardust. These were some of the earliest casinos in the city. While some of these casinos have been demolished, others, such as the Fremont and the Golden Nugget operate to this day.

 

Mafia Rule Brought to an End by American Financer

 

The rule of the mafia gangs in Vegas started coming to an end when noted American financer Howard Hughes began buying out some of the major casinos. An eccentric man, Hughes refused to vacate the room in the Desert Inn, where he put up when he initially visited Vegas. Instead, he purchased the hotel! Hughes established an empire consisting of 17 casinos. He was also able to purchase a lot of real estate in Vegas, hotels, media outlets (connected to organized crimes) through his strong connections.

 

Once Hughes forced out the Mafias, he became one of the most popular and powerful men in Vegas. In fact, Hughes was credited to have changed the Wild West image of Vegas to a refined cosmopolitan city. He sold his interests after 10 years. The mafias tried moving in after Hughes retired from business; however, these attempts were stalled because, in the 1980s, the FBI cleaned up all the mafia-operated casinos and sold them to legitimate holdings. And, it is these newcomers who are largely responsible for transforming the desert town to the most sought-after holiday destination as it is looked upon today.

 

The reason why mafia gets into gambling is this: initially gambling is illegal and criminals run it – an example is betting on cricket in India today. Let us say tomorrow sports betting becomes legal in India, as only criminals have the expertise, they would continue to run it. However, in course of time as businessmen acquire the expertise, sports betting would pass from the mafia into the hands of legitimate companies.

 

India must learn from all of this: let not countries like Nepal, Sri Lanka, Singapore or Macau get an advantage – legitimize gaming in all states.

Outsourcing vs. Obama

Posted by: on Oct 5, 2011 | No Comments

Barack Obama, the first black President of the United States and Nobel Peace Prize Winner, cuts across an impressive figure – one that inspires many from our generation. His speeches reflect intelligence coupled with idealism. He could very well be the next socialist cultural icon.

Well, that’s not exactly what I want to talk about. What I find interesting about Barack Obama is his ability to remain in a highly pro-nation state, at a time when cosmopolitanism and globalization are the order of the day. No doubt, every person elected as the President of the United States needs to have a strong pro-nation stand, but Obama’s speeches seem to go back several generations, talking about how the United States is falling back and needs to get ahead of countries like China and India in today’s competitive race.

His speeches often focus on outsourcing, specifically the outsourcing of jobs to India as sign of the United States’ productive incompetence. His belief that America could have been a far richer country if they had control over outsourcing seems regressive and represents anti-globalization tendencies. In fact in a number of ways, Obama’s stand seems to make little sense – it almost argues that the American population wouldn’t be able to compete in the global market without any state protection.

What is still more fascinating about all this is, Obama’s world view is still respected among intellectuals and academics all across the world – despite the fact that it lacks logic. Just reminds us of how the actions and beliefs of human beings are guided more by emotions and ideals than by logic.

Obama and Outsourcing

Posted by: on Nov 16, 2010 | No Comments

Barrack Obama is one of the most inspiring figures of our generation. He combines a majestic dignity with a deep immersion in popular culture. His speeches reflect intelligence and idealism. He is the next socialist cultural icon.

What interests me about him is his ability to be very pro-nation state in an age given to globalization and cosmopolitanism. There is no doubt that every elected president of the United States requires a firm pro-nation stand. But Obama seems to cut back several generations in his speeches about how the USA is falling back in the competitive race and needs to catch up with countries like India and China.

Outsourcing is often the focus of many of his speeches, as he cites the opening up of the service sector and the outsourcing of work to India as a sign of America’s productive incompetence. His idea that America would perhaps be a richer nation with a control on outsourcing seems almost regressive and very anti-globalization and free market. In fact in a lot of ways this stand makes very little sense, it almost seems to argue that Americans without state-protection would not be able to compete with the world market.

The recent midterm results were undoubtedly a repudiation of Obama’s boundary-hugging policies, but it is still fascinating that his world view commands respect amongst academics and intellectuals all over the world, despite its inherent lack of logic. It is a reminder of that fact that human beings are moved more by ideals and emotion than by logic.

The Military Industrial Complex

Posted by: on Sep 29, 2010 | One Comment

The US deployment of troops in Afghanistan has raised much ironic press against Nobel Peace Prize winner, Barack Obama. It has also brought back speculation with regards to the US defense budget, specifically money allocated to private production of defense equipment and the supply of this equipment to other ‘enemy countries’.

Many journalists and documentary makers have begun quoting Dwight Eisenhower’s farewell speech where with much foreboding he spoke of the Military Industrial complex and its many cancer like outcomes.

Interestingly India for the last decade has been speculating on opening up the private sector, in the defense sector. The government founded a Group of Ministers committee that submitted a report titled: “Reforming National Security System”. Based on the recommendations of the report, the defense sector was opened up 100% up to private investment and was given a 26% FDI cap.

This reform was part of an ongoing dialogue, obsessed with increasing India’s strength and research capability in terms of armaments. The country’s armed forces have been subject to poor, imported, and expensive armament technology for some time. India’s research divisions under organizations like the DRDO have seen negligible progress. Bearing these factors in mind, it seems natural that the government might want to look into private investment in defense by awarding Raksha Udyog Ratnas to reliable firms. But, is the RUR enough? And, isn’t the armament industry in America sufficient admonition against private investment?

Desiring government control is all nice and idealistic but when the money starts pouring in, it would be naïve to expect the government not to try and profit from private defense technology production. Maybe they’ll fling a few wars around the world? People will die.

If you were to glance at the decrepit state of the country’s defense technology now, you might neglect the warnings. The question in itself is not a closed one. Perhaps private investment in defense needs a lot more thought.