Is there a Cashback, NY too?

September 17, 2008

My learning for the day: Mastercard is headquartered in a New York town called Purchase. I suppose being headquartered in a town named after the service you offer counts as priceless.

A little Googling adds further information: the town was originally called Harrison’s Purchase, because it was established on land bought by a dude called John Harrison. His motivation in doing this is not clear. It is also in Westchester County whose most famous residents are Professor Xavier and the X-Men.

There doesn’t seem to be any information on whether MasterCard chose their headquarters on the basis of the name. Pity.

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The Anandpur Sahib Resolutions

September 12, 2008
SVG version.Image via Wikipedia

Now that the snark is out of the way, let’s look at one of the most interesting documents in the history of Punjabi nationalism or secession: the Anandpur Sahib Resolutions.

The Anandpur Sahib resolutions were the Akali Dal‘s response to being wiped out electorally in 1971 and 1972. They decided to recoup by:

  1. Getting the borders of Punjab redrawn to bring in more Punjabi speakers and Sikhs
  2. Ramp up federalism in general so that the national parties would have less influence in Punjab, which would mean the Akali Dal would have a free run

The end result of this came in 1978, with a document called the Anandpur Sahib Resolution (ASR, for the rest of the post). It’s a fascinating mix of naked gerrymandering, federalism, religious fundamentalism, sound economic policy and terrible economic policy. You can read the whole thing by clicking through, but let’s look at the more interesting highlights.

First, the gerrymandering. There was this:

(a) Chandigarh originally raised as a Capital for Punjab should be handed over to Punjab.
(b) The long-standing demand of the Shiromani Akali Dal for the merger in Punjab of the Punjabi-speaking areas, to be identified by linguistic experts with village as a unit, should be conceded.

in the resolution itself. But the political resolutions preceding the ASR have this stunning stuff:

The fundamental policy of the Shiromani Akali Dal is to seek the realization of this birthright of the Khalsa through the creating of a geographical entity and a constitutional set-up of its own.

For the attainment of this aim:

1. The Shiromani Akali Dal is determined to strive by all possible means to:
(a) Have all those speaking areas, deliberately kept out of Punjab, such as Dalhousie in Gurdaspur district, Chandigarh, Pinjore, Kalka and Ambala Sada, etc. in Ambala district, the entire Ina tahsil of Hoshiarpur district, Shahabad and Guhia blocks of Karnal district, Tohana sub-tahsil, Ratia block and Sirsa tahsil of Hissar district and six tahsils of Ganganagar district in Rajasthan, merged with Punjab to constitute a single administrative unit wherein the interests of Sikhs and Sikhism are specifically protected.

But the political resolution also has a very strong and unambiguous call for federalism, which is practically revolutionary considering the Indian Constitution:

(b) In this new Punjab (as in all other stated) the Center’s interference would be restricted to Defense, Foreign Relations, Currency and Communications, all other departments being in the jurisdiction of Punjab (and other states) which would be fully entitled to frame their own Constitution. For the aforesaid departments of the Center, Punjab (and other states) would contribute in proportion to their respective representation in Parliament.

2. The Shiromani Akali Dal would also endeavor to have the Indian Constitution recast on real Federal principles with equal representation at the Centre for all the States.
3. The Shiromani Akali Dal strongly denounces the Foreign policy of India as framed by the Congress Party. It is worthless and highly detrimental to the interest of the country, its people and mankind at large. Shiromani Akali Dal shall extend its support only to such policies as are based upon the principles of peace and national interest. It strongly advocates a policy of peace with all neighboring countries, particularly those which have within their borders Sikh population and Sikh shrines. The Akali Dal is of the firm view that the foreign policy of India should in no case be one of playing second fiddle to any other country.

and look, gun rights!

6. The Shiromani Akali Dal is of the firm opinion that all those persons, including women, who have not been convicted of any criminal offence by a court of law should have the right to possess any type of small arm like revolvers, guns, pistols, rifles, carbines, etc., without any license, the only obligation being their registration.

Now the trouble with advocating federalism which is revolutionary in the Indian context is that if you have a ruthless dictator at the helm of things, she thinks you’re advocating secession. And the clampdown after that was so strong that secession actually became the nature of things. But I digress. The federal bits of the ASR itself are:

The Shiromani Akali Dal realizes that India is a federal and republican geographical entity of different languages, religions and cultures. To safeguard the fundamental rights of the religious and linguistic minorities, to fulfill the demands of the democratic traditions and to pave the way for economic progress, it has become imperative that the Indian constitutional infrastructure should be given a real federal shape by redefining the Central and State relation and rights on the lines of the aforesaid principles and objectives.
The concept of total revolution given by Lok Naik Jaya Parkash Narain is also based upon the progressive decentralization of powers. The climax of the process of centralization of powers of the states through repeated amendments of the Constitution during the Congress regime came before the countrymen in the form of the Emergency (1975), when all fundamental rights of all citizens was usurped. It was then that the programme of decentralization of powers ever advocated by Shiromani Akali Dal was openly accepted and adopted by other political parties including Janata Party, C.P.I. (M), D.M.K., etc.

As such, the Shiromani Akali Dal emphatically urges upon the Janata Government to take cognizance of the different linguistic and cultural sections, religious minorities as also the voice of millions of people and recast the constitutional structure of the country on real and meaningful federal principles to obviate the possibility of any danger to the unity and integrity of the country and, further, to enable the states to play a useful role for the progress and prosperity of the Indian people in their respective areas by a meaningful exercise of their powers.

Now all this sounds brilliant and federalistic. But that’s just resolution 1. The Akali Dal then issued 11 more resolutions which demanded that the Central government do a bunch of stuff, which sort of makes the whole demanding that it stay out of everything except Defense, Foreign Relations, Currency and Communications sort of worthless. But such is life. Some of the interesting demands were:

The Shiromani Akali Dal calls upon the Central government to make an international airport at Amritsar which should also enjoy the facilities of a dry port. Similarly, a Stock Exchange should be opened at Ludhiana to accelerate the process of industrialization and economic growth in the State. The Shiromani Akali Dal also desires that suitable amendments should be made in the Foreign Exchange rules for free exchange of foreign currencies and thereby removing the difficulties being faced by the Indian emigrants.

Capital and Current Account Liberalisation, in the early 1970s. Heh.

The Shiromani Akali Dal also calls for the rapid diversification of farming. The shortcomings in the Land Reforms Laws should be removed, rapid industrialization of the State ensured, credit facilities for the medium industries expanded and unemployment allowance given to those who are unemployed. For remunerative farming, perceptible reduction should be made in the prices of farm machinery like tractors, tubewells, as also of the inputs.

This was long before farmers were dying in Vidarbha.

This session seeks permission from the Government of India to install a broadcasting station at the Golden Temple, Amritsar, for the relay of Gurbani Kirtan for the spiritual satisfaction of those Sikh who are living in foreign lands.
The session wishes to make it clear that the entire cost of the proposed broadcasting project would be borne by the Khalsa Panth and its over all control shall vest with the Indian Government. It is hoped that the Government would have no hesitation in conceding this demand after due consideration.

I find this one particularly fascinating. It’s a mix of public goods financing, overwhelming licensing, and the inadequacies of technologies then – now, of course, this could be accomplished by just having a satellite uplink from the Golden Temple. Or even a webcast. The fact that technology, government control of broadcasting, and the particular politics of the period made this impossible is particularly poignant.

This mammoth gathering of the Shiromani Akali Dal strongly urges upon the Government of India to make necessary amendments in the following enactment for the benefit of the agricultural classes who have toiled hard for the sake of larger national interests:
1. Hindu Succession Act be suitably amended to enable a woman to get rights of inheritance in the properties of her father-in-law instead of the father’s.
2. The agricultural lands of the farmers should be completely exempted from the Wealth Tax and the Estate Tax.

Honestly, not sure how this would impact on the ground – I’m unaware of the debates surrounding inheritance law. But again – fascinating.

They had demands that make me cringe too:

The 18th session of the All India Akali Conference take strong exception to the discrimination to which the minorities in other states are being subjected and the way in which their interests are being ignored.
As such, it demands that injustice against the Sikhs in other states should be vacated and proper representation should be given them in government service, local bodies and state legislatures, through nominations, if need be.

The Congress government is called upon to vacate the gross injustice, discrimination done to Punjab in the distribution of Ravi-Beas waters. The Central government must also give approval for the immediate establishment of six sugar and four textile mills in Punjab so that the State may be able to implement its agro-industrial policy.

The Shiromani Akali Dal emphatically urges upon the Indian government to bring about parity between the prices of the agricultural produce and that of the industrial raw materials so that the discrimination against such states that lack these materials may be removed.

The Shiromani Akali Dal strongly feels that the most pressing national problem is the need to ameliorate the lot of millions of exploited persons belonging to the scheduled classes. For such a purpose the Shiromani Akali Dal calls upon the Central and State governments to earmark special funds. Besides, the state governments should allot sufficient funds in their respective budgets for giving free residential plots both in the urban and rural areas to the Scheduled Castes.

So the ASR as a whole is utterly fascinating. It starts out as a call for federalism – something I sympathise with hugely – but then reverses direction and starts demanding that the Central government do something. The two aren’t necessarily incompatible if you’re transitioning to federalism and still want to get Central support until you achieve ‘true federalism’ – but the ASR is a reminder of one of the biggest obstacles to federalism.

This is that states aren’t just competing with the Central/ Federal government for resources and power. They’re also competing against each other – for investment, for taxpayers, and for resources which the other states might have a hold on.  Which means that states are always going to have an interest in maintaining a federal government which they can milk. It’s comparable to the Prisoner’s Dilemma problem – everyone would be better off with no federal government interference whatsoever, but each state would be even better off if it manipulated the federal government into favouring it over the other states. This will play out in Tamil Nadu  – Karnataka disputes over the Cauvery, Punjab – Haryana disputes over Chandigarh, and Maharashtra – Karnataka disputes over Belgaum.

So states coming together and demanding power from the Centre will always be hijacked by one state which would rather have a powerful Centre to fall back on. And of course the Centre could cut quid-pro-quos; so that even something where there was no inter-state conflict like law-and-order could be bargained against infrastructure or tax sharing. Or plain old horse trading. So even if Narendra Modi is serious about making himself the saviour of the states and getting more power from the centre (can’t find the link anywhere, sorry), it’s not going to happen until a whole bunch of things get sorted out between the states first.

The gradual decline of the national parties will mean things will become even more complicated. Either things will be as they are now, even more so, with each regional party determined to prop up the centre in order to extract concessions from it, or a bunch of regional parties will get together and decide to emasculate the centre altogether and start transferring power to the states. I’m not sure how many regional politicians there are today in India who would actually think long-term enough to go after federalism – but it might just arise.


Dear Tata Motors,

September 5, 2008

What were you thinking in the first place by going to Bongland?


More on Finance and Inclusive Growth

June 17, 2008

Suddenly, the idea that financial sophistication leads to inclusive growth seems to have caught on (well, except with the Ministry of Finance, which is actually in a position to do something about it). First there was my Pragati piece. Yesterday, Nivirkar Singh’s column in Mint also touched on this:

Petia Topalova of the International Monetary Fund has recently examined the links between policy and inclusiveness of growth. In particular, she uses variation across states as well as three time periods, spanning 1983 to 2005, to examine these links. Inclusiveness is defined as the difference between the consumption growth rate of the poorest and richest 30% Indians.

First, higher financial development, measured either by real credit per capita or by a larger initial share of agricultural labourers with loans from formal financial institutions, is significantly associated with more inclusive growth.

(Mint)

OK, this is interesting. One of the points the Raghuram Rajan report raises is that access to credit is actually only one leg of financial inclusion, and is the most overused one. The other two legs – access to savings instruments and access to risk management instruments like insurance – have traditionally been missing. So there are two ways to read this:

  1. The correlation between credit and inclusive growth doesn’t mean anything. It’s just a coincidence that this turned up, and might be caused by something else – more urbanisation, say, or might even run in the opposite direction – financial inclusion leads to more demand for credit (though I personally think it’s a positive feedback loop – they cause each other)
  2. The research is right. Credit might be only one leg, but it still has an impact. And we haven’t even seen what would happen once savings and insurance also get taken up. In that case, the gap could close in a stunning way.

Moving on. After Nivirkar Singh’s column, there’s also the cover story in today’s Business Standard the Strategist. It’s about FabIndia, and how they’re encouraging artisan communities to set up private limited companies where the shareholding is split between the artisans themselves, their employees, FabIndia, and outside private investors.

The concept, now a Harvard Business School case study, is simple. A fully-owned subsidiary of FabIndia, Artisans Micro Finance, a venture fund, facilitates the setting up of these companies, which are owned 49 per cent by the fund, 26 per cent by the artisans, 15 per cent by private investors and 10 per cent by the employees of the community-owned company.

The artisans gain in many ways. The value of their shares goes up. They earn dividends when the company is in a position to declare them.

The shares offer the artisans a divisible asset class (land can be divided but its divisions are often disputed and jewellery is largely indivisible) and community-owned companies help convert FabIndia’s artisan base into an asset.

“If he wants to get his daughter married and needs money, he can sell his shares and realise the appreciation. He can also take a loan by offering his shares as collateral,” says Bissell.

(the Strategist)

The article is worth reading even if you aren’t interested in finance, and you’re more interested in social entrepreneurship or marketing or traditional handicrafts. Axshully it is worth reading even if you are a metrosexual and only buy organic muesli as you will get to know about new and exciting opportunities to buy it as FabIndia expands.

By the way, William Bissel mentions in the article that the co-operative system imposes too many restrictions on the artisan and the private limited company makes more sense. This is a massive understatement. The legal and accounting procedures for co-operatives in India are so totally broken that co-ops inevitably end up in the hands of regional politicians. That, however, is the subject of another post, and by someone else.


An Early Misuse of Geographical Indicators

March 5, 2008

From The Big Oyster – A Molluscular History of New York:

The leading merchants realized that such practices were damaging the reputation of their most valuable product. One of the leading New York City houses grew concerned that Chesapeake oysters were being sold to England as Bluepoints. An agent for the house intercepted a shipment of Bluepoints, opened the barrels as they were being loaded, and found that they were mostly “Virginias.” It was a new age of communications and the agents was able to telegraph Liverpool so that British authorities were waiting for the shipment when it landed. The oysters were confiscated, though it is not clear what happens to a healthy confiscated oyster. The American shipper was charged with mislabeling, which carried considerable fines. The New Yorkers were not accustomed to such stringent consumer protection and the American agent argued that the oysters had spent a little time in Great South Bay and they had thought that this was all that was required to label them Bluepoints. That the Americans don’t know any better is always an argument of some currency in England, and the charges were dropped.


Innovation in the Third World

January 21, 2008

This Boston Globe oped (free registration might be required) is astonishing. The author, somebody named Jeremy Kahn, has violated the Sominism-cheat-sheet and Neelakantan’s guide to writing about India left, right, and centre. He appears to have actually understood the nuances of what he’s writing about! And he doesn’t mention caste, growing inequality, pollution, or elephants on the road even once!

OK, that’s the sarcasm out of the way. Seriously, the oped is a very good read. It’s about how Third World conditions are forcing cellphone companies, banks, and Tata Motors to innovate and come up with low-cost technology, and how this means that design and innovation is now splitting up and being driven by two different things: luxury in the First World, and productivity and low costs in the Third World. In the bargain, First World and Third World innovation are both leading to high technology, and the Third World is now actually in a position to export technology to the First World.

 Excerpts:

This might seem like a classic example of the Third World struggling to catch up with the First. After all, people in the United States and Europe have been using ATM cards and the Internet for years to perform the simple banking tasks Das is only now able to do. But look again: The technology used to bring slum-dwellers like Das their first bank accounts is so advanced that it isn’t available to even the most tech-savvy Americans – at least not yet.

This represents a stunning reversal of the traditional flow of innovation. Until recently, consumers in the Third World also had to tolerate third-rate technology. Africa, India, and Latin America were dumping grounds for antiquated products and services. In a market in which some people still rode camels, a 50-year-old car engine was good enough. Innovation remained the exclusive domain of the developed world. Everyone else got hand-me-downs.

And as they do, companies are confronting the unique challenge of making high-tech products cheaply enough to make a profit. In some cases, this means shifting jobs for talented designers and engineers to the developing world – not just to save labor costs, but in order to better understand the markets they are now trying to reach.

“Developing markets offer the best opportunity for global firms to discover what is likely to be ‘next practice,’ as contrasted with today’s best practice,” Prahalad has written. “The low end is a new source of innovation.”

In a globalized world, people in emerging markets want first-class products – but at prices they can afford. Meeting that demand, particularly in countries where basic infrastructure is weak, requires more creativity than designing a product for a more advanced, affluent market.

Read, read. It’s worth the two-minutes it takes to register.


Regulation, Zamindari, and the Jagadguru

November 6, 2007

The Jagadguru says:

What I am against is the deregulation of the banking sector. Cutting off or weakening the regulatory arm is not good for the country. Letz have private players, with a strong regulatory body, under the control of a democratically elected government. I think this will ensure the best of both worlds. We will have private players in the industry bringing in the much needed competition (and hence better service) and we will also have strong regulations ensuring that needy people are not sucked out of their blood.

The only way to stop such misuse is by having strong regulations on the market. Only strong regulations can stop ICICI kinda atrocity or zamindari system.

The RBI had come up with a regulation against employing goons or intimidation for collections two years ago. But ICICI kinda atrocity wasn’t stopped. Why is this?

Dumbhead free market fundamentalists will tell you it’s because regulation makes honest people overcautious while not changing the behaviour of rogues. But they are wrong. The true reason the strong regulation failed was because K V Kamath has not let the Jagadguru into his heart. When he surrenders himself to the Jagadguru, ICICI Bank will be transformed, and so will its outsourced collections agencies.

Even strong regulations are useless if we do not surrender ourselves to the Jagadguru.


Mint on FM

October 29, 2007

Today’s Mint is carrying a report on the future of FM radio as a business, and how differentiation is finally happening under the pressure of competition. Do read it, and also my old post on where the opportunities for differentiation lie.


mChek Goes Live?

September 19, 2007

The much-hyped, long-in-development mChek seems to have gotten a little closer to mainstream commercialisation.

Okay, it’s much hyped only if you follow the telecom sector and read BusinessWorld every week, but within that set of people, it’s hyped enough. mChek is basically this company/ product which allows you to use your mobile phone as either a credit card or a card swipe machine.

So if you’re the guy paying, mChek theoretically allows you to stop carrying five credit cards in your wallet and just use your mobile phone. And if you’re a merchant, mChek lets you skip the pain of installing EDCs with dedicated phone lines, and just use the mobile phone you already have. (That’s the theory – I’ve never seen it in practice.)

Anyway, why I’m saying that it got a little closer to mainstream commercialisation today is that Airtel spammed me and told me that I could now pay my Airtel bill with mChek. Which is the first case I’ve ever seen of a merchant announcing that they would take mChek payments.

The only thing is that I won’t actually be using mChek, since I’ve already set up ECS payment on my credit card. Even if I hadn’t, I probably couldn’t, since mChek seems to be set up only for VISA, and both my cards are Mastercard.

Some thoughts on mChek in general:

  1. mChek actually brings together two of my favourite things: telecom and finance. I approve heartily, because as I’ve pointed out, they’re mostly the same thing.
  2. I think the reason mChek is set up on credit cards rather than on debit cards/ bank accounts is because of RBI regulations which don’t allow bank account transactions on anything other than chequebooks and debit cards. I’m not sure about the details – I’d have to mail some people to check. This is quite a tragedy, because something like this could demolish the costs of transacation banking for banks, and actually spread banking far faster than the FinMin’s diktat to provide no-frills banking accounts.
  3. Since I am a geek when it comes to stuff like this, I’ll go ahead and say it: this doesn’t go far enough. I’m dreaming of the day when your mobile phone credit limit and your credit card limit are the same. Instead of linking your phone to your card, your phone becomes your card. You shop with your phone, and your purchases are included in your mobile bill, whose credit limit is underwritten by your card company.
  4. I wonder what their sales strategy is for bringing merchants on to the system. Their own website admits that this sort of system works best for people like taxi drivers and auto drivers. But how is a startup going to sell to a massively fragmented and unorganised market like this? It’s easier for them to target corporates like Airtel, but for an Airtel, an extra payment system doesn’t have that much value. Or are they planning to piggybank on their partners? The website mentions SBI and ICICI Bank as partners – is this going to show up as a cross-sell target for ICICI’s EDC division? This promises to be interesting.

(And now I regret unsubscribing MobilePundit from my feedreader some months ago. Need to head over there and find out what Veer Chand Bothra’s been saying about mChek now.)


Design for Servants

August 22, 2007

I have been thinking recently about how so many Indian household products and housework processes are badly designed. I am not talking about brands but entire product categories. Examples of badly designed products include beds which are difficult to move (not so common these days as twenty years ago), wire netting window covers which collect dust, mixies which are too noisy (especially if you compare a desi brand like Sumeet or Jaipan with a Philips or Morphy Richards), and entire houses which are badly laid out (I will elaborate on this later).Also, products which are well-designed and replace bad ways of doing things are not popular at all. In my building of sixteen flats, mine is the only one with an ironing board. Also, everyone hangs their laundry out on the balcony. Nobody uses a clotheshorse. (I myself am to blame in this respect, but only because I haven’t bought one yet. I’m planning to do it next month.) This is stupid for two reasons: first, Bangalore has a rainy climate, and drying your clothes outside could just mean that they get wet again. Second, a bird can come and crap on your laundry after you’ve washed it, wasting all the effort that went into washing it in the first place (yes, I’m bitter, so sue me).

The slow way in which well designed products are adopted is astonishing. Washing machine penetration is abysmal as it is. But even when there are washing machines, top-loading washing machines outsell front-loading machines. After ten years of frost-free technology, manual defrost refrigerators are still on the market even though the price difference is just about five thousand rupees. This makes a total mockery of motivational sales lectures about how price is irrelevant if you can offer a customer value.

So why isn’t the customer looking for value in design? I think the answer lies in domestic servants. The Indian servant culture (stretching from visiting bais to stay-at-home cooks) means that the person who buys the product (the householder) is completely different from the person who uses the product (the servant). Since the buyer is not going to use the product, he sees no value in usability, and so always chases value in terms of price reductions instead. This can have horrible consequences for the person who has to use the badly designed product.

Example one: mopping. If we’re the ones wet-cleaning our floors, we go out and buy a mop. As long as the maid is around, we expect her to do it with a pochha, her back bent at a completely uncomfortable angle. The extra price you pay to avoid that uncomfortable posture is only a hundred and twenty rupees, but the cost-benefit ratio doesn’t even enter your head until it’s you who has to bear the cost and benefit.

Example two: kitchens. Specifically, my kitchen. It is this kitchen which has got me so worked up about the whole subject and left me convinced that designing for servants is the reason usability in India is so crap. The problems with this kitchen include:

  1. It is too small. This makes ventilation a problem even with an exhaust fan. It also means ingredients and utensils have to be densely stacked. So to access one thing, you have to first remove five other things (and then put them back). It also makes cleaning it difficult.
  2. The cupboards have no shelves. There are no nails from which to hang utensils or utensil racks. Again, this causes problems when you need to move five things to get to the one thing you’re looking for.
  3. There are not enough power points for appliances. There isn’t enough shelf space or floor space for appliances for that matter. The floor space is all taken up by the master bedroom (which my flatmate only uses to sleep in), and the hall (which isn’t used at all).

This is a problem for me because when I’m fixing breakfast in the morning I want to do it as soon as possible so I can get to work. At that time having to remove three different plates and bartans to get to a frying pan is completely annoying. Of course, the person who designed the kitchen was doing it for a bai whose time was much less valuable, and so the cupboards have no shelves.

Unfortunately, the situation will not change until any of these four things happens:

  1. People realize that their domestic servants are human beings, and stop expecting them to do stuff that they wouldn’t do themselves. Ha ha ha. Good luck trying to change the attitude of three hundred million people.
  2. The government or industry associations step in and set minimum usability standards. Ha ha ha. Good luck trying to enforce the standards.
  3. Domestic help moves from a servant model to a service provider model, where servants are professionals who are hired and paid well by the hour. Ha ha ha. Good luck trying to set up a professional and premium maid service in India when there are half a billion Biharis, Bangladeshis, and Nepalians who’ll happily work for peanuts.
  4. More people start doing their own housework and start relying less on domestic help, and so start demanding better designed household appliances. This, I am actually optimistic about. Domestic help can be a value-destroyer in many cases: supervising servants takes up time, which you might as well use to do the work yourself. If there’s no grandmother/ jobless wife around to supervise the servant, the cost-benefit changes (which is why I’ve sacked my cook).

This post could lead to many other topics, such as why there are no ten-litre packs of juice in India, and why Praful Bidwai is an idiot, but I have no time to write them. So I’ll end it here.