US-India-relationship
Business, Finance, Politics, Public Issues

US and India Relations – A tale of two democracies

(One more guest article by Ankur Singh . You can read his previous article here. Ankur will soon start writing on Strat.in as a regular author. Do you want to write on Strat.in too? Read this for details )

US and India Relations – A tale of two democracies –

Democracy, as its meaning suggests, is all focused for the welfare of people. And its two most celebrated practitioners are India and the US. Both are the world’s largest democracies with plural societies tolerant of diversity. However, both of them are now bound on a journey that may twist the very fabric of this system.

The social and political conditions in both countries have never been amazingly similar as they are now. Both countries have witnessed a nation-wide public movement (Lokpal and Occupy Wall Street). Both the governments are struggling with economic and financial problems. Important elections are due next year in both countries. And finally, governments of both countries are entrapped in a mire of allegations and stalemates.

Let’s start with US. The government formed a super-committee that had representatives from both republican and democratic party who were expected to suggest a solution to the debt crisis of the country. It was also decided that the suggestions made would bypass the conventional rigmarole and would be implemented expeditiously. However, the committee tossed up its hands on 21st November and left millions of Americans disgusted.

Now let’s see the Indian scenario. A few days before, key industrialists like Mukesh Ambani & Ratan Tata emphasized on fast decision-making on the part of government. This statement was made in front of representatives from both Congress and BJP. However, our parliament seems unperturbed. The 1st two days of winter session of Parliament have been disrupted by opposition  with no significant output. Plethora of reforms (some good and some adequate) are lying in the pipeline. But neither our responsible government nor the constructive opposition have accomplished anything.

The reason for stalemate in both countries is the lack of social responsibility on the part of politicians. As the elections are close, the opposition parties could not let the government get their policies right. That could mean severe damage to the vote-banks. I am sure that similar thing will happen if the parties’ positions are swapped (ruling party becomes opposition and vice-versa). This vicious cycle may go on leading to delay in a number of welfare schemes over the decades. However, none of the parties are violating any rule of democracy. So, we can’t complain.

So did our constitution-framers made a mistake? Should we resort to system like that of China which is undemocratic and partially capitalist but has yielded much better growth results than both US and India? Perhaps not. Perhaps, the current events may just be once in a while scenarios. But the current situation definitely calls for some changes in the decision making. “What those changes could be” is an open question. Please express yourselves on this issue. Notes from the Editor: This is an article contributed by Ankur Singh – A guest strater. Ankur works as aStrategy and Operations Analyst with Deloitte Consulting and studied at Indian Institute of Technology, Delhi earlier. The article serves as an eye opener about the value added by Engineering Entrance Exam coaching centers in the Indian Education Ecosystem. We look forward to more insights from Ankur in the coming months. Also, the views expressed are author’s own and Strat.in neither supports or opposes them. Strat.in is a forum for thought provoking discussions and will continue to remain so.

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Entrepreneurship, Politics

The Start Up Visa

USA-startup-visaIts 2010 and as we step into the next decade, Business and Technology remain the scale of measuring the overall strength of any country. Though jaw-dropping start ups keep coming forward from the dorm rooms and garages of the Silicon Valley, investors in US are worried that the  government is not doing enough to entice entrepreneurs to stay.

So the US congress is now considering what can be called as a ‘start-up Visa’. A visa for foreign born “techies” who have good ideas, so that they can stay ‘in’ US and continue working on them. This is especially valid for foreign students who drop out of school to found their own companies. It is particularly hard for them to get visas and continue in the valley, and US is aware of its losing ground if it doesn’t encourage smart brains from India and China to stay within.

The visa also aims at attracting foreign capital. So if your business plan is good enough to attract $250,000 through Venture Capital or $100,000 as angel funding, or shows prospects of creating 5-10 jobs and around $1Mn in revenue, then you are eligible and up for the visa. Such visas are already in place in Canada, UK and Australia and US knows the importance of funding the founders if it does not want to give away any advantage to one of these.
But the point to ponder upon is, if US, with all that it is, is thinking so seriously and taking steps to attract talent, imagine what steps India is going to have to take to at least retain its talent. The reforms from 1991 have provided the fuel for entrepreneurs to pick themselves up without licensing hassles, but do we have a government that is worried about start ups in India?

According to Dr Venkatraman, Indian born US based 2009-Nobel Prize winner, if India does not invest in the facilities that support long term research now, it is going to find itself 10-20 years behind in harnessing technology for better benefits.

We have one of the most, if not the most, competitive educational systems in the world. But it is also true that most of the smart brains are showing all their competitive spirit in India and Creativity outside it!

There is indeed a lot of activity going on in the start up incubators in India. Loads of VC funding and a build up of an entrepreneurial ecosystem with foundations like NEN, but we seem to miss godfathers like Andy Bechtolsheim and Mike Markkula coming ahead to mentor the Google’s or Apple’s of tomorrow.

With the Indian population all set to hit 1.5 Bn by 2020, the Indian market and economy is essentially going to piggyback on the ability of future job creators. The ecomonic reforms from 1991 have provided the fuel for entrepreneurs to pick themselves up without licensing hassles and red tape , now it is the turn for our educational reforms to pick up soon enough to catapault innovation and R&D. Are outdated rotten courses going to make way for a fast changing and flexible course systems that incorporate iphone and Android apps on the go ?

Image credits 1

PS: Click here if you wish to know more about the visa.

Click here if you think something has to be done about our educational system!

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Marketing, Strategy

Why Every Market Needs a Tight SLAP !!!

This is Shantan’s third post on strat.in . His earlier two posts have been extremely well received – Leader v/s thought leader; Federer at French open . He has now joined Strat. In team now, after contacting us from the Write a Post section.

In 2005, in my final year of undergrad, I embarked on an entrepreneurial venture with two of my college buddies. We were not too successful. It lasted a brief time. But some of the marketing and business lessons learned there…have stayed on.

One of them is what i call the SLAP theory!

I coined this acronym back then in 2005, when one of my cousins read about my work and called me up to learn more about what i was doing.

I tried to explain to her what our software application would do. Her next question to me was “So how will you make money? Will you start selling it now?” I instinctively replied to her a couple of lines which then went onto a long conversation, and finally got embossed in my head forever (and perhaps her head too!!) I told her that the software application we were building was not yet fully ready. It was just a prototype. She asked me what i meant when I said “ready” considering that so many students and folks had seen the product in our demo at the exhibition. I replied that, “ready” meant that when someone sees your product, they should readily purchase it.
They should see it, get interested. look at it and then immediately purchase it. There shouldn’t be any room for doubt in the minds of the customer.

Over the phone, I reiterated the words to her…See, Look, And Purchase………and hit upon the acronym SLAP. And I delivered the trademark killer marketing punch of my one-liners (one of my other favorite hobbies) by saying “when you build a product, it should SLAP the market!”

ooohhhhhhh!!!

That was like gold standard for my cousin. She liked the line.

And i was still wondering how i came up with SLAP!

Over the last few years, I have internalized this theory into the way i look at products, or contribute to building them. This cousin of mine keeps reminding me of it now and then…”so did you SLAP the market now????” hehe….

What exactly is SLAP theory?

Build a product..well not necessarily a product. it could even be a project..a service……it could be a book. it could be a TV show.It could be a music album. It could be anything that any of us do..But when we do it….it should be of such high quality that it just SLAPs the market away!!!

Customers should SEE the product or service:

This is important. Many great ideas don’t succeed because they are not branded well. They dont catch the eye of the customer. They just get launched. And keep groping in the darkness with a miserly market share. A great example would be Microsoft’s Zune player. They created some buzz but that was because it was Microsoft. I am not too sure if customers would have been able to spot the player if it was not Microsoft’s. Well there are better examples..there is a dollar store here in the USA where you get granola bars for just 25 cents. They are awesome quality and very good for health. But u know what? they are stacked up in one of the remotest corners of the store. No-one can possibly see them. Thats why when I showed some friends during lunch, they were like “oh gosh!! how come you spotted that”.

Customers should be LOOK at the product/service:

There are two clauses here: One, customers should be compelled to pick up the product and look at it. Ever been to Crossword, the book store? There are so many variety of books there. But I hardly get compelled to pick up the books though i know they are good ones. Well perhaps its a personal taste. Even in retail stores….there are some really exciting stuff out there. but somehow…I just don’t have the patience to check it out.

The other clause is: customers should be able to actually look at the product. This brings into scope the need for usability and convenience. Customers can be put off if they don’t “get it” when they are looking at your product and trying to understand it. Look at the ipod. There is just no way you “can’t” get it. You have to! Its so easy and convenient to use. User experience and convenience is such an important aspect. Windows Vista lost this battle….but Win7 promises to be a class apart.

If you have customers, seeing ur product, and then picking it up to look at it, you better make sure that they “get it” in the first 5 seconds of them picking up your product.

It could be any product: retail foods, groceries, electronics, books. software, cars…u name it. Not just a product..it could also be a service: choosing ur local bank, paying telephone bills, a new identification system being implemented in the office….every service needs to get a buy-in from you, the customer. You are the king!

AND
Nobel laureates in literature call this a conjunction. And is important to the look and feel of the SLAP theory. You have got to pat me on the back for this!

Customers just HAVE TO PURCHASE it now:

When your product catches the eye of the customer, and then engages him into exploring it, you better hit the nail and get him/her to buy it! Many times I check out a product and then after marvelling it for a while I keep it back on the shelf saying “Great stuff!” and go to the next shelf. Or we end up saying “hmmm..looks awesome..should buy this soon” and keep the product back where it was! Gosh! The product lost the battle there!!!!

To explain this better, take the classic case of the ipod and all of Apple’s products that came out after that. When people saw the ipod, they just couldnt resist it. This explains why the iPhone 3GS hit a sale of 1 million in just 10 days of its launch! People cant resist it. they just want it! Build a product or service like that, and you ll make millions!!

Another aspect of this is the pricing itself. If the price is way too high, then even the most loyal customer might not buy your product. Reason: he just doesnt have the money!! So the price should be competitive. good enough to make your margins. but equally good enough to get your customers to buying it…..buying it immediately!!!!

So the next time you have a great idea to create something, make sure you “SLAP the market!!!!

Shantan

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Business, Finance, Planning, Politics

Why Obama’s plan can fail …

(This post is contributed by another guest strater who wrote to us on contribute@strat.in . The author is an IIMC alumnus currently working in the US. The post is a strat.in SPECIAL about the measures taken by the US government to tackle the recession.)

While the USA has entered its 3 year of recession, Barack Obama still enjoys record approval ratings but the euphoria over a Washington outsider returning the country to its people is dying out fast. Obama has the right ideas but he does not know how to fullfil them..Here’s why..

Let us look at his stimulus package and his financial advisors viz. Tim Geithner and Larry Summers. Summers was one of the architects who repealed the Glass Steagall Act and allowed investment banks to take on unlimited amount of risk, while Geithner famously allowed Lehman to collapse. After Hank Paulson scared the US House about an economic collapse without the bailout, the number of begging bowls at White House have gone through the roof. The 700 billion tax payer dollars with a modest leverage ratio of 10:1 (Citigroup’s was 33:1 quite recently) would have created 7 trillion dollars of investable capital. This would easily be enough to make USA energy independent within 4 years and create jobs in the private sector. Obama feels that banks would start lending once the toxic assets are cleared off their balance sheets. He is completely wrong, in my view. Banks have learnt a lesson they can never forget. Banks make money by lending to people who can pay back the money with interest. Americans do not have jobs and there can be no savings or loan paybacks without jobs. The ills caused by consumer spending over the last 30 years cannot be cured in one year. If Obama wanted to get USA out of recession through creating demand then the size of the stimulus had to be far larger and invested in creation of cash producing assets instead of bailouts. But that would have resulted in an immediate run on the dollar and staggering inflation(though that is  unavoidable now). Keeping the value of the dollar high would not have been a cornerstone of US policy had USA been a export oriented economy like China, Germany or Japan. But after losing its manufacturing prowess by 80s and relying on treasury sales after the IT boom and bust, USA has little that the world needs except fiat money. Strangely, a global recovery would mean a fall in value of the dollar as people begin to invest in more riskier assets.

Obama wants to make a downpayment of 600 billion dollars on healthcare today when he himself does not know how healthcare reform will pan out and what will be the eventual solution for this problem. GM and Chrysler are bankrupt. What was the point in giving billions more to burn earlier this year? That only prolonged their misery. Bankruptcy of GM and Chrysler will cost jobs but not all of them. They still have valuable assets. The airline industry in USA went bankrupt post 9/11. They never received a bailout. All airlines are operating today and the quality of service from Delta ,for example,is at par with the likes of Cathay Pacific. But it is a leaner airline today with far better management than in 2000. Same can be the case with the auto industry.

Would the dollar continue to remain strong as ever?

In my opinion, Geithner is an extremely indecisive man with deep connections to Wall St. Hence he is fine with pouring billions into Bank of America and Citigroup while all it will take to wipe out the cash injection is for the house prices to fall by 10%(which is bound to happen). An orderly bankruptcy (unlike the one for Lehman) for Citigroup,BankofAmerica was in the tax payers’ interest. These banks did not pay higher taxes when they made record profits and should take full responsibility for their mistakes. All banks did not have such massive losses. Many smaller banks in USA are in fact faring far better. Nationalising these banks for a period of 2-3 years like Sweden did in 90s is a far better solution than pouring billions into a hole hoping to hear the cash hit the bottom.The real reasons why Geithner does not want to nationalise banks is because his Wall St friends are still in charge. In addition to that, many investors and foreign countries including China and Singapore foolishly invested in American financial institutions. A bankruptcy would wipe out their holdings and prevent them from lending money to the USA in the future.USA needs these investors and countries to buy its debt today more than ever before.

Obama wants to invest 150 billion over 10 years to make USA energy independent while Steven Chu himself admitted that USA would not be able to meet its share of emission cuts due to pressure from the industry. He also said that biofuels and not hydrogen was the practical solution (he headed the biofuels department at Lawrence Livermore Labs) for USA to be energy self sufficient when the world still faces a food shortage and the time for biofuels is past. For a good example, we can look at Brazil. Brazil started the biofuels program in 1980 and it took almost 30 years for it to be a net  energy exporter. US energy demand is many times that of Brazil & the world’s food requirements are twice those in 80s. Many experts agree that the US economy can be converted into a Hydrogen based economy within 10 years with less than 5 trillion dollars – at the expense of Exxon Mobil, Chevron, Conoco etc and a funding cut for Steven Chu’s former pet projects!! (Wonder what will it take to make influential americans to give up their
vested interests)

The Obama administration  can only be characterised as one which is grossly misallocating resources which ultimately will lead to failure and hardship for future generations of Americans. This recession is an opportunity for a structural change in USA economy to consume less and produce and save more. It is also an opportunity to get rid of industries and businesses with outdated ideas and management but is not being used as such. The USA is still benefitting from the hangover of its superpower status.  Many commodities are priced in dollars which keeps dollar demand high inspite of it being a fiat currency. Almost all developing countries back their currencies with the dollar while the dollar is not backed by anything !!

To conclude, in my opinion, even if the US economy improves, it still suffers from the fundamental problem of borrowing and consumption for growth.

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Politics, Strategy

China US Relationship (2/2) – How should India react?

In my last post, I discussed about the China US relationship and how it will/may undergo a change in the coming decade. In this relationship, India I believe is a prime stakeholder as well. I say this statement because the role India takes on the global stage will determine how and where will this relationship shape up. In this context, a few perspectives need to be considered – I underline 3 of those below –

1. India as an alternative to China – First question is, whether this is possible? If yes, on what scale and sectors? Currently, the China-US relations are so tightly intertwined, this will take some doing. However there are indications that steps towards this have already been taken post the re-election. Here’s an excerpt from a DNA report about it

    “Our task is be to strengthen the partnership that exists between US and India, to base that on our converging values and interests,” said assistant secretary of state for South Asia Robert Blake. “The nuclear deal is going well…but there are still a couple of steps that India has to take to implement the agreement.”

    The US is thrilled that Singh may not have to rely this time round on scrappy support from Communist parties. They quit the government in opposition to India’s deal with the US on N-deal– the signature achievement of Singh’s five years in office.

    2.  Expertise building within – I believe India needs to develop expertise in sectors other than IT or outsourcing. Probably that would be the single most important factor that may shape India’s fortunes in the coming future. It has to be done quickly and it won’t be easy as well, since organisations like WTO are already pressuring India to take steps against protectionism as indicated here

    The World Trade Organization (WTO) chief urged the United States and India to start talks as soon as possible to tackle protectionism and called on Gulf Arabs to open up to international business. “The U.S. and India are at odds with protectionism in agriculture. Now the elections of both countries are over, we expect them to start engaging in talks,” Pascal Lamy told reporters.

    3. Taking a stand on issues – In the past, India has been avoiding taking stands on critical issues. If India wants to get counted on a global level, India would have to take stands on critical issues – such as Global warming, nuclear proliferation, even on countries like North Korea conducting Nuclear tests. India as a country, has not reacted in a way a major power should have reacted to a mini-invasion like 26/11 . This has to change from an Indian perspective, and fast.

    An economic times report gives views of US special envoy for Pakistan and Afghanistan Mr. Richard Holbroke

    “We can’t settle issues like Afghanistan and many other issues without India’s full involvement,” Holbrooke had said. “India is a vital leader in the region,” added Adm. Mike Mullen, chairman of the US Joint Chiefs of Staff, who accompanied Holbrooke.

    Clearly, India’s importance and relevance in the world context is growing by the day. But, for India to capitalize on it, the government and corporates need to become proactive. For decades, ‘In-action is the best action’ has been a mantra for India. Would that work in the future? Write your comments about the same below.

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    Business, Public Issues, Strategy

    China US relationship (1/2)

    A couple of days ago, I read this incredible, almost shocking article on NYT. The headline read ‘Will China still bankroll us?’ I thought perhaps the headline was constructed by a smart editor keen to record highest sales on that day. But then, it was NYT which was publishing this article, perhaps US’s top newspaper. (I am not sure of the ratings, please don’t throw circulation numbers at me!) So I investigated further and looked at data too. Here is what I came up with.

    For past three decades, Chinese exports to US have been growing steadily. According to these official US Census reports, in US China bilateral trade for 2008, US had a trade deficit of $266 billion. Over the past 20 years, China’s export oriented economy has benefitted enormously due to America’s high spending habits. Right from the material that went into constructing the new building at the New York’s World Trade center to the raincoats worn by tourists at the Maid of the mist boat on Niagara falls- everything has one logo in common – ‘Made in China’. To quote the aforementioned article,

    Over the past decade, China and the United States have developed a deeply symbiotic, and dangerous, relationship. China discovered that an economy built on cheap exports would allow it to grow faster than it ever had and to create enough jobs to mollify its impoverished population. American consumers snapped up these cheap exports — shoes, toys, electronics and the like — and China soon found itself owning a huge pile of American dollars. Governments don’t like to hold too much cash, because it pays no return, so the Chinese bought many, many Treasury bonds with their dollars. This additional demand for Treasuries was one big reason (though not the only reason) that interest rates fell so low in recent years. Thanks to those low interest rates, Americans were able to go on a shopping spree and buy some things, like houses, they couldn’t really afford. China kept lending and exporting, and we kept borrowing and consuming. It all worked very nicely, until it didn’t.

    17china-600The US will certainly act to check this. However, is there an opportunity for Indian Government, industrialists and even entrpreneurs in this? That is perhaps the question to be answered.

    Now what does India make of this? For India, China is that country which does literally everything that India does, only does it much better. China’s influence in South Asia is huge. Right from LTTE – SriLanka tussle, to the arms found with terrorists coming into India from Pakistan, to the arms with the Naxalites- we see Chinese influence. China’s hand in Pakistan’s emergence as a nuclear power is beyond doubt. But given all this, is India going to do something about it? I believe India has to take some proactive steps with regard to these new developments. But what? Read the next article to know more…

    Source:  NYT – For the quote and the picture. Facts_china-us_Stratin  from Wolfram Alpha.

    PS: This is also ‘strat.in’s 50th post! 9 posters, 50 posts, 25 days, 10000+ pageviews, 71 facebook fans, 47 GFC friends, 200+ comments and lots of compliments  already – its been one heck of a journey, and perhaps this is just a start! Until the next time, keep ‘strat.in’g!

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    Business, Finance, Planning

    US Auto Industry – Is it in terminal decline?(1/2)

    Chrysler files for Chapter 11 Bankruptcy protection

    Today’s most striking headline indicated that the smallest of the Detroit’s big three – Chrysler filed for Bankruptcy protection. While Chrysler’s story is interesting on its own and an alliance with Fiat is imminent which will be supported by Govt funding upto $4.7 b dollars, this article takes a look at the state and causes for the seemingly terminal decline of the US Auto industry.

    To quote President Obama,

    General Motors Corp., Chrysler LLC and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future.

    Let us examine the causes of this decline first –

    • Car registrations in USA – a statistic which has shown a net YoY increase for the last 100 years, even during the 1929 Great depression – today is in decline. The trend of growth faltered in the 1990s itself and in the 2000s, the trend is in decline. Essentially, the pie which was growing for the last century, suddenly stopped growing or even started marginally shrinking.
    • Failure of the US Auto industry to react to this change – The big three should have anticipated this long ago. When the industry stops growing the drivers of the industry change and survival in that industry becomes dependent on superior performance, cost efficiency and most importantly for the auto industry, technological superiority. Detroit’s big three –  GM, Ford and Chrysler didn’t see this coming and/or didn’t react to this swiftly.
    • Declining market share of the Big 3 in USA – Just 25 years ago in 1984,  the Big 3 from detroit -commanded an 80% market share. However in 2009, that marketshare has fallen to 45% . Cars made by foreign manufacturers have made huge inroads into the US auto market. Particularly Toyota and Honda, whose growth has been spectacular have pushed the Big 3 on the backfoot with their focus on technological superiority along with affordability.
    • Green car conundrum – Obama’ while announcing the first bailout package in February demanded that the US Auto industry should focus and lead in the Green car revolution. In line with this, the American automakers created a lineup of electric and hybrid cars. However, with the global economic depression pushing the oil prices down alongwith the plummeting consumer confidence has raised questions about the economic feasibility of these costly products . Hence, huge investments into technological research regarding green cars is in danger of not giving immediate or short term financial gains or market-speculator support.
    • Auto unions – Today, the auto unions are so powerful in the USA, that they force the big 3 to produce only  a product mix of  the highest profit cars leaving the auto industry without a product line up for changing market conditions.  What we mean over here is that the consumer preferences keep changing – from big gas guzzlers in 2004 to high efficiency vehicles with fluctuation in oil prices and to low cost cars due to the global economic meltdown. Clearly, as we were taught in our Economics in HR course at IIM Calcutta, the bargaining power of the Unions has reached such levels that it has started to harm the interests of the car makers. The government’s failure to reign in these auto unions is a big cause of concern for the US based car makers.
    • VAT tax disadvantage – The VAT tax allows the foreign companies to subsidize exports while taxing imports. As this article indicates, VAT tax puts US automakers at a huge disadvantage and cost the industry $327 billion for 2006 in terms of lost productivity. Such losses can be taken when market conditions are good, but in a depression type scenario, the opportunity cost borne by the industry due to such policies is like a death knell, even for the biggest of the firms.
    • The Cost component to this piece:

      Labor cost per hour, wages and benefits for hourly workers, 2006.

      Ford: $70.51 ($141,020 per year)

      GM: $73.26 ($146,520 per year)

      Chrysler: $75.86 ($151,720 per year)

      Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)

    • Thrust on quality, or the lack of it – US automakers did not pay enough attention to quality. It was a common observation among consumers that the US cars break down more often than their Japanese counterparts. Such things were unnoticed till the 80s but today in the era of tough competition, things like these become the decision making points for the prospective new vehicle buyer.

    Clearly, all these causes did not shoot up overnight, they grew into giant monsters gradually over 15 years. But today, they have become a huge roadblock. Can the US auto industry respond, is there a way out , or does the future look pitch dark for the great US auto giants? Check the 2nd article in this series by me to find out!

    (Facts/ quotes from: Strategic disadvantage, Auto-Report , Chrysler bankruptcy , Money Central report about Obama, Financial Times)

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