When Microsoft launched Xbox in 2001, the decision was greeted with scepticism from the investment community. The video game market back then was dominated by Sony’s Playstation. The received wisdom was that it would be difficult for Microsoft to challenge Sony in the marketplace. The fact that Microsoft had, until then, been a pure-play software-product company and was venturing into uncharted territory, didn’t help its case either.
That the product became a huge success, surpassing Sony in the video game business, is now history. Management thought leaders have used it as a case study to explore notions of what works and what doesn’t in strategic management.
Risks and returns
The real lesson in the Microsoft example is not so much about identifying the right business for a strategic foray, but something entirely different. This becomes clear if one looks at the situation confronting the company at that particular juncture.
The market felt Microsoft ought not to dependent principally on ‘Windows’ and ‘MS Office’ as a revenue stream for all time to come. It reasoned that as users and application developers took to using open source software, the company’s dominance in the proprietary operating system and office applications software market would be under threat.
While the company’s situation was by no means dire, it still had to be seen as doing something to measure up to the market’s expectations. Rather than throw everything at one big strategic gamble (a foray into electric vehicles, perhaps), it chose to limit itself to doing just enough to keep the market satisfied and at the same, not undermine its core financial stability. In short, the lesson from Microsoft is this: Business is risky as it is, but on no count is it wise to load up on more risk if there is nothing to warrant it other than pandering to market sensibilities.
A flashback
It seems the elected representatives (MLAs) from both the Congress and the Janata Dal (S) parties in the recently-concluded Assembly elections in the State of Karnataka, have absorbed this lesson. They chose to play it safe as the situation did not warrant any risk-taking behaviour on their part. After the results were announced and the Bharatiya Janata Party (BJP) came tantalisingly close to achieving a simple majority on its own, a section of the community of political analysts and commentators thought the BJP could easily cobble up the required numbers by poaching MLAs from the rival camp.
That didn’t happen and BS Yeddyurappa, the BJP aspirant to the Chief Minister’s chair, ended up acquiring the dubious distinction of having served as a chief minister for perhaps the shortest duration in the history of electoral politics in India.
To be fair to these analysts, such a possibility (MLAs switching loyalties) did not altogether escape the minds of both the Congress and JD (S) leaders. Witness the alacrity with which they whisked the MLAs away to a resort where they couldn’t be easily reached, and then brought them to the legislative assembly at the last moment to take the oath of office and vote against the motion of confidence moved by the chief minister-elect soon thereafter.
Moral superiority?
Did those who refused to be swayed by inducements, that were doubtless on offer, act out of some superior moral purpose? Maybe they did. But there is no denying that some enlightened self-interest too dictated their actions. Put simply, the risks of a strategic choice in favour of switching sides were too great and fetched them nothing by way of exceptional returns.
In financial management terminology, the expected value of future returns was close to zero when adjusted for risk. That they reckoned along these lines is hardly surprising.
The legal framework is such that they had very little to lose by staying with their respective parties. On the contrary, by going along with the BJP, they ran the risk of throwing away their hard-earned electoral victory for no tangible purpose.
Win and lose
The law on anti-defection is very clear: MLAs elected on a Congress or Janata Dal (S) party symbol are bound to obey the party line on any issue, which, in this case, would quite naturally have included opposing the Yeddyurappa-led BJP Government. It was almost certain that the two parties in question would have issued a diktat (a ‘whip’ in legislative parlance) to their elected members to vote against the new Government.
In the event, any elected MLA defying the party ‘whip’ would most certainly have run the risk of being disqualified. Whether the BJP Government continues in office or not is of little comfort to the elected representatives, who would anyway have lost their seats in the process.
Technically, these MLAs could have avoided taking the oath of office, which would have helped the BJP’s cause and at the same time, avoided the prospect of being disqualified under the anti-defection law. Thus, the risk of being disqualified might be regarded as nil, while the opportunity of enjoying the fishes and loaves of the office could be high.
Legal nuances
But a closer reflection would have told them that this amounted to skating on thin legal ice. For one, such a course of action goes against the spirit of the anti-defection law, if not its letter. When seen in the backdrop of the observations of the Supreme Court, which was hearing the petition challenging the Governor’s invitation to Yeddyurappa to form a Government, it seemed to suggest that it might well hand out a ruling in accord with the spirit of the law and thus make it the letter as well.
In effect, therefore, not taking the oath of office would have been just as risky as taking oath and voting against the party ‘whip’.
The risk-return dynamics play out somewhat differently if the State in question is not much in the popular conscience. We saw that some of the Congress party MLAs in Manipur (which went through an election some months back), have been able to cross over with none of the penal consequences of the anti-defection law. But the Karnataka MLAs would have rightly reasoned that a strategy that works in the North-East might not be good enough for a mainstream State.
The bottom line
So the bottom line is this.
If the objective of fighting an election is to give oneself up to the lofty purpose of ‘public service’, a decision to do so under the leadership of the BJP would have given them no greater advantage than remaining with the party organisation under whose symbol they fought the election.
But what if the objective was to make it personally profitable? Even here, there is no reason to suppose that staying under a ruling dispensation headed by a JD (S)-Congress combine would be less rewarding than any arrangement under a BJP-led Government.
A JD(S)-Congress Government would be just as beholden to the elected MLAs as a BJP one. When you throw in the fact that the former course of action (of staying with the parent organisation) has the added advantage of being completely risk-free while the latter is fraught with legal uncertainties, is it any wonder that these MLAs opted for the status-quo ?
Of course, by choosing in the manner they did, they have not, by any means, foreclosed their options for the future. If the expected returns do not materialise, or the risks decline, they will always be in the game for a superior alternative. In the marketplace of electoral politics, MLAs are rational economic agents looking to maximise their welfare, while minimising risks as they participate in the commerce called democracy.