Walking away from a wrong table

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!

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The motivation for entrepreneurship

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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

  • significant ownership to control the company
  • mostly bootstrapping, but being open to taking selective strategic shareholders when need for money arises without diluting voting power
  • be conscious of where I spend my time

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.

The ethics of money and business

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).

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Never play the Russian roulette

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.)

Source: Wikipedia
Image Source / credit: Wikipedia

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.

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True financial freedom

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?

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A decade of investing

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.

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The decision to allocate capital

Last year, in June, I liquidated most of my debt investments thinking that I would invest it in my own company.

outsiders

In that period, I also read this book – “The Outsiders”. I really liked the modus operandi of the entrepreneurs featured in the book. They were all capital allocators and had done very interesting things – many a time going against conventional ‘grow big’ logic. Those guys often would ask themselves,  “which is the best option to put my next Rupee into?”. They would always seek an edge. And got out of businesses with leaky-boat economics. And invested heavily into businesses where they could build more competitive advantage.

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Growing the root

I read this statement by Rahul Dravid in an article and loved it. It’s similar to this post I wrote a while earlier.

“When I’m requested to speak to youngsters I like talking about this phase of my life and liken it to fascinating plant: The Chinese Bamboo. You can take a Chinese bamboo seed and plant it in the ground, water and nurture the seed for an entire year & not even see a single sprout. Infact, you’ll not see a sprout for 5 years. But suddenly, a tiny shoot will spring from the ground. And over the next 6 weeks, the plant can grow as tall as 90 feet. It can grow as fast as 39 inches every 24 hours. You can literally watch the plant grow.

What was the plant doing during these 5 years, seemingly dormant period, it was growing its roots. For 5 full years it was preparing itself for rapid, full growth. Without this root structure, the plant simply couldn’t support itself for its future growth. Some would say the plant grew 90 feet in 6 weeks, I would say it grew 90 feet in 5 years & 6 weeks”