This post might come across as a surprise to few close friends.
I think of myself first as an investor. Even before I had my first job, I thought about investing. I dabbled through several mistakes in real estate and other places before finding a footing in equities and entrepreneurship.
Several times in life, I’ve sat at the wrong table and waited for things to get better. A wrong job, a bad investment, a bad industry… to list a few. Talk about table selection and I’ve made all mistakes one could!
2 years in a job I hated. 3 years with a significant investment I wasn’t sure about. 2 years in an industry that I knew would take me nowhere.
I waited.
Nothing really happened!
Sitting at my window desk on a rainy day, as I was thinking about why I should be an entrepreneur, I spotted the vegetable vendor who visits our street everyday.
I have been seeing him since 2008.
He sold vegetables to our neighbour and took shelter from rain in their verandah for a while. Our neighbour spoke to him and then disappeared inside. Few minutes later, she came back with a tiffin box wrapped in a cover. I guess she gave him his lunch.
That gesture shows how much she reciprocates the goodwill he has created.
The guy is fairly reasonable, has a pleasant demeanour and is a hard working chap. People in our street depend on him and trust his arrival, even on rainy days.
On a day like today, it is easy for him to stay at home in warmth. That would mean few families have to go out in rain shopping for vegetables or make do with whatever they have at home.
Or he could apply a rain-induced surge pricing model and charge 2x on his vegetables. Profit maximisation by the MBA book. He doesn’t. In the process, he has earned the trust of his customers.
These guys are the real heroes of business who carry the society beyond their weight and get very little credit for it. They give me the inspiration that you can do a good job in any business irrespective of size.
As the rain subsided, he walked away pushing his cart. I came back to my thoughts and the motivations for why I am an entrepreneur.
Profit as a side-effect:
I have to admit that profit is one of the reasons we do business for. There’s nothing wrong about being profit-oriented.
Great businesses have profit as a side-effect of doing something profoundly good, not as a reason for doing business. Of course, keeping costs and cashflow under control is very important. People have to be paid good salaries and expenses have to be met. Or else, the business will soon be history. Profit ensures business continuity and hence, is important. But profit and money alone cannot be motivations for being in business. There have to be stronger reasons.
After spending some time thinking on it, being inspired by various people including the vegetable vendor, here are my reasons.
Pride in performance:
Doing a meaningful job and having pride in your work is very important. Ensuring high quality service, continual improvement, doing the right thing, not taking short cuts, paying employees good salaries, contributing to the society in a positive manner, etc are worth more than just pure pursuit of profits.
The need to build something of high quality has to be our core motivation.
Autonomy:
Our capitalistic society is designed such that people with money have more power. However, money follows the law of diminishing returns above a certain limit. For example, if you think you need 3 crores to live a comfortable life, having 30 crores is not going to improve your life by 10 times.
More than the pursuit of money, I will be optimising my work for autonomy.
To walk to my own beat and to chart my own path. To venture into places my heart takes me without being constrained by the lack of money. For that reason alone, I want money. Having enough money is good because it gives you autonomy to a good extent.
Optimising for autonomy means
Long term value creation:
I am not talking about valuations here, but good old simple value! Value creation for employees, customers, society and finally, shareholders. It is not about moving fast and breaking things, but about caring for customers and going about business at a speed that is right for you and the business. It is not about bootstrapping or funding, but about taking the right kind of money from the right kind of people (who understand you and your business) with right expectations.
It is not about baiting customers with cash back and discount programs (and later surge-pricing them), it is about serving them well at a mutually beneficial price. It is not about being lazy about your cost structure that you try to pass on to your customer, but about being efficient, frugal and lean so that you can afford to charge lower and still create value for yourself and your company.
It’s not about being focused on value creation itself, but about being focused on the right things and let value be created as a side effect.
It’s a journey and never a destination, and hopefully, I’ll be at it for very long.
Ever since 2005, I have really enjoyed studying businesses and have kept my money mostly in publicly listed stocks and since 2011, been interested in building one myself. At the same time, I love and seek inspiration from nature.
I’ve had trouble keeping them together because capitalism and its main cogs – business and finance, seem to be largely working against nature. I find it disturbing and hard to balance.
Several years ago, I owned ITC shares – a friend questioned how I could make money from smoking and tree-chopping (paper). I got out (though my reasons are ambiguous at best).
I used to track my expenses religiously for 8 years – initially using notepad and Excel, later with GnuCash.
In 2011, when I started my own company, time became a limited commodity. I found it hard to keep track of my expenses. So I devised a simple minimalistic method to track my expenses – one that took just 15 minutes every month.
It’s been exactly 4 years since I quit from my last job. This morning, kept pondering over the years gone by.
4 years is a long time. I’ve had my share of ups and downs. Here’s a short long note on how things have been so far.
My idea behind quitting the job was to explore an entrepreneurial opportunity. To see if I had it in me to be an entrepreneur, if I could learn the ropes, if I could build a business, make it sustainable and possibly scale it up.
Charlie Munger often says, “tell me where I’m going to die, so I will never go there”. Avoidance of terminal risk is of great importance to him (and to Warren Buffett).
That is a very important thing to follow in life.
A Russian roulette is one game that is simply not worth playing at any price, even though the odds are in your favor. (There is a 5/6th chance that you will survive and there is a 1/6th chance that you’ll get the bullet, if the chamber is reset every time.)
Any game that can get you killed is just not worth it! Even if there is a good chance that you might survive and win a hefty prize.
A friend and I were discussing money and financial freedom, amongst other things in life.
“How much is enough money to be financially free? How do you decide?” I asked my friend.
Is it a fixed number? The ability to not work for money and have enough of it to pay all your bills through your lifetime? Is it 30 times your annual expense? 50 times? Having a good part of it in inflation beating investments? Or having a business that has good free cashflow and longevity?
A few months ago, while reading Buffett’s annual letter, I came across 3G Capital and its principals, mainly Jorge Paulo Lemann, and got curious.
This article on him that made me more curious.
Now, Buffett is an astute dealmaker. And fantastic at picking partners in business – nearly all his partners are people with outstanding characteristics. Few examples are Charlie Munger, Tom Murphy, Mrs Blumkin, Albert Ueltschi and Ajit Jain. Even the lesser known people like Ted Weschler and Todd Combs are ones I’ve come to admire a lot.
I just realized its been exactly 10 years to the day since I first entered the stock market. Being risk averse and skeptical, I equated stock market to casinos and thought I’d never touch it with a long pole. Little did I know that a large part of my own life would be devoted to studying and investing in that very same treacherous market.
The date was May 17, 2004. A senior colleague looked very pale and I came to know that he had lost a lot of money that day in the crash. I was perplexed as to why people invested in risky things such as the stock market and vowed that I would do no such stupid thing.