Malaise of modern corporate workplaces

An Indian corporate workplace thinker/designer is clueless today. Influenced by status quo and conditioned by cherry picked cases, the modern workplace has spawned into a cesspit of mediocrity and monotony.

But the environment of workplace is not only a function of architecture, it is also that of people. So the larger malaise of the modern corporate workplace will be explored along these two dimensions – architecture and people.

What are the so called problems of modern corporate workplace?

  1. Open architecture seating: The modern corporate workplace has no concept of isolated/solitary private space- where an employee can engage in active thinking/learning. Ironically the architecture was made “flat” so that there is a cross-pollination of ideas. But this has become a self-defeating aim because to cross-pollinate ideas you have to have ideas first.
  2. The people factor:  Flat architecture also served as a preventive measure for stopping employees from wasting company resources. However it was a classical example of trying to right a wrong by building another wrong. There is no substitute to good self-motivated people. There is no substitute to people who are sincere and think for themselves.
  3. A lack of people development and plenty of people management: The modern middle managerial paradigm revolves around getting the work done and not making a person skillful enough to get the work done. The nuance is subtle. But the end effect is devastating. The entire onus of skill development falls down upon the employee. No active grooming/mentoring is undertaken.
  4. Mediocrity breeding mediocrity: I am a big proponent of measurable performance. Measurable performance doesnt imply quantifiable performance, but measurable implies clarity in results. This is one reason why there is so less “politics” in a hedge fund. You eat what you kill. But in all other places, the rules/measures are gamed and promotion is first decided then goals are given. So if the consensus is promotion will be done only when some process improvement takes place, an artificial project on process improvement is done- which has no bearing on the real improvement.Thus this mediocrity is passed to the upper level where they judge performance from their lens of mediocrity.

The solution ahead? Its difficult, complex to execute and will require a lot of effort. An intense focus on people hiring quality is important.Hire slow, but only when there is a clarity in the value that the person brings to the table. Boston Beers follows a rule of hiring people better than the average.

Invest, a lot in people development/ idea development/wisdom development. And when I propose invest, it doesnt imply resources but managerial efforts. How will the leader of tomorrow grow when the set of challenges an employee of today has faced is limited.




Understanding policy through politics

3df4ad3In 1977 when Janata government first came to power on the back of a majority it messed the plot in about two and a half years. As heartwarming its success was (if the defeat of Indira Gandhi was considered the defeat of civil right suppression), its failure was not a surprise. It was the first time India had a non Congress government at the center. It was also the first time coalition politics came up. As much deft governing a country like India requires, so much more skill managing a boat running on coalition fuel demands.

At the backdrop of this, it is not surprising that Janata government had little to no institutional memory to draw its lessons from. It had no reservoir of prior experience and thus no skills in managing the country.

In 2011 Trinamool Congress(TMC) swept the Bengal Assembly elections. Poriborton or “a structural change” became the rallying war cry of TMC. Hopes of better governance and a steering away from leftist politics inspired the masses, on the back of which TMC registered its first assembly victory. It was the first time in 25 years Bengal had a non Leftist government. It was also the first time a non-Congress, non Left party won. It was the first time TMC had a major role to play in state politics. As much intellectual capital steering Bengal away from the embraces of leftism requires, even more so forging new policies (in a new political paradigm of cooperative federalism) demands.

Cut it any way which, TMC had a patchy record at best in governance.Ranging from  Ambika Mohapatro case to delaying of Teesta accord- spanning from refusal of FDI in retail and insurance to a general breakdown in civil rights in the state- TMC remains an immature political party at its best.

And it is not surprising because like Janata government- it is the first time for TMC- and it has no organisational knowledge to build upon.

In 2013 December, Aam Aadmi Party poised a significant challenge in the assembly elections with a stunning 28 out of 70 seats in its pocket. It was the first time a political party was handed the mandate to rule within a year of formation. Not only was it a 1 year old party but had no “repository” of politics and political management to draw from. It was an empty reservoir in terms of organisational knowledge.

And no doubt, that its failures were stark and serious- from its numerous skirmishes with the Centre to its abdication of Delhi on drop of a hat it was an unmitigated disaster in governance.Its janata durbars, a much touted governance measure on the lines of direct democracy had to be kept aside because of mismanagement; Somnath Bharti’s vigilantism to dharna politics – all were the hallmarks of a party wonderfully bereft of ideas.

However AAP defying history (abdications have very low success rate when judged by history) came to power in 2015 assembly elections with 67 seats. This time the general expectation was even a prodigal son should be given a second chance. But AAP has bungled and in large measure the last 5 months have ranged high on decibals low on intent.

Modi government is in many ways straddling the mean between these failures. BJP government in general has a reservoir of experience in administration. Modi himself has administered a state. But then their strengths are also their weaknesses. It has been 10 years that BJP administered country last and like anything time also depreciates experience by removing able hands from the gene pool/ service pool (e.g. Vajpayee, Shourie etc)

So if Modi government has had successes it was because of this past experience and its failures nevertheless are undoubtedly in areas where it never had new ideas in its repository and those areas which are uniquely belonging to Centre- “civil rights”, “education” etc (nitpickers may find fault in me classifying them as Central subjects while they are concurrent but think of crowding out effect- Centre’s precense renders state inconsequential)

It is not a surprise that in large measure knowledge acts like a muscle. And soft skills/managerial skills are even more so. Lets call them managerial muscle in short.

What are the areas where India has developed managerial muscle?

1. We are slowly learning to tackle public health – we have learned to tackle and eradicate polio- a big milestone in my dictionary. I believe in the next 10 years a lot of other public health mess will get taken care of : TB for example.

Just to think in 2009 we had the highest burden of polio victims. In 2012 we were polio free!

2. Learning mountain warfare- we have a big advantage over China in the sense that our defence forces have a much deeper experience of combat while China doesnt have it.

3. Disaster management- no explanations needed. Very strong and deep managerial skills and organisational knowledge here.

The deepest of social understandings should be fertile. And it is no different in this case. The idea of knowledge muscle can be very well built inside the framework of capitalism as well.

An entrepreneur who learns by successive failures  is a prime example of this- the same reason why venture capitalist firms discount first time entrepreneurs more aggressively than seasoned ones. A CEO who has gone through at least one trough in a business cycle also falls into this category.

And finally when Sanjay Bakshi mentioned that one of the causes of market myopia is a higher discounting of past managerial setbacks (Point 5 )- he was bang on because market is unable to tease out the nuances between corporate misgovernance and genuine setback.

Strangely this very same “mental model” can be used to separate the wheat from the chaff. Judge the man based on his access to “managerial muscle”.

Case in point will be to study the potential turnarounds:

1. Eicher Ltd.

In 1994 Eicher bought out Royal Enfield (RE), a high end motorbike maker and yet till 2000 Eicher continued to bleed in this segment. For an annual capacity of 6000, Eicher continued to churn out barely 2000 bikes.

Faced with a question of coast or shut, the iconic motorbike maker received a shot in its arm in the form of Siddharth Lal. A 26 year old die hard fan of Bullet (the iconic range of bikes from RE)  with substantial backing from the promoter family.

You see, he was a young scion of the promoter family.

He realised one thing very quickly. Tractor makers will have very low “knowledge/managerial muscle” to turnaround an iconic bike brand. He roped in R.L. Ravichandran- an able hand with deep experience in bike segment (earlier experience in Bajaj Auto and TVS Motors)

Reference: Business Today profile of the Eicher Turnaround

2. Ajay Piramal 

Ajay Piramal was a man who is the epitome of a managerial learning machine. His knowledge muscle got honed by repeatedly engaging in tough business situations- of management buy in, industrial conflict resolution and the works. Today he uses it to his advantage in solving simpler but more rewarding problems – like how to buy companies with able management.


I wanted to add a third and fourth and fifth example to the list. But I am tempted to turn the mic towards you.

Where all, have you come across examples of “knowledge muscle” working its charm?

Competition Sutra #9: The games companies play-II

(…Or bringing disparate ideas together)

This blog post will try to connect multiple ideas together, some of the ideas are old but just that I understood them enough to appreciate them quite late, some of the themes discussed here are quite famous business episodes and of course how incomplete is an blog post on competition without invoking some old and famous Chinese thinkers.

Míng xiū zhàn dào, àn dù chén cāng

(Openly repair the gallery roads, but sneak through the passage of Chencang)

The less famous cousin of The Art of War is 36 Strategems- a Chinese essay to reflect on the tactics used in politics,war and also civil interaction.Notice an idea here- both politics and war renders beautifully to a game theoretic representation at least in the bare minimum complexity.

One of the key strategem in these competitive games is deception.

This is idea #1.

This is November 27,2003 and Reliance has just announced its foray in telecom with a national roaming feature, directly pitting against the encumbent Bharti Airtel. This is a major move and Reliance never takes any prisoners.

Bharti Airtel’s collar grew damp. Sunil Mittal’s collar grew damp. These guys are known to pick up a competitor, chew them alive and spit them out. The leadership team’s mood was sombre. Mittal at this point is reported to have given a Churchillian speech, something on the lines of-

We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender

Mittal reportedly saw inspirational movies every day to feel and look like a fighter- even though he was deflated inside- (Rocky series being his favourite)

Exactly one year later- when the leadership team met once again to take stock- they knew one thing- they have stood up to the Goliath and stared it down.

Idea #2

I once read Prof Bakshi descibe an Aesopian lesson as an important mental model. The lesson being – “A hare runs for its life, while the hound only for its lunch”. I always dismissed it as a flight of fancy- “huh, an aesop fable as an investing mental model- what next? Mullah Naseruddin’s wittisms?”

While I do agree they can provide a nice operating system to live a life, but now I also do agree on the fact that it can be a very interesting mental model as well.

The following business case provides ample context

In 1993- HUL announced its entry into toothpaste business by introducing Pepsodent brand in Indian markets. Prior to that almost 80% of the market was ruled by Colgate-Palmolive.

The stocks of Colgate-Palmolive quickly fell. And fell as if it has been dropped by investors like it was hot!

Savvy investors muttered to themselves -Colgate is the hare and HUL is the hound and I am Aesop. They bought the shares on truckloads and eventually after a year or two when market realized that Colgate is taking the fight back to the HUL, the price of shares eventually corrected upwards.

Truth to be told, I never understood how can someone use such a subjective idea into backing up their own conviction. Doesnt it look like stretching the facts to fit the story?

Herein lies the kernel of our next idea. Ladies and Gentlemen- here is our idea #3. Or better word here will be  case snippet.

Three disparate ideas in one blog post. If your head was still not spinning, then let me add a fourth one here. Allow me to discuss the few key takeaways from the Chapter 11 of Competition Demystified.

Few takeaways:

#1: In the previous post, we discussed an important but albeit incomplete version of competition- pricing and localised expansion. This post will more specifically talk about entry/pre-emption.

I.E the different scenarios which arise when a new competitor decides to enter an arena, where already one or a few incumbents exist.

As such, the nature of quantity competition differs in fundamental ways from that of price competition.

#2: The first non-obvious difference between quantity competition and price competition is timing. While pricing change can often be executed within a short notice- entry/pre-emption cannot be . Significant lead times are needed to set up a plant and start production.

Its implications are clear.

While in price wars anyone can be a follower or a leader and thus all players are pitted almost equally (hence the matrix system and the Nash equilibrium plays out so beautifully in this form of games- zero sum games), in entry/pre-emption games one can almost always put his finger and say – “here Joe is the entrant and Harry is the incumbent”

Another non-obvious difference is the “permanence” of the decisions. Just like price cuts can be achieved very easily, so can the decisions to reverse it.But a decision to reverse a previously taken market entry decision will likely attract a lot more attention (“unwelcome” and “media” are helpful adjectives here), costly write offs (when Berkshire exited the textile industry finally by selling all the machinery in one swoop- WEB commented that anyone winding up will realised how big a gulf exists between realizable value of fixed assets and the amount that is carried in the books. I just can’t help but show you this link. Thank you for your patience! ) and most strikingly some rolling off the heads.

Given all of this- the propensity of an entrant to resort to aggressive decisions are reduced.


#3: What makes things even more complicated – is the “rules” of the game change with every slightest development. Let me explain:

The decision to enter is to be taken by a challenger, and all the defender can do in a general way is to resist the incursion. Assuming that the entrant chooses between two possible entry moves – full frontal assault and avoid, the world looks markedly different for the incumbent in both the cases. When an entry has taken place- by definition deterrence has failed. An aggressive reaction to repel the entrant can lead to expensive,drawn out conflicts involving price wars, costly advertising expenses and extensive promotions.

In such cases the decision to compete needs to be balanced with the idea of accommodation as well. Balancing here implies the cost-benefit checked.

#4  These kind of dynamical situations yield themselves particularly well to tree form of analysis(we will discuss this in a later post). The matrix form is suitable for pricing, marketing and product feature decisions which in general are more easily revocable and can be adjusted many times.

#5. The first step in a simulation is to identify the actors, their motivations and the initial choices that informs them.

Once the incumbent has made its choice- the entrant has limited flexibility. It can either retreat or advance from its initial position. In the extreme it may decide to back out altogether. But the nature of such a simulation implies that a large part of the outcome will be determined by the incumbent’s reaction to entry.

So if an entrant has to maximise his chances of survival, it can do everything possible to avoid provoking an aggressive response by the incumbent.

The following strategies can work to alleviate this problem:

  1. Avoid head-to-head competition (both RCOM and HUL were guilty of this). Focus on niches.
  2. Proceed quietly. Taking one small step at a time. Dont go all out on TV  openly proclaiming to capture incumbent’s market share.

The lobster dropped suddenly into a pot of boiling water struggles and tries to jump out. Lobsters eased into a pot of cold water which is then heated gradually, remain passive, even as they become dinner.

3a. Signalling works. Use signalling to send out non-confrontational message out. A single store is less threatening than five. A single plant that satisfies only 5% is less threatening that 15%. Idiosyncratic financing works- large and visible war chests do not. Note both RCOM and HUL were guilty of breaking all of them.

Startups working away in garages busying themselves not only in stealing an incumbent’s market shares but also killing their business models attracts nothing but derision and board room laughter.

3b.  An incumbent who has only one specialization, who has only one line of income will be that much more vehement in his response than those who have a hundred eggs to watch. (Note Bharti and CP both met this criteria and thats why Bharti and CP ran like a hare, or rather fought like lions while the entrant was merely a bloodhound.)

4. Move in one market and not all at a time.

5. If there are multiple incumbents an entrant should spread the impact of its entry as widely among them as it can. Doing a little damage to all is far better than doing total damage to one.

6. Keep your fixed costs low for the time being.

Any attempt by the incumbent to hit back will likely lead to a huge collateral damage because the incumbents have a lot more to lose (because quantity of incumbents >> quantity produced by entrant. So profits foregone by price cuts is that much larger)

At all times- the entrant must openly repair the gallery roads but secretly sneak in through the passage to Chencang. Which was our idea #1.

“The Gun” by C.J.Chivers

Every once in a while a book arrives which leaves you spinning, disoriented and exhilirated at the same time. This is that kind of a book.

This book is also one of those, which deftly switches narrative styles- traverses time and contexts and yet keeps an unerring focus on the underlying theme- the Automat Kalashnikova -47. Otherwise known as AK-47.

The journalism is sweeping, the research intensive and history rich- C J Chivers, its author,  at once makes “The Gun” a combined narrative of human fantasies, intentions, values, ingenuity and follies.

From the fantasy of Dr Gatling to produce an efficient weapon of war to end all wars to Leonid Minin who was the modern day merchant of death, lord of war arming insurgencies aroundthe_gun-tfb
the world – the scope and revelations of C J Chivers is broad and comprehensive.

The price of a Kalashnikov is the barometer of a society’s fears”

Chivers  covers the eclectic personalities of gun history from Gatling, to Maxim to Hugo Schmeisser inventor of sturmgewehr(German assault rifle of WW-II fame), finally to firmly focus on Mikhail Kalashnikov- the inventor of the AK-47. But deep within the story also lies the failure of the Soviet state and the paradoxes it gives birth to. Rarely in mankind’s history an invention has been made by deliberation by committees and finetuned and improved upon by an entire nation. AK-47 is an exception. AK-47 though was initially conceived by Kalashnikov and yet the final product which we today see is a gun made by committees, by deliberative bodies and push and pull of Cold War politics. AK-47 long ceased to be Kalashnikov’s gun and instead took a turn towards being the Soviet Union’s gun.

The Gun is also a story of the insurgency and unrest that mars the 21st century. As Cummings, a gun runner remarked, that the demand of AK-47 remains- “an index of human follies”

One idea that repeatedly repeats itself in the book is the apparent simplicity of design, the huge margins of safety attributed to the major operating system of the gun which decided its longevity.  Stories of child soldiers retrieving caches of AK-47 years after being buried and then testing them successfully tells a story of its durability. What made the AK-47 so robust?

Neither nature’s ravages nor human stress tests were able to find a fault in it?

In many ways- the core takeaway for me was simplicity trumps. American made M-16, were a shattering and embarrassing failure against AK-47 in Vietnam. They jammed!

But why did they? Weren’t American manufacturing processes better than Soviet ? Wasnt American industry more innovative than Soviet?

M-16 had a lot of flaws.And these flaws were a combination of misguided institutional preferences and blindfolded trudging in strategic space. But from the perspective of engineering- it was too perfect!

It used modern manufacturing techniques which used precision cutting, very high level of calibration and tolerance levels. It was tightly fit and the gap between moving parts was so less that only modern automation could assemble such an engineering marvel.

The idea of engineering precision which enabled man to reach moon (equivalent to firing an intercontinental missile to land on a precise volleyball) was put to use. Tolerance levels shrunk to millimeters and even fractions of that.

When compared to M-16, AK-47 was an abomination of craftsmanship. When one removed its spring, the entire mechanism rattled and jangled. The cartridge feeder system was so designed that when a bullet was fired, the bolt action which expelled the cartridge pulled back a full 150% of a cartridge’s length.

Now what does it mean?

Think about a gun- and the soldier wielding it. Like the soldier- the gun also will travel to various climates, operate in various punishing environments and in extremely stressful combat situations. The gun had to be robust enough to keep operating in all circumstances.

For an automatic, one of the major problems is “failure to extract”. Failurefailure to extract to extract implies a gun’s inability to eject out the spent cartridge( like below, resulting in jamming of guns like in right). This implied that the gun had to keep ejecting cartridges at all times. Now being an automatic machine gun – it comes with its own uniqueness. The gun has to keep operating in long bursts thus the temperature inside a barrel can go extremely high.

In such cases, metal expands in unpredictable ways and any “precision” casting part will soon jam. In contrast, AK-47 because of its huge margins of safety- operated without any hitch at all times.

Long operations also meant accumulation of soot, possible accumulation of dirt etc. AK-47 was so ably designed with enough tolerances that Soviet gun testers had difficulty in making it jam. It was dragged through sand, soaked in salt water and dipped in bog and yet it fired. In one revealing place- Chivers discusses how a friend of Kalshnikov described the tests after it was dragged through sand

Look, look, sand is flying away in all directions- like a dog shaking of water from its fur”

The system due to its inherent margin of safety was self-correcting.

The implications and lessons for an investor are clear:

1. Maintain adequate tolerance level in your thinking- account for stresses in your viewpoint.

2. Adaptability of mind (because of high margin of safety he has gained in being flexible) renders an investor profitable and less prone to adverse events.


As one reads through the book- the motif is clear. While Soviets were time and again ready to challenge status quo and imitate their opponents, America found itself hobbled and paralysed by remnants of past and blind shutting out of any criticism for self. For once- the Soviets became free thinkers and the Westerns became ossified thinkers.

And free thinkers- won again!

Suman learns to trade and invest-II

Suman ran across the field with the shin high grasses caressing him and parting away as he moved across. With the spring sun behind him and a clear sky beckoning him- he ran with a joy in his heart.

And then he stumbled. Something hit his toe and he stumbled forward. When he looked back- the sky darkened to grey and a pot of gold lay in front of him. Glittering and shiny. He bent forward to pick a solitary gold coin lying on the field, but the standing grasses suddenly transformed themselves into protector and keeper of their treasure. The grasses joined themselves to form a matted covering, protecting the gold coin from Suman’s hands.

And almost spontaneously, the pot of gold shifted! It moved along the grass trail he made earlier as if it was dragged along by an invisible hand. The more he ran, the more he found the distance between the pot and him increasing.

No, no – it can’t be  it can’t be!

When he lifted his eyes from the receding pot of gold to the horizon- he saw three figures. Somehow Suman could see them clearly. Laughing, joyous mixed with occassional smirks towards Suman.

Arun,Ravi and Shekhar- high fiving each other, while the pot of gold lay at their feet. Suman felt a stab of pain hit his chest. He grimaced.And suddenly it became clear the futility of his position. He was running on a treadmill.

No, No, No- thats mine!

But his voice was muffled and choked. A mute cry. A silent groan.

Suman woke up with a start. His chest heaving slightly and a thin bead of perspiration was threatening to make its way across the jugular vein.

Suman got up and lurched across the living room. His shirt clinged to his back and he needed some cold water!

My throat feels like sandpaper. 

As he opened the door of he refrigerator he expected the inside light to guide him towards the bottle. It didnt glow up. The current was gone. But thankfully the bottle was still cold. Reasonably.

Suman gulped almost half the bottle in one go,but nursed the other half on the dining table for the next two hours. Trying to remember the dream but felt like holding back water in his palms. It quickly precipitated back in his memory, except some bits and pieces here. The intensity of feelings- the intense fear when he saw the pot of gold moving away, the despair and disappointment when he couldnt run behind it.

Get a grip, boy. Get a grip.

At about 10, he has an appointment with Manish. Strangely Manish made him write a different address as they spoke over the phone, than the one on the visiting card. His mind instantly went to the Gordon Gekko character. Manish didnt look like him, but maybe he transformed himself into one when he was trading. Gordon Gekko

As his car meandered across the lazy and jammed traffic across the city, he was slightly tensed. He knew nothing, and all he wanted was to make money. Why did he feel afraid ? He always felt afraid of new experiences. As he came across the venue, he was taken aback by how bucolic the setting was- the neighbourhood looked peaceful!

He anticipated that the environment will magically transform itself from a tranquil, serenity he was experiencing right now to a high pressure, boiler room kind of situation inside. He braced up.

As he moved through the glass door, he was struck at the realisation of being wrong, so badly. In front of him were Manish, Puneet and another guy- all busy at their respective desks. Manish was gleaning at the screens but in front of him lay a thick sheaf of papers and a well worn book. Something by Ed Seykota.

Manish stole his eyes from the screen at the man standing at the door and greeted him with a warm smile -“Hey Suman come over.”

Puneet too looked up from what seemed like a bunch of reports and a sheaf of papers, a calculator lay over them.  Puneet got up and exchanged the pencil in his right hand to his left and extended it to shake hands.

Suman was slightly dazed, a slight disorientation- on encountering something so much unseemly. The third guy sitting at the corner didnt even notice the new developments in the room. With his eyes fixed on the thick bunch of papers and newspapers, he sat on his chair- almost inanimate.

Suman didnt expect a one on one conversation with Manish to have two more people for company. Manish thrusted the conversational ball to him by expectantly looking at him to explain himself.

Suman at once braced himself weighed down by the burden of vulnerability, rather the admission of vulnerability.

“Manish, I want to learn to trade and invest”

Thats it! There is no turning back now. 

The words hung in the room like stale smoke. For a long time- no one said anything. Puneet kept looking at him. Manish leaned back on his chair. The room intermittently disturbed by the faint ruffling of sheets.

Manish looked at Puneet and finally turned to Suman and said- “Alright”. The words rang in Suman’s ears like an orchestra.


Puneet interjected- “But the path wont be easy, though! I, Puneet Khurana, will equip you with tools to understand psychology and finance together”

“And I, Manish Dhawan – will teach you how to put your emotions at one side and trade…”

A chair pulled back from the back of the corner of the room, and the almost inanimate reading man got up, raised his hands and bent his back to stretch himself. Puneet and Manish looked back and smiled.

“Suman- meet our third partner- Soham: listen to him carefully boy, when he speaks! He believes in reading 500 pages a day- so when he speaks hear him carefully”

500 pages! Thats humongous!

Suman peered into his eyes and saw through the bespectacled frame- a pair of eyes which were mischievous* and intense* at the same time.

“Hello Soham, I am Suman. I intend to learn investing from you”

A warm handshake and an even warmer smile, came from Soham.

Soham spoke haltingly, measuring his words, weighing the implications- “Its not an easy job Suman I can promise you that. But if you are here for some intellectual pow-wow there is no better place to be”


1 year later:

The TV in the cafeteria blared out at full volume:

“…Rajeev, the markets have dropped 25% in the last two months- and this is the worst June we are looking at. We are heading lower following Chinese real estate cues. Where do you think the bottom is?”

Sonia, we have been repeatedly saying that fundamentals are looking suspect for a long time and the market is just reacting to that. Chinese fever and Middle Eastern political problems are threatening high crude and a global deflation. And we expect markets to head down lower. Our advice to investors will be to avoid this kind of markets, and book losses if need be”

The mood at the table was sombre. No chest thumping admission of doubling or tripling of corpus. Arun’s face looked like it was hit by a truck, as he saw the index tumbling down. Shekhar didnt say much- but almost all stocks he had been touting for the past few months were shedding the flab.

But like last time, Suman didnt share the mood. At one level- nothing did change. At another level- everything changed. Suman closed his eyes for a moment, almost to collect all his determination and resolution – a moment to recollect all the teachings of Manish, Puneet and Soham over the past 12 months-

He opened his eyes. He lifted his mobile from the table. A few jabs- a number came up on screen.


“Yes, Ashutosh- this is Suman speaking. Can you please put in an order of 7000 for Indag Rubber?”

Folks, Suman had to learn all of this in 12 months- but you need not.

Manish Dhawan of Mystic Wealth , Puneet Khurana of Pragmatic Investing and myself are joining forces to arrange a workshop in Delhi where we will share how to master investing basics and principles over the course of 1 day. It will bring you at par with professionals of the game and give you tools and ways to beat the professionals in their own game.

At one level- Manish will discuss his trading strategies, his investing strategies, his system and will be giving away his system for free.

At another level- Puneet will discuss how to adopt behavioural psychology to detect imbalances in the the market and avoid the mistakes rookies do.

And yours truly, will be there to teach you- moat thinking, valuation shortcuts- where the opportunities are there in the markets and where do the threats lurk. A free wheeling session where you can ask everything you always wanted to ask an expert but never could find one!

Its said that life doesnt give you many chances- but when it does you will be a damn fool to miss it.


Ladies and Gentlemen, this is that chance!

Buy your tickets now, folks! There is a limited early bird discount as well! 





Suman learns to trade and invest-I

Suman’s brows were furrowed. A slight tension gripped his jaws and his eyes reflected regret.

He was lying prone on his bed, staring at the ceiling. The critters of evening were singing their songs, but Suman’s thoughts were somewhere far away.


“Joining us in studio today is Rajiv Goyal of PLD ventures… Rajiv when we met last time in our studio you were confident that NIFTY will be scaling 9000 mark. Now that it has, would you like to tweak your numbers higher?”
“Sonia, thanks for having me here. The way we see in PLD Ventures its the start of a secular bull run and definitely we will see NIFTY at 12000 anytime soon.The earnings are healthy, our economy is firing…”

The broadcast on TV seemed to have perked up the mood of the men having their lunch.

“I bought NHV last month, 50% up…”, Shekhar remarked stealing a small piece of paneer from Suman’s plate.
“… the way things are going, I dont mind paying capital gains and booking my profits” added Shekhar smugly.

“DishTV – long till 88. Short till 82. Doubled my 5 lakhs”- Arun, chimed in almost disinterested.
Easy money,folks! 

Ravi suddenly lost interest in TV and blurted out- “You doubled? Seriously?”

Arun looked up and gave a wink.

“Pass the dal first”

Suman had nothing to add really. A sinking feeling washed over him. Left out, alone, fending for himself. Did I make a mistake in not investing? Oh god, Arun doubled his 5 lakhs. Shekhar has made 50% in one month. If I would have invested  1 lakh in NHV- my return ticket from Bangkok would have been paid of. 50% monthly implies…

Envy,regret,anger. Everyone around him has become rich.A feeling of fear and envy swallowed him. His mind reeled back to a documentary he once saw- of a mongoose being cornered by a bunch of cobras. Helpless and Afraid. He felt something similar. Helpless and Afraid. Only there were no cobras here.

If someone asked his mother, she will never be able to remember if Suman had a mean streak. His wife at times got exasperated with the supine way he handled the office politics- taking on his chin and settling for the next time- everytime.

But at that moment, suddenly Suman felt the bite of a lost chance.He was envious and in pain. He could have invested 10 months back when Puneet advised him to. I should have listened to him. He is a wise guy. What did I do?

Puneet Khurana has always been a taciturn guy- measures his words and advices. But generous in spreading and voracious in gathering wisdom. An acute observer, of what the Bard said – “the tides in the affairs of men“. He eats behavioural psychology and breathes investing. If there ever was a stoic-thats him.

Puneet adviced Suman about two years back. Urging him to plough all in the financial markets. Suman was unsure and even he will never admit it that he was afraid.

Afraid of the “hairiness” and uncertainity of the macroeconomic situation. Fiscal deficit was high. Oil was higher. And investor confidence, if it could go any lower would have stood frozen in South Pole.Suman distinctly remembered the conversation he had in Puneet’s drawing room.

“Suman, look at it this way- can things get any worse?”

The Jack Daniels in Puneet’s hand made a beautiful color and Suman’s gaze was transfixed at that. His ears kept hearing the urgings and his mind, afraid of the uncertainty kept ignoring it.

The day melted into evening and his thoughts of anger and envy melted into pain. He lay on his bed trying to will away the pain. His thoughts drifted away to that chance encounter.

10 months back, Suman met Manish- a self confessed Ed Seykota fan, in the local pub. During the conversation they both discovered that Puneet was their common friend and the conversation really flowed from there. The conversation flowed from their family – both had a kid, of the same age to their drinking tastes- Manish liked Beer and Suman liked his whiskey.

The evening was amiable but when the conversation came to markets- Suman was not only afraid of investing in the markets but knew practically nothing of the markets themselves.How shorting works, what are futures, how to trade- nothing, nada! Manish’s message was clear- invest now. Suman felt it to be a misplaced confidence.

Suman lay on his bed simmering in a concoction of envy, anger and regret.If Puneet had a telescope inside Suman’s mind he would have shaken him into sense- because Puneet knew how deadly a combination this is. And if Manish would have known then he would have shown him how do savvy trader/investors make money.

Suman was close to losing it all. And he didnt know it.

He got up, took a long deep breathe and lifted his phone. A few jabs of keys and then a number. He is calling that number for the first time.

A ring.And then another. And then another.

“Hey Manish, this is Suman here.I need your help”

Can Suman get out of this cesspool of emotions? How will Manish help Suman? Can Suman master the financial market?

(…contd in Part II)

P.S: Its good to be back

A commentary on Competition Sutra #8

This is an analysis and commentary of the case study posed in the previous post.

For Vikram Monga, the scenario is completely skewed against him. He can’t win. And any victory will be merely pyrrhic( hollow). Plus, the choices shown here reflect only one iteration of moves. But real life is a string of moves – each joining with the next, caused by the previous. While a rational choice suggests to move to the Nash Equilibrium i.e. move towards price cuts and let the game play out. If Sam turns out to be truly wise he will also respond with his cuts. Not cutting will steal his customers, expanding physically to gain them back is suboptimal. Which implies there is only one action left for Sam to respond – price cut of his own.

As a result, a price cut will be matched by a price cut. But lets think from a different perspective. This game can be played once more, and again the same decisions will be taken – price cut matched by a price cut (perhaps this time Sam will cut the price first to force Vik’s hands).

When you set out to dig a grave for someone, dig two.

What looks optimal in short term, may turn disastrous in the long run. Having a long run perspective is perhaps the most important skill for a successful leader. If Vik realises that a price cut will initiate a chain reaction, then he can very well intrapolate that one day the margins left will be as thin as a wet tissue paper. He may walk into the sunset as a gung-ho leader who played a “no-holds-barred” game with his competitors and who knows the business media might celebrate it as well- and yet his successor will none the less be worse off.

A simple thing for Vikram to do is to choose to not to do something. That is- don’t disturb the apple cart, do nothing, choose nothing, let the status quo be maintained et al. However if he must he can try to completely change the nature of the game:

When you can’t win, change the rules

One of the big takeaway from this game is that there are certain rules at play. However real life is varied and different with its own dynamics. Vikram should try to change the rules of the engagement altogether

a. Invent itself as a platform: Can B&M increase the engagement of an average customer with its products and services? Can it make the average customer interact with the existing setup? And in the process can it give some value to her? Think how Target drives its business. It doesn’t see itself as a dispenser of products, it sees itself as a dispenser of retailing experience. That way it can turn the rules of the game on its head by imposing a psychological switching cost on the customers and monetizing it by raising the prices.
b. Niche, Niche, nice! : Can B&M and Jubilant Retail come to an unwritten, tacit understanding with the help of (plenty of) signalling to divide the offerrings completely among themselves? One of them completely focusses on the home and kitchen appliances, while the other stocks it minimally (else regulators will catch hold of them) and focusses completely on entertainment.
c. Loyalty Programs: Airlines do it, so can retail. Vikram should focus on increasing the psychological switching cost for his customers. Cutting price is also a kind of imposing a switching cost on the customer- but it is the feeblest and the weakest cost because anyone else can come in and undercut your price.

Competition Sutra #8: The games companies play


Vikram “Vik” Monga is thinking hard. And if he isn’t, he should be.

For Vik the piece of paper lying in front of his was telling everything he needed to know. And he was right. The situation is messed up- with no avoiding of the blood bath that lay ahead.


52 year old Vik was the CEO of Bentham & Martin – one of the largest retail chains in India and the largest in Eastern India. However for Vik, life wasn’t easy. He had Jubilant Retail snapping up at his heels.

Jubilant Retail was the new kid on the retailing block. Started merely 12 years back, aggressive expansion was in its DNA. It was almost as if the entire team of Jubilant were a bunch of toughened gun slinging westerners. There was Samarth “Sam” Prakash- their CEO, a young man with a taste for hard negotiation, close competition and fast expansion. 8 years back, Sam broke the back of a local suppliers cartel by acquiring a Bangladeshi supplier. At that time, the local suppliers scoffed at the move. But by the time they  scrambled to prevent the damage, their demise was cast in stone. Since then local suppliers stopped holding their prices high and Sam got cheap inventory.

Till now the Bentham & Martin had 450 stores in Eastern India. Jubilant Retail has 390 stores. 8 years back it was an expansion machine, but today it has settled down into an uneasy truce with Bentham & Martin. However, the low number of stores shouldn’t be judged as a giving up by Jubilant Retail. Bentham& Mills and Jubilant Retail were competing store for store in the most profitable circles of Eastern India. If anything, it didn’t compete in the sub 450 circles (Circles are divided as per the average billing rate of an individual customer unit- even a family shopping together will be counted as one customer. 450 implied here the average billing rate. It stretched to maximum 980 evident in metros to a minimum of 300 evident in tier 3 and 4 cities).

For Vik the problem was two fold. Western India was slowing down and to maintain the profitability he had to milk the Eastern cow. But milking the eastern cow was not easy. Any move to break the uneasy truce in East will lead to a bitter tooth and nail fight for market share.

It was a dicey situation indeed.

What in the hell is brewing here mate, muttered Vik to himself. If he opens new stores, Sam will mirror each move with his own store in every new circle. Result, driving real estate prices preventing further expansion, a decline in footfalls. This will kill the profits for both the firms and the net profitability per customer for both will fall to Rs 15/cust. However if Jubilant Retail decides to cut the prices- Bentham & Martin will be left holding the bag – Jubilant’s per customer profitability will outstrip Bentham’s.


For Vik Monga- the situation was worse than it looked. Any move to cut prices can create a converse situation where Jubilant responds by building new stores ( which will create the exact converse replica of the case where Bentham expands physically and Jubilant cuts prices, with the exact concomitant result) or matches the price cut by a price cut. In the later case, a price cut when matched by a price cut will give them both a near about the same net profitability per customer. Only, the  profitability difference between the two will shrink from 8% to 4%.

But for Vik – it was both a blessing and a curse that most probably Sam was also doing the same calculation. The blessing it was because in such a wafer thin margin business a dumb competition can kill the entire sector. Curse because dumb competition also meant easy lunch for the smart. And for Vik the balance was completely skewed. While he was given four choices – two of them were just decoys. And he understood it very well. If he played the game for a long time where each of them chose differing choices (i.e. not mirroring each other) then the resultant payoff for each player will  be sum of probability weighted profits ( in this case 50% of 30 + 50% of 20 = 25).

Bloody decoys. 


Vikram Monga looked up at the clock. It was 5.30 pm already. His  8 year old grandson had a school play today and he wont be missing it. He took off his jacket off from the chair, swooped his arms in. But his mind was still racing, he was thinking about the situation and mess both of the companies are staring into.

It’s a cesspool of blood, mud and filth. All the choices lead to either one of them.

If you are the advisor to Vikram Monga, what advise would you give him ?

Competition Sutra #6: The Coors went national

This is the sixth part ‘in Competition Sutra’ series. This series is an attempt to distill the core learnings of Bruce Greenwald’s seminal book “Competition Demystified”. We explored in previous posts what does growth do to incumbents. But we never did explore the effect of lack of growth on competitors who are trying to enter the market. This post aims to correct that.

It doesnt take much for Brendon Elliott Mills to stay amused. This is 1998 and his sharp mind, keen eyes and deep intellect has enough of the feed to keep him amused. For another lifetime. For the 67 year old Mills, amusements comes in three flavours- funny, damn funny and business hubris.

And why not, Mills have seen such an act of hubris from very close quarters. And he has been involved in it far more than he would like to admit. But Mills, today admits being struck with the fine predictions of untold riches due to a shiny new thing called internet. The Coors can of beer resting by his side, he glances through the business newspaper scanning the important news of the day. It took a lot for some people to spot others mistakes. For Mills, it comes easy.

Some one once asked him what interested him so much about failure and he couldn’t properly answer her. At 67 years, he understood himself better. He looked at the Coors can resting on the sofa side and his thoughts went 30 years back.

To his time in the company which didn’t have to pay a single penny to two greatest icons of his time to promote its products.

Because Paul E. Newman and Henry Kissinger drank Coors beer.

At the turn of the decade of 1970s, Coors had everything going in its favor. It produced a unique unpasteurized form of beer. Its devotees claimed it to have a certain “draft-like” taste of beer. Coors went one step further and touted the gifts of “Rocky Mountain” spring water with which it manufactured the beer. As a mid manager in Marketing division of Coors, Mills was aware of the strengths of the brand. However his sharp eye didn’t prevent him from seeing the differences between Coors and its bigger competitors like Anheuser- Busch.

Integration: The Coors way

For one, Coors was integrated vertically to a staggering degree. It produced its own strain of barley, mined its own coal and aluminum for the energy and cans respectively. It even owned the land from which the Rocky Mountain spring water came up from. It owned one big brewery in Colorado of the size of 7mn barrels in 1970. For the 37 year old Mills, it was a source of strength, for the 67 year old he has its doubts.

“Coors was a regional player till 1975. It produced and was consumed in 11 Midwestern states only. This lack of volume prevented the scale of economies kicking in for its various feeder businesses. That implied a higher cost and a higher management bandwidth to maintain it.”

These problems, Mills recounts, the management was aware of . But they drew the wrong lessons from it. He remembers “Old Jeremy”- Jeremy Wilkins, Head of Marketing and mentor of Mills , to have fought tooth and nail against the lesson which the management took from this.

At that time, Wilkins was seen as a dinosaur, a remnant of the past.

10 years later Wilkins was vindicated. But that didn’t matter- he died in 1980 and Coors started having trouble shortly thereafter.

“Old Jeremy correctly saw what the problems were and what its solution was. When you see the problem as lack of scale you will infer that the solution was building scale. And the management bought into it. Jeremy understood that things were not as easy. If you tried to build in a scale, that would imply expanding into untapped markets and territories. That strategy puts the company fortunes in terrible jeopardy. Expansion and growth is never free. And expanding into unknown territory with other competitors firmly entrenched can prove to be very costly. And indeed it was. Old Jeremy saw it.” remembers Mills.

It was not that Coors management are to be solely blamed for its harakiri. In 1975, Federal Trade Commission mandated Coors to go national. It was just the excuse that management needed. They expanded with gusto and shipped with passion. Till 1975, a single can of Coors earned almost twice an AB can did. At 11%+ net profit margin on a $520mn sales, Adolf Coors and Co. eked out more than AB did out of every single dollar of sales- $85mn profit on a sales of $1.65bn.

The Cost of Growth

” Coors when it expanded into new markets, had to buy its way in. We had to forge new relationships and new wholesellers. Often the stores with whom we signed the contracts were fringe players themselves. The larger ones were all taken and locked out by the heavyweights. That’s one. Coors flagship product was High Life brand of beers- which were unpasteurized. This implied tight cold chains, fanatical inventory management and the entire works. And that’s two. In business its hard enough to survive with three strikes. In beer business, two is all what it takes. Somewhere in late 1980s, we realized we have lost the plot.”

By 1985, Coors sold in 44 states across US, completely negating its local advantages of scale. On top of it, Coors ran a remarkably integrated ship. Its hub and spoke model of beer distribution centered around Colorado also increased the transportation costs. The story of Coors cuts across two big developments- beer is seldom seen as an aspiration product and expansion in a commodity business is fraught with immense risks. But what about the endorsements by Newman and Kissinger?

Priceless Mystique

The mystique of Coors didn’t translate quite well into profits.

In 1977, Coors collected $41.50 per barrel whereas AB without all the mystique collected $46.The trend continued till 1985 as well.

That mystique is no mystique when it is sold for free.

With the absence of such differentiation, Coors beer reduces to just another beer and thus a fiercely fought commodity war ensued. On top of it, while AB expanded its production capacity aggressively it was able to pick up the economics of scale quicker. In 1977, Coors production costs per barrel was $29 compared with $36.60 of AB. In 1985, it was $49.50 for Coors compared to $51.80 for AB.


But what changed between 1970 to 1985 that made Coors turn into an also ran? Mills takes a long gulp of the beer and recalls:

“Coors before 1975, was a regional powerhouse. We had 8% of our market share in our pocket by merely focussing on three Pacific Coast regions. Two out of these three, Coors was the dominant force. And in the other we ranked equally with AB. Post expansion, we still had 8% market share but we trailed AB in every state.

For Coors, expansion meant dispersion and dispersion meant costs. When Coors went national, it sacrificed its local home advantages and chose to compete on a level playing field with AB. For the national beer market, AB was the incumbent and Coors was the player outside looking in. AB was saved by the lack of growth in the beer market. It grew by only 3% annually in that period. And for Coors this lack of growth implied that scale advantages couldn’t be achieved fast.

The result? Coors operating income margins fell from once mighty 20% to a mere 9%. AB expanded to 15%. The difference is more stark in the details.

While AB spent 3 times as much as Coors for advertising, but $4 less per barrel.

Coors had this equation inverted, when it stayed limited to a region. Advertising costs are fixed on a regional basis. So AB coming in and trying to wrest away markets purely on an advertising spree will not be on a terrific advantage (just because of its deeper pockets).

Mills remembers somewhat wistfully- “If you take a look at the numbers of AB and Coors from 1970 to 1990 and hide the years you can perfectly imagine it as a zero sum game. Coor lost and AB won. Almost to the exact decimal point.”

Its inevitable that Mills doesn’t feel some chafing at the great fall. He saw the giants make mistakes and saw its demise from a very close angle. He quotes von Clausewitz these days to make sense of it all.


“Perhaps, Coors should have read ‘Vom Krieg’ , Clausewitz said- concentrate your best forces on your central line. Coors should not have expanded into unchartered territories. And when pressurised by FTC, should have done it only sparingly, trying to meet the bare minimum requirements. Perhaps we could have charged heavily for each can so that real demand stays low. Its counterintuitive, who kills a demand after all, but perhaps necessary”- offers Mills if somewhat presciently.

There is no guarantee that the “think local” strategy would have worked. But there is a fair chance that it would have made lives of AB executives a little bit more tougher. Beer drinkers are remarkably fickle. Footloose customers often signify lack of differentiation. So what remains is in essence branding and promotion to take care of it all.

As the markets make new highs, one is tempted to ask what he thinks about the new dot coms.

“Make no mistake”, Mills says – “Internet has made everyone an outsider looking in. There are no incumbents here. It is just the opposite of the beer industry. We are seeing a spectacular growth and everyone is competing. Growing a scale advantage or any other advantage is easier said than done here.”

“At the end, every site is a toaster. Zero differentiation.”


The post is a fictionalised version of the brilliant chapter in Competition Demystified. The characters are imaginary.


Edit: Discovered there were bucketful of grammatical errors. Fixed them all.

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