The two types of share buybacks

In my post about introduction to share buy backs I touched upon the two types of share buybacks that can take place in the Indian share market, and a recent comment by Raja52 about the buyback offer of Allied Digital and their share price presents a a good practical example of one type of share buyback that you should be particularly mindful of.


As I said earlier, a company can buy back its shares in two ways:

  1. They can buy the shares from the stock market.
  2. They can buy the shares from the shareholders by asking them to tender their shares.

It is important to know what route the company is going to follow. If they are going to buy the shares from the stock market, then the share buy back price is of little meaning to you.

Raja brought up the example of Allied Digital Services Limited. Their buy back price is Rs. 140, and the current market price of the share is just around Rs. 33!

Is that a great opportunity or what?

Not because of the share buyback  – it isn’t.

Allied Digital is going to buy the shares from the stock market and not from the shareholders, and the price of Rs. 140 is not actually the buy back price, but it’s the maximum price at which they can buy back their shares. When companies get approval from their boards to buy back their shares from the stock market, they have to set a maximum price. This is the upper limit beyond which the company can’t buy their shares from the share market.

So, if Allied Digital has set up a maximum price of Rs. 140 – it only means that they can’t buy shares at a price over Rs. 140. They can buy the shares at any price below Rs. 140, and can certainly buy it at the Rs. 33 or so at which it’s currently trading.

As far as retail investors buying the shares at 33, and selling it to Allied Digital 140 is concerned – it’s not going to happen, and in a way – the low price already tells you that. Had it been the buyback where the company had promised to buy its shares back from the investors directly – the 140 number had more importance, and they would have probably not even chosen such a high number.

Lesson: Find out if the company is buying shares from the public or from the share market, and if they are buying from the share market then ignore the buy back price because it’s really the maximum buyback price.

If the company is buying back from the shareholders then you have to look at how many shares they have offered to buy, how much time is left for the buyback to take place, and what is the difference between the current market price, and the offer price.

What decision you take depends on these variables, and they can be so different in every case that you will have to evaluate each offer on its own merit.

In general, I’d say don’t buy shares in companies you wouldn’t otherwise mind owning. ABB is a good example that comes to mind – they are a solid company that came up with a buy back offer last year, and the good thing about that is even if your shares don’t get accepted in the buy back you still own a very strong company with good prospects.

Other than that, I don’t think you can make generalizations and will have to evaluate each offer on its merit.

How is tax on NCDs calculated?

Reader Kanti Kiran emailed me with a couple of corrections related to taxation of NCDs post that I wrote yesterday, and I’m going to talk about them in this post.

I said that the cumulative NCD option is not tax free, and that the money you get during the redemption will attract capital gains.

Kanti Kiran wrote to me saying this isn’t correct, and while the amount is taxable, it’s not taxable as capital gains, but as interest income that will be clubbed with your other income and taxed at your regular tax rate.

This is a meaningful difference because people at the highest tax rate will have to pay about 30% tax on this income instead of the lower capital gains tax rate.

There was another reader who weighed in on the subject, and he opined that if there is a coupon rate associated with the NCD, and if that NCD pays out a cumulative option then you have to declare the income every year, and pay tax on that much like the tax on recurring deposits.

However, if there is no coupon rate on the NCD and they pay a lump-sum amount then that will be treated as capital gains. It’s not quite clear to me how a coupon rate gets associated to a cumulative NCD.

I couldn’t find an authoritative source on any of this, so if any of you have practical experience or know for sure how this income should be treated then please leave a comment or email me.

There was also a comment on treating capital gains on these NCDs in the same way that you would treat the capital gains on shares if you buy or sell the NCDs on the stock exchange.

The rationale for treating them as equity funds is that you pay Securities Transaction Tax (STT) on these transactions. I checked with Shiv on the transactions that he has done on the exchange, and he hadn’t paid any STT on the NCD he sold, so it doesn’t look like you can treat capital gains on NCDs in the same way as equities.

The last point was about no TDS on only those NCDs that are listed and are compulsorily in Demat form. You will remember that this is what we talked about when infrastructure bonds were issued last year when many of them were first compulsorily Demat and then turned into physical form, and a bit of confusion ensued.

Since one of the main features of these NCDs is listing in an exchange, and they are seeing a lot of demand from people who have Demat accounts – I don’t see them changing this aspect of the NCD, but it’s a good point to keep in mind.

So, these are the various interpretations of the tax on NCDs that have been shared so far, and I will appreciate any feedback that you may have on this.

Thanks to Kanti Kiran, ankm83 and Shiv for weighing in and giving input for this post, and I apologize to everyone for not getting this right on the first go.

Introduction to NCDs – Part II

I wrote Introduction to NCDs – Part 1 some time ago, and in that post I covered basic aspects about them. Then I wrote about how you could buy NCDs or bonds, and in this post I am going to look at some other questions that have cropped up about them since that time.

In a subsequent post I will address some more questions about listing, and yields etc. but this post will address some points which are slightly less complex than those ones.


How are NCDs taxed?

NCDs can earn you income in two ways – you can buy the series which promise an interest payment periodically, or you can buy the series that doesn’t pay you any interest but pays you a higher lump – sum amount at maturity.

Both these types are taxable.

If you buy a NCD that pays interest then the interest will not attract TDS, however you will have to add the interest to your other income and pay tax on it according to your income tax slab.

If you buy a NCD that pays a higher amount on maturity then that will attract capital gains tax, and you will have to pay capital gains tax on the money when you eventually receive it.

Are all NCDs allotted first – come first serve and why does this make a difference?

The listing gains game has started on NCDs the way it started on IPOs a few years ago, and as a result retail investors have found that they aren’t able to get full allocation on the NCDs that they apply for.

Every company that has come out in the recent past has allotted bonds on the first come first serve basis, and I think that will continue to happen in the future as well.

What this means is that if you plan to buy a NCD then you must do it on the first day itself. That will ensure that you get as much allotment as possible, and your money isn’t stuck with them for long for no reason.

Where can I get real time over subscription numbers of NCDs?

Since over subscription is happening right now, and it makes a difference on when you apply – it would be nice to be able to see how much a NCD is oversubscribed at any point of time.

However, currently, this data is not shown anywhere publicly. Even though these bonds list on NSE and BSE, they don’t display the over subscription numbers on those websites.

I think the first come first serve basis allotment, and the over subscription data not being displayed anywhere situation will change with time, but so far that hasn’t happened.

How do I judge the relative attractiveness of two or more different NCDs?

There is a lot of subjective judgment involved when it comes to this question. You can straight away compare the rate of interest between two NCDs, but it is rather difficult to compare the quality of issuers especially when both of them are lesser known.

Considering whether the issue is secured or unsecured is one parameter that you can use. The additional debt that the current issue will add to the books is another issue that you can consider.

The business of the company is another thing of course. Who does it lend to, what collateral it takes, and how good is the mix on its loan book.

But perhaps the most important thing to consider is how much additional interest this NCD is giving over other prominent NCDs like the SBI one.

If that is just a percentage point or so then there is a good chance that may mean that this NCD trades at a discount when the interest rates rise in the future.

All these factors may sounds like a bit too complicated to figure out, but NCDs are reasonably popular these days, and most news articles do cover all this information in some detail. If you read a three or four articles about an issue you will gain a good bit of knowledge about these factors.

Also, the credit rating of an issue tells you what the issuer think about them, and they have a brief summary on their rationale that you can read as well.


To summarize this post – NCDs are taxable – no matter what option you choose, so far they are allotted first come first serve, and that makes a difference because the current issues are being over subscribed. If you decide to invest, then do so at an early stage.

This is counter to applying for share IPOs because they don’t use the first come first serve method and also show the over subscription online.

And finally, judging the relative attractiveness of two issues is subjective but factors such as credit ratings, issue size, loan book mix etc. can help you in judging that.


Bionic Hand, Vanishing Trees and Polished Chauffeurs

First up, here is a video about a very meaningful technology that’s amazing, as well as heart warming.

The bionic hand works using electronic signals from the ending of the hand, and you can see from the video that the technology works quite well.

Like any breakthrough, it’s expensive, but it’s only a matter of time when the cost goes down, and it becomes more accessible.

Watch the video, it’s quite incredible.

Next up, this news story about a Chinese military propaganda video accidentally showing some footage of launching cyber – warfare against US universities got quite popular this week. But I don’t think anyone was shocked hearing this because of what had happened with the Gmail hacks earlier this year.

On to something completely different now, a few weeks ago I linked to a story about a research firm called Muddy Waters coming out with a report about a Chinese company called Sino Forest basically accusing it of fraud.

Today, it’s shares were suspended in Canada, and the stock fell over 70% in the US. Muddy Waters did some research and shorted the stock, and must have made some really good money on it. Here is the Bloomberg story on it.

An interesting aspect about this is that billionaire hedge funder John Paulson used to be a big investor in this stock, and lost a lot of money in it. He sold all his stake after the report came out, but I would have thought that billionaires had better tools than the ordinary public to sniff out frauds.

On that topic – WSJ reports that John Paulson’s losses continue this week, and one of his funds have lost about 38% this year.

A finishing school for Indian drivers – isn’t that an interesting idea? Rich Indians need chauffeurs who don’t eat raw onions, can control their anger, and that sounds like a great business opportunity.

Finally, Hemant on a new product called Reliance SIP Insure.

Enjoy your weekend!

My thoughts on equities, fixed deposits and gold

This week has seen a lot of unusual activity along different asset classes and has continued to add to the environment of uncertainty that was prevailing earlier (and I’m only talking about economic environment here).

Wednesday saw the NCD of India Infoline list at a big discount of 8%, which hasn’t happened before, and gold fell quite a bit in the US markets that day as well. On Thursday, gold fell about 5% in a day in India, which is very unusual for it, and to the best of my knowledge has never happened in India.

The same day saw a fall of 1.7% in the German index DAX, and other stock markets globally aren’t exactly having a peachy time either.

In this context, Kartavi Dave wrote a very interesting comment and I thought I’d write a full post detailing a response to it.

First, the comment.

Manshu, we are awaiting your new post.
Please also keep in mind following points:
In India, What General (Middle Class) ppl should do ?
• Interest rates on Bank Deposits are around 10% .
• Gold Prices are rising like any thing. one article says that it will rise for 2 to 3 years and thereafter the GOLD BUBBLE may burst and may show bottom. So, long term investor should avoid GOLD.
• Some News Paper articles said that this year share market (and hence Mutual Funds) will not give better return than Prevailing Fixed Deposits ( around 10% )
A small investor cry out … Aare bhai…. Kare to Kya kare ? !!
1. Should one ( in India) Sell out all our M.Funds / Share holdings and invest in Bank Fixed deposits.
2. Should one go for a SIP for Gold ETF (purchasing fixed units every month) for 10 Years for a good purpose (say child marriage or mere investment).
3. Should one buy a house (for investment) ?
My humble request to address all above points in your next post.
With regards.


In terms of the big picture, I don’t feel that anything has happened that should change the fundamental approach of an investor towards savings and investments. In the past decade we have seen several very bad crashes due to the great recession, real estate bubble, 9/11 and dot com bubble, and all these events tanked the market, but at least the Indian markets have continued to grow in that period. I feel that even if we hit a global double dip recession – India will come out of it better than other countries.

In terms of the specific items listed in Kartavi’s comment – I think it’s a really bad idea to sell all stocks or mutual funds and move into fixed deposits only.

You should have a balance of both, and if you have SIPs with good mutual funds then you should continue those regardless of the market uncertainty. Volatility is in the nature of the markets, and I wouldn’t let these wild mood swings change my approach to investing.

No one knows what the bottom of the market is so you can’t wait for the fall to play out as that’s like catching falling knives. This is essentially the same thing I wrote in October 2008 (of course there weren’t many people reading then), and if you remember the uncertainty surrounding the economy at that time – it was way higher than today.

Stick to your SIPs and equity investments, and don’t let the market movement scare you out of them and sell at a deep loss.

But all your money shouldn’t be there either. You should have fixed income instruments, and I think it makes sense to look at NCDs in addition to fixed deposits also.

A lot of them have launched and some are even trading in the market for a discount. Today I saw that Religare Invest has also filed its papers with SEBI for the launch of a NCD so that’s another one that’s coming up. I think it makes sense to buy a few of these from the stock market when they are trading at a discount in addition to fixed deposits.

A point about both these things is that a lot of you will invest in 80C investments during the tax season – you can think about those now itself and see if you want to buy some ELSS mutual funds, or do tax saving fixed deposits etc.

On the point of gold, regular readers know my aversion to gold, and I have been writing about this since at least March 2009. Gold has risen by about 100% in the time, but if anything, my aversion has become stronger in the last few days looking at all the activity in it.

For a brief period this week the world’s biggest gold ETF – SPDR Gold Shares became the world’s biggest ETF as well, and it owns more than 1.1 million kilos of gold! In contrast the GoldBeES – India’s prominent gold ETF must own about 8,500 kilos of gold. This should show you where the trading market of gold really is, and also drive home the fact that gold prices will move in tandem globally.

I’m going to sit at the sidelines as far as gold is concerned, but if you do want to buy it then buy it systematically, and don’t let it become more than 5 or 10% of your portfolio. I see a lot of folks saying very proudly how gold is the biggest component of their portfolio so even though the market has crashed they have made money, but the question is what if they are wrong about the future of gold?

What if they are wrong like the people who owned real estate stocks were wrong, and the people who owned IT stocks before them were wrong?

If you truly own so much gold, and find that prices go back to where they were two years ago – that will destroy your portfolio.

Do you really want to take that chance?

The last point in Kartavi’s comment is about a house, and that’s the thing that is more emotional than financial for a lot of people, and is a very personal decision. I would personally never take a loan that puts me so deep under debt that it takes me 20 years to repay that and it leaves nothing else to do, and I wouldn’t advise anyone else to do that either. Unfortunately, at today’s prices a lot of deals do exactly that. I understand that a house means more than money to a lot of people so it’s for you to decide, but I myself wouldn’t stretch to buy property at today’s prices.

This is how I view the current situation, the way I would behave myself regarding my finances. By now, it should be clear to most regular readers that this is driven by a very long term outlook on the markets, and hasn’t changed at all since I first started writing. This is what I would do, and I’ll be happy to hear what you make of the current situation and if that has changed your outlook in any way.

Per Capita Consumption of Electricity: Indian States

I was looking at the per capita consumption of electricity by Indian states and I noticed two interesting things in there. Well three actually, but the third one is something that you would come to expect anyway.

The third thing that you would come to expect is how low this number is – for the last year the per capita electricity consumption for India was 778.71 kWh, which is quite low when compared with industrialized countries, or even other emerging economies.

For example, this number is a whopping 17,053 kWh for Canada in 2008, and 2,471 in China. The per capita electricity consumption for the world is 2,782.

Here is a chart that shows the per capita electricity consumption for a few countries of the world.

World Per Capita Electricity Consumption
World Per Capita Electricity Consumption

The government data breaks out the per capita electricity consumption by states, and also regions, and that shows a huge disparity between the various regions.

Intuitively, you know and think about this disparity but still when you see the number right in front of you that is lending something concrete evidence to what’s otherwise just a gut feel.

Here is the per capita electricity consumption for the various regions.

Per Capita Electricity Consumption India Regions
Per Capita Electricity Consumption India Regions

The thing that stands out from the above chart is how low the number for the North East region is. If you remember my earlier post about the per capita income of different states then we saw there that a lot of the North Eastern states didn’t do as well as the national average, but they weren’t so far below the average either. In this case the average is just about a third of the national average.

Is it because the data is bad, or is due to some other geographical reason?

Now, let’s take a look at the state wise break up shown in the following charts.

North and South

North and South States Per Capita Electricity
North and South States Per Capita Electricity

East and West

North East

Per Capita Electricity Consumption North East
Per Capita Electricity Consumption North East

This data more or less falls in line with the other state level data we have seen in the past viz. the unemployment in India broken down by states, or the per capita income by states, and hammers in the stark disparity between the regions, and the inter linkages between the various parameters.

The more I look at these type of numbers the more I get convinced that in order to grow steadily and consistently it’s important to focus on a few important things at the same time, and also what a long way to go there still is to meet global averages.

Take whatever per capita number you want – the results are always so abysmal – maybe that’s where the focus should be instead of talking about big aggregate numbers all the time.

SBI Gold Fund Review

SBI Gold Fund is a fund of funds that will have gold as its underlying asset, and will primarily invest in its own gold ETF – SBI GETS.

It was just a matter of time that SBI came out with a fund of fund that invests in gold since gold has been on fire lately to such an extent that the world’s biggest gold ETF – SPDR Gold Shares owns more than 1,200 tons of gold! That’s not a typo – they really do own 1,284 tons of gold! 

In my last post about gold ETF performance in India – I discussed how 4 new gold ETFs have been launched in the last year, and it’s only natural for players to jump in this market since that’s where the demand is.

Getting back to the SBI Gold Fund – this is a fund of funds targeting gold. In this case it means it will own another fund which then owns the physical gold. The other fund in this case is the ETF – SBI GETS.

Now, this is really important because I see a lot of people who say gold ETFs don’t really own gold and they are fraud, or they say that they don’t understand the way gold ETFs work and it’s not safe and then they go ahead and buy a gold mutual fund which in turn will buy gold ETFs!

Ways of owning gold
Ways of owning gold

If you don’t like gold ETFs – you have no business buying a gold mutual fund that then owns a gold ETF! It makes absolutely no sense at all.

Please understand that there is no gold mutual fund in India that owns physical gold directly. There is only one type of gold mutual fund in India, and those are gold fund of funds. This means that they invest in other funds.

Those other funds are of two types – gold ETFs or mutual funds that own shares in international gold mining companies.

SBI Gold Fund is the type of fund that will  own units of the SBI Gold ETF called SBI GETS.

So, you must understand that when you are buying SBI Gold Fund – you are really owning units of SBI GETS.

Now, let’s talk about some other aspects related to the SBI gold fund.

Expenses of the SBI Gold Fund

Every mutual fund or ETF incurs some expenses in running its fund, and these expenses are recovered from the unit holders by reducing the NAV to the extent of the expenses. These expenses are charged as a percentage of the assets and in case of the SBI Gold Fund – their document says that the expenses will not exceed 1.5% of assets including the charges of the SBI GETS ETF.  Practically, I don’t know how much they are going to charge, but due to the competitive nature of the gold ETF market – fees have remained low and about the same for every fund.

Tracking Error

Another thing about fund of funds is that they are not able to put 100% of the money in the underlying asset because they need some cash or liquid investments to take care of any unit redemption that happens. These are usually in low yielding instruments, and I would expect the returns on the SBI Gold Fund to be slightly lesser than the returns on SBI GETS due to this reason.

Exit Load

Since this is a mutual fund, they have the luxury of charging you a 1% exit load if you exit out before a year. If you just bought SBI GETS directly, you wouldn’t have to bear this load if you exited within a year.

Stock Commissions

There will be no brokerage or commissions since this is a gold mutual fund, however if you do buy  SBI GETS directly – you will have to pay commissions since that is traded like a share. If you are buying in smaller quantities then that can make a lot of difference in your cost, and that’s one thing to keep in mind.

Demat and SIP

You don’t need a Demat account to own the SBI Gold Fund whereas you do need a Demat account to buy shares or units of SBI GETS or any other gold ETF.

Since this is a mutual fund – you can do a SIP as well.

NFO Dates

The SBI Gold Fund NFO is going to start on the 19th August 2011, and closes on September 5th 2011.

This should really not make any difference as you don’t gain anything by buying a mutual fund during its NFO period. The 10 rupee NAV is the most ridiculous myth when it comes to mutual funds, and if you don’t know why I am saying that read my earlier post about why mutual fund NAV doesn’t impact performance. 


Because of what I said earlier about expenses and tracking error – I would expect the performance of the SBI Gold Fund to lag the performance of SBI GETS as long as gold prices are rising.

Personally, I don’t see much merit in buying a fund of funds when you can buy the underlying fund directly.

People who want to buy small amounts like say less than a thousand rupees and don’t have a Demat account may be an exception to what I’m saying, but other than that I would think that investors are better off buying a gold ETF instead.

Now, this doesn’t mean that I’m recommending gold, and to be frank my aversion to it has only increased seeing the rise in the last few days, but what I mean is if you were considering buying a gold fund of fund – give a serious thought to buying a gold ETF instead.

Image Credit: Gold bar image

How to look for good stocks?

A question that crops up from time to time is how can a retail investor find good stocks. In my opinion – most retail investors are better off buying mutual funds than individual shares because the chances of your beating a professional fund manager are low. That said, there are a large number of people who do buy shares directly (including me) and they need some sort of a filter to alert them to good stocks. With over 1,300 shares listed on the NSE – you should have some guidelines that help you narrow down the good ones.

In this post, I’m going to talk about some aspects that make me interested in a company. These are things that tell me hey – this thing can be good. That’s important – these indicators will make me interested to go and read the annual report of the company, and find out more about them. So, in that sense these measures will help in narrowing down the universe from a few thousand to a more manageable number.

Here are five such indicators that I use.

1. Great products: This is really obvious but somehow doesn’t get talked about that often. When you are buying a share in a company – you are betting on the future prospects of the company. The future prospects of the company depends on how good their products are and how much they can charge the customer for that.

When I see a good product I’m interested to know who makes it and if they are listed or not. When I see my sister in law admonish me for getting the wrong brand of glue, or my dad waiting for a week to get his car battery replaced because his brand is not available – I’m interested in finding out who makes these products, are they listed, are they making money? Are they profitable etc.

2. Lots of cash and little debt: This is another obvious sign of a company doing extremely well, and more often than not also means that the company will be able to ride out tough times when they eventually do hit it. I say that because most businesses are cyclical and it is inevitable that they hit a rough patch at one time or another. Companies with a cash cushion are much better placed than others in these times.

Also, when the stock market crashes, and everything comes down, there is a good chance of some of these stocks becoming really cheap.

If I hear about such companies then I’m always interested to carry out more research into them.

3. CEOs and founders buying shares:  CEOs and founders buying shares of their own company is definitely a positive, and something that makes me take notice. If they are willing to put their own money in the company’s stock by buying it from the stock exchange then that must mean that they think that the shares are undervalued, and this piques my interest and makes me look deeper.

4. Doing something unusual: When a company does something unusual that always catches my eye – this could be a company refusing to give guidance to equity analysts despite all the pressure, or a bicycle company holding a cross country bike rally, a company going out of its way to help an employee, or even a company with a really funky name.

It takes a lot of courage, passion, and creativity to break the mold and do something new – these are all signs of a good company, and if I find a company doing something that goes against the grain of conventional wisdom – that really interests me as well.

5. Long history of dividends: If a company pays out dividends steadily then that’s a good sign as well. It shows that the company has a good capacity of generating earnings, and also has a benevolent outlook towards shareholders. This is also a very popular way of finding stocks, and you will find entire websites devoted to picking stocks this way.

As you can probably see, these indicators reflect my belief in long term investments, and holding shares for very long periods. These are ways to find good companies that make great products because that’s the type of investing that works for me. It gives you great comfort in the time of panics  because you know that people still continue to buy the products of your companies, and usually such companies have been around for decades, and some even a century or longer and that helps you from panicking too. And of course, when the tide turns and times are good – these companies are rewarded by the market for their good financial performance.

Book Review: In the Plex by Steven Levy

I have recently finished reading In The Plex, a book written by Steven Levy which traces the history of Google right from its early days to today.

It was an incredible read, especially the first half or so that talks about the early days of Google when it was still a small and relatively unknown company, and talks a lot about the founders in those days, and how they took decisions and what things they valued and steps they took to grow the company.

Steven Levy describes the brilliance of Larry Page and Sergey Brin at several points, and they sound like mad geniuses who have a vision, intelligence and understanding about the internet and things around them that isn’t matched by anyone around them.

These are both big picture things like Larry Page thinking about the Google Books project while he was in Stanford itself, and also minute details like him being able to discern delays of 600 milliseconds!

Here is a small excerpt that illustrated this:

Buchheit remembers one time when he was doing an early Gmail demo in Larry’s office. Page made a face and told him it was way too slow. Buchheit objected, but Page reiterated his complaint, charging that the reload took at least 600 milliseconds. (That’s six-tenths of a second.) Buchheit thought, You can’t know that, but when he got back to his own office he checked the server logs. Six hundred milliseconds. “He nailed it,” says Buchheit. “So I started testing myself, and without too much effort, I could estimate times to a hundred milliseconds precision—I could tell if it was 300 milliseconds or 700….

What would have been super fast for most people was called slow for Larry Page. It’s quite amazing to think how high his standards are when it comes to user experience.

But, the book is not a story about how brilliant the founders are. It makes you feel that though the founders had a great role to play in the development of Google, there were many other brilliant people working with them who allowed the company to do the wonderful things it did.

These are not just stories about Eric Schmidt or VCs, but also about lesser known engineers who developed great products while in Google, but hadn’t got much press or publicity and are largely unknown outside Google.

These stories give a good glimpse on the attitude and culture at the company (at least in its initial days) and I’m excerpting one such story that I really liked about the engineer who developed the Google Toolbar.

Chan realized that users were ignoring the Toolbar because it provided no value to them. His idea was to implement a feature that would allow people to block annoying pop-up windows, which at the time were a plague on the net. But when he presented the idea at a meeting, Brin and Page, who had tied water bottles to the venetian blind cords and were playing a game of water-bottle tetherball, nixed the idea. “That’s the dumbest thing I’ve ever heard!” said Page. “Where did we find you?” Chan built the pop-up blocker anyway, and surreptitiously installed it on Page’s computer. (“He’d leave the computer on in his office,” says Chan.) Not long afterward, Page remarked that his browser was running faster. Chan told him that he’d installed the pop-up blocker. “Didn’t I tell you not to do that?” asked Page. “Oh, it was a 20 percent project,” said Chan. Page dropped his suspicions and okayed the feature, which helped spur millions of Toolbar downloads.

This was a great example of some really clever thinking by a Google engineer, and a good example of the brilliance that flows through Google.

Steven Levy has by and large nice things to say about Google but the book is not a mindless glorification of the company. He talks about several things that Google did which were inconsistent with their philosophy, and instances that show Google bent its views to suit its commercial position.

The best example of this is Google’s stand on Microsoft’s proposed takeover of Yahoo!

Here is the relevant excerpt.

Microsoft’s $48 billion offer included an aggressive 62 percent premium over the struggling target’s share price, and so observers assumed that the merger was sealed. But Yahoo’s chairman, Jerry Yang, resisted, and his efforts to thwart the takeover were aided by Google. Within days of the offer, Eric Schmidt called Yang and began talking about a partnership that would help the weaker company. Google also began contacting legislators and regulators about the antitrust implications of the Microsoft deal, a rather odd stance considering Google’s previous insistence that the search marketplace had no lock-in and thus wasn’t a valid candidate for antitrust action.

This is a great book, and I really loved reading it. My only criticism is that the pace slows down quite a bit from the first half to the second. The part about the young Google is a lot more exciting to read than the latter half of the book, and I found I couldn’t quite breeze through the last half of the book the way I did the first half.

That said, everything else about In The Plex is great, and I have no hesitation in recommending it.

Disclosure: Amazon links are affiliate

Print Solar Cells, Stanford Prison Experiments and Accidental Insurance

First off, let’s start with the most amazing thing I learned this week – MIT researchers have found a way to print solar cells on paper!

Now, isn’t that something – apparently it could already be done, but the new method is much better than the old one. They need special room, and equipment of course, but can then print the solar cells on any paper – even a newspaper!

Now, before you get too excited and start hunting for companies that make solar cells, let me temper you down with an article about a solar cell company – Evergreen Solar Cells declaring bankruptcy.

I wish every cool idea made money, but it doesn’t.

Something a little gloomy – The Stanford Prison Experiment – when I read about this the first time – I wasn’t sure if it really happened, or what sense to make of it. It’s a pretty impressive study, and the results truly surprised me.

Now, something more practical – Hemant has a great article on accidental insurance.

Chartered Club on how to save taxes by forming a HUF.

Value Research answers a reader’s question about reducing debt or investing money.

Economist asks if a country like India which is thinking of setting up its own international aid agency, should receive foreign aid.

Finally, here is an hour long interview of Warren Buffet where he talks about taxes, economy, housing, America’s AAA rating downgrade and others.

Enjoy your weekend!