Should Apple Buy Out Greece?

GOT YOUR ATTENTION, DIDN’T I? But seriously, if it weren’t for this sovereignty business wouldn’t you give it a second thought? Think about it. Apple has enough cash on its balance sheet to acquire a few distressed assets like Greece without even resorting to leverage. Business governance as demonstrated by an Apple could turn around an under performer like Greece in a reasonable time. I say this because I believe it isn’t a lost cause. Just one that is poorly run. It is one of the oldest and strongest brands in the world. And in no time Apple shareholders will get a fair return on their investment. Seems like a plan.

Not quite. This is turf and entitlement. You expect others to bail you out for your sins. Not unlike the “too large to fail” logic proffered for the massive subprime bailout. Everybody had their fun. Everybody knew exactly what they were up to; and lined their pockets till the money ran out. When it did run out and everyone stood exposed, it then became the turn of the hardworking taxpayer to cough up. Because if they didn’t these important institutions would crumble. It’s laughable that someone like Richard Fuld took home $400 million for destroying a 200-year-old legacy like Lehman (please watch the movie Margin Call).

There is this neat piece on the Greek problem doing the rounds on WhatsApp about Mary the bartender. In short, her drunk and unemployed customers were spending less and less and her business was looking poorly. So she has the idea of giving them ledgered credit which they willingly accepted, resulting in a huge upswing in consumption and therefore sales numbers. Her bank structured the debt, creating bonds and selling them on the securities market as Drinkbond and Alcobonds. It all comes apart when the risk manager at the bank decides to call in the debt from the unemployed drunks. To save the bank, the government steps in and bails it out. The bailout comes from taxes. Then the government asks the taxpayers what they think... you know what happens. 

Can Air India ever be privatized? Why not? Because it is the endowment of the entitled. Which politician or bureaucrat in this country would agree to give up the benefits of a free ride like that. But at minus Rs 40,000 crores they expect the taxpayer to continuously cough up for a deliberately ill governed carrier that was once the pride and joy of this country. May JRD’s soul rest in peace. 

Can Air India be given a bailout package with tough conditions attached? You have to be kidding. I have heard of one of our Cleopatras who used to go to her favorite hairdresser in London first class on AI. This is her right, of course. Why should any bailout package rule otherwise. Why would her husband agree to such a bailout?

If India is not a Greece, it’s only because of the millions of tax paying toilers like you who work their shirts off to keep the boys club covered. Think about this: nearly a third of India’s corporate debt stock is in the name of companies that do not have enough profits to cover interest payments. Public sector banks (who hold three fourths of these assets) have a dodgy loan ratio of 12 per cent. Think of what that means in money terms for a lender with a Rs 900,000 crore book size! Too big to fail. But who will underwrite these Titanics?

Whether it’s Greece or India or Air India the story is the same. Sovereignty brings entitlement. Which is always the opposite of governance. Which, in turn, is the opposite of government. 

Apple may not be allowed to buy Greece but a good OS could be the answer to its problems.

The author is president and CKO, EQUiTOR Value Advisory and can be reached at ramesh@equitor.com.

(This story was published in BW | Businessworld Issue Dated 10-08-2015)