Skip The Headlines. Get Into Details

You tube shorts. Tik Tik Videos. Book summaries. Headline Summaries. Summary of the summaries. We are the Maggi 2 minute people. And even 2 minutes is too long these days. Khane me kya hai? People are rushing to deliver things to you in under 10 mins. It feels to me that we are staying right next to a kirana store. The next iteration is someone dressed as Santa standing outside our door every day with a pack of goodies, as our habits get mapped by AI and our dumb phones provide enough information for these companies to know exactly what we need and when. Desire mapping and delivery to follow. And then fantasy mapping and delivery. Cross the fantasy mapping. That will need the platform guys to turn contract killers for those households married for decades. Just kidding!!

Relax. We need to take it easy. Skip the summaries. Go long on detail. Spend time alone and let your mind wander. See what comes out (like this piece). Stop the dopamine flow. Can’t avoid it altogether though, this blog was typed on a laptop and is most likely getting consumed on a screen. But we need to be mindful.

What’s the problem with the summary? You miss the nuances. The grey. The edges. The wrinkles and creases. That is where all the fun is. That is what makes each one of us unique, and human. Summary of human kind is that we are all male and female (sincere apologies to them/they/it and others). Then continent wise white/brown/black and yellow (repeat sincere apologies to the rainbow community). Then religion wise. Etc Etc. As you keep going down, even at the smallest subset of this is not interesting at all. Just a statistic. Or a employee code. Or a government issued identification number. Where it gets really interesting is starting with you as the individual. Your story, your experiences, your beliefs, your uniqueness. Not the stats. Understand? That’s why the headlines don’t capture anything at all. The devil may be in the detail, but he is definitely interesting (sure as hell, get the pun?).

All love stories are the same. Boy meets girl (or the other way, or boy and girl marry) go through ups and downs and then live happily ever after. Or live happily until they decide to separate and then go on to live happily ever after with other partners. Or realize that they are missing one another too much and come back to live happily ever after. You get the drift. It’s the details that make all love stories beautiful – the background of the people, the courtship, the circumstances, the family members/friends/pets and all other things that make each love story so beautiful.

At the top, even life headlines are the same - birth and death. The details make the difference. Did you get the ovarian lottery or the short straw? It takes an entire village to raise a child. How was your village and the community? How much did you take? How much did you give back? Your attitudes to life and people. Your personality. Your evolution as a person. The role of luck. Your taking the asymmetrical payoffs. Your connections, to people present, past and future. Even the tombstones don’t capture it. Name. xx.xx.xxxx to xx.xx.xxxx Loving Spouse. Doting Father. Friend Of Friends. The One For All. You see, the summaries suck.  

And in the same way, Friendship headlines are the same. The details make all the difference.

Business headlines are the same. The details make all the difference.

Civilisation headlines are the same. The details make all the difference.

Working life headlines are the same. The details make all the difference.

So start bottom up. Don't let the headline click bait manipulate you. Take time and effort to absorb the details. Get to know the stories behind the numbers. And then life will be fuller, more fun. In the end, we can’t beat the tombstone summary. But while we are here, lets make it worth the time and effort.

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Markets - Private & Public

India is the land of opportunity. Entrepreneurs capitalize on opportunities and solve problems to create businesses. We need many more of these rare breed of individuals to take our country to the next level. Till the longest period of time, public markets were the only way to access equity capital for entrepreneurs. However, over the last two decades, private markets have become very large and there are lessons that we as public markets investors can learn from the same.

Private markets here refer to privately held and VC funded companies. Public markets here refer to the listed companies. It is fascinating to see the journey of some very large and successful private companies which have gone public, many more are in the pipeline to do so.

As an active public markets investor, I have spent a long time scoffing at the workings of the private markets. But as I have matured (hopefully) I wanted to assimilate what is best in that world and work to bring it to this side. As it turns out, there is a lot that we can be done. So here we go. 

Some of the salient features of the private markets -

Founders backed by VC are very hungry for growth and scale and are built to delay gratification (profits) for later.

They work in teams (co-founders are common) and enable the larger teams. The teams also have stock options to benefit from the eventual pay day.

The founders rely on the VC not only for funds but for strategic advise too. The VC have their playbook for the growth of the companies and eventual exits.

The founders are not averse to diluting their stake for the sake of raising capital to propel growth. Owning a smaller piece of a larger pie is preferred.

Many of these companies are founded to tackle large issues and work on “mission mode” most of the time.

Mostly “institutional” capital backs these companies.

Private companies are staying private for longer.

Private markets have a massive “network effect” and the culture of “paying it forward”. The culture of the ecosystem is to help out one another.

Now let us look at what public markets can learn from the success of the private markets.

While many public companies are profitable and majority owned by promoter families, growth mindset is sometimes lacking. Slow and steady or fast and the furious can describe the two divergent approaches. All the multi-bagger gems in the portfolios of ace investors grew multi folds by growing both their top and bottom lines. Growth comes first. Valuations follow. The aim should be to go for sustainable growth.

Serial entrepreneurship in the VC world is common - as an investor or an operator. Too few in the business world go back to backing of new promoters or starting new ventures on their own, having successfully exited earlier ones. Their experiences are extremely valuable and should be put to good use. 

There is an opportunity to create a good “sounding board” to get ideas validated and understand the nuances of running a listed business. Successful public market investors should play a more active role in advising and guiding entrepreneurs on scaling up their businesses and at the time of making important decisions.

Both the worlds involve a leap of faith and a bet on the promoter. Public markets have the advantage of a certain size and scale. Private markets can bet on teams with ideas on a drawing board.

On the scale of risk, private market investors seem to love uncertainty while the public market investors seem to love predictability. This is interesting, as the largest investors in private markets vehicles in the developed world are institutions and endowments who should, in theory, be averse of the extra risk. The winners take care of the losers in the portfolio, it is true of both the private and public markets.

Public markets have the additional benefit of liquidity, profits and validation of your investment thesis by the other investors. It is also an “open club” where any investor can own the piece of the business unlike the “private club” structure of the private markets. 

In the private markets it is not rare to see many “marquee” investors on the same cap table, coming in at much higher valuation rounds and significantly different rights as the companies scale. This is rare in the public markets.

Some private market investors have now become very good public market investors. We are also seeing many public market investors actively seeking and investing in private markets. The “crossover” is already happening.

Given the size of our country, we are still extremely capital deficient, especially equity risk capital. There is an urgent need to back the visionary promoters who have achieved scale and are raring to go to the next level.

Our aim should be for the public markets to keep getting better and deeper, which can only happen by enhancing the quality of the companies and the investors. Because ultimately, the private markets are dependent on the public markets for their exits.

Choose Your Hard

 
Being passive is easy.
Being active is hard.
Choose your hard.
 
Having a fixed mindset is easy.
Having a flexible mindset is hard.
Choose your hard.
 
Binge watching is easy.
Binge eating is easy.
Working on yourself is hard.
Choose your hard.
 
Following someone else's path is easy.
Creating your own path is hard.
Choose your hard.
 
Blaming is easy.
Taking ownership is hard.
Choose your hard.
 
Throwing up your hands and walking away is easy.
Folding your sleeves and putting your shoulder on the wheel is hard.
Choose your hard.
 
Having a perfect life on social media is easy.
Having great relationships with the people who matter in life is hard.
Choose your hard.
 
Earning sympathy is easy.
Earning envy is hard.
Choose your hard.
 
Thinking only about yourself is easy.
Thinking about others is hard.
Choose your hard.
 
Taking the max from the pie is easy.
Expanding the pie is hard.
Choose your hard.
 
First impressions are easy.
Lasting impressions are hard.
Choose your hard.
 
Being distracted is easy.
Being focused is hard.
Choose your hard.
 
Building material wealth is easy.
Building social wealth is hard.
Choose your hard.
 
Not taking risks is easy.
Taking risks is hard.
Choose your hard.
 
Following someone else's benchmark of success is easy.
Creating your own benchmark of success is hard.
Choose your hard.
 
Expecting loyalty/love/respect is easy.
Giving loyalty/love/respect is hard.
Choose your hard.
 
Impatience is easy.
Patience is hard.
Choose your hard.
 
Thinking short term is easy.
Thinking long term is hard.
Choose your hard.
 
Being bitter and resentful is easy.
Giving life second chances is hard.
Choose your hard.
 
Being fake is easy.
Being genuine is hard.
Choose your hard.
 
Being distracted and doing superficial work is easy.
Being focused and doing your life’s calling is hard.
Choose your hard.
 
Being nasty is easy.
Being kind is hard.
Choose your hard.
 
Not knowing today is easy.
Not knowing even tomm is easier.
Make the choice.
 
Consensus is easy.
Contrarian is hard.
Choose your hard.
 
Criticizing is easy.
Complimenting is hard.
Choose your hard.
 
Being salaried is easy.
Being entrepreneur is hard.
Choose your hard.
 
Preaching is easy.
Doing is hard. 

Choose your hard.

My Budget Wish List

It is the time of the year for budget wish lists. Lower taxes and better standards of living are on everyone’s mind. Reminds me of something a wise person said.

Everyone wants to go to heaven but no one wants to die.

Going with the seasonality effect, here is what I wish to see this year.

Tax farm income in excess of 10 lcs –

There is no reason for all farm income to be tax free. Also do away with all the tax incentives for farmers on purchase of all luxury vehicles.

Create a department of efficiency –

The same way as proposed in the US, a special ministry should be created to take a look at the government departments and their expenditures and suggest measures to cut flab and get efficient. 

Make PPF voluntary –

The middle class and lower middle class is leveraged with loan rates being much higher than what returns being offered on this mandatory investment. For retirement savings the NPS exists. Trust the citizens to plan for retirement with a combination of SIP, insurance and NPS. Will also improve ease of doing business by eliminating the PPF related compliances.

Make STT and brokerage paid deductible from capital gains –

STT was introduced when capital gains were abolished. Now we have both co existing. This will provide some relief of the increase in capital gains taxes undertaken last year.

Make GST paid by individuals as advance tax –

Up to 25% of the GST paid by individuals in the highest GST bracket should be allowed as advance tax. Will reduce the demand for items to be brought down from highest tax bracket, widen the tax base and improve compliance. PAN of the individuals can be provided at the time of consumption to get this benefit.

Create a scheme to encourage gold recycling in the country –

Incentive households and temple trusts to recycle the gold being held by them. Sovereign Gold Bonds was a good scheme. Channelise the domestic capital into areas of the economy where it can be productively used.

Stop export of domestic capital –

We remain short of domestic risk capital, in spite of the rise of the SIP and equity cult. The recent IPO of an auto MNC sets a dangerous precedent. A large consumer durable MNC is next. More will come. These MNC’s have already extracted their capital and profits out of the country. Now they are raising fresh capital and taking it back to their home countries. This should not be allowed. Any capital raise by an MNC in India should be strictly for reinvestment back in the country. Billions of dollars have already been taken out. Many more tens of billions will follow, if this is not stopped.

Make hospitalisation expenses not claimed under insurance deductible as expenses –

Many families suffer reversal of fortunes and loss of accumulated savings by medical emergencies where they are not covered/reimbursed under insurance. Such expenses should be allowed to be treated as expense without limits and deductible from income being offered for tax, up to the annual income of the year.

Retain different tax rates for different income types –

There is no rationale for the tax rates to be same on interest income and equity capital gains. The current system works well. There is no need to tinker with the same.