An hour drive with Mr. Subhanu Saxen, CEO, Novartis

I received a call at midnight from Dilpreet. "Will you go to receive Mr. Saxena" at the gate at 4.00?" After meeting many first generation entrepreneurs this was a time to meet a CEO of truly global MNC.

What will I do till 4 in the night. A better idea would be to go to pick him up at airport i thought and also since Jinal (wife) and Moulik (kid) were in Mumbai i had nothing better to do. So i came back home, had a clean shave, put on formals and left for the airport.

We reached airport at 2.30 in night and the driver wanted to have some food as Ramzan is in process and he can only have food till 4.00. I was in a dilemma whether to ask him to go for food or no as the flight was scheduled to land at 2.55 and i was sure that the driver would not be back on time. However i allowed him to go ahead and have food.

The flight was on time (it generally will be when u do not want it to be). Mr. Saxena shook the hands and i told him that the car would take sometime due to Ramzan. He was absoutely cool about it, this was at 3.00 in night. I was really impressed. He started his discussion with ISB and how he has been associated with the institution, then the discussion shifted to INSEAD and life of an MBA student there. It was almost half an hour we were standing outside the airport and discussing about MBA and he was least bothered about the delay in car. Have never seen such a down to earth CEO. Finally the car came at 3.30 and we started for ISB. While in the car the discussion went on to the hottest topic, the financial mess. I liked his views; it happens every decade. It will come and go and come again. The only difference is the % fall in every crash has been higher than the previous one. Few rules of investing that he followed; never invest in a single asset class, never take a loan or always try to repay the loan as soon as possible and never trade in derivative, the weapons of mass destruction. He recommended a book 'richest man in barbelon'.

It took us an hour to reach ISB and I should pat my back was able to keep the CEO involved in a discussion for more than an hour. It was a great drive, i never thought i would be able to keep on chatting with him and also make him chat for the entire drive...

Bail Out - Moral Hazzard

I was curious to know why is US govt. bailing out these companies who deserve to be wiped of for their wrong doing. I asked this to Prof. Krishna Kumar and his reply was "there is a school of thought who feels that the great depression of 1929 could have been avoided. It was a similar situation and the govt. did not provide funds to generate liquidity. This was despite of the fact that US govt. had ample funds. Hence fed does not want to take a chance this time".

This is arguably the only reason why fed is justified in bailing out. But it gives rise to one more evil of 'moral hazzard'. All these firms did what they were not supposed to do, now they are paying for their wrong doing and US govt. is providing funds for that. What is the guarantee that this will not be repeated few years from now. I had few important points that I wanted to pen down.

What happened after the great depression, there was a lull of economic activity, large scale unemployment, etc. for a period till 1933. Post that there was world war II, after which US emerged as a super power. We do not know if there was no great depression what would have happened and it is difficult to argue for any scenario.

This time it is difficult to imagine what would have happened without this bail outs. It is just a hypothesis that the financial markets would have crashed, but even if this happens, I would like to argue so what? Is bailing out a permanent solution? Where is the money for these bail outs coming from? As far as my knowledge goes there can be three options:

1. Increase taxes - you will make the condition of an average person worse as he is already under the threat of unemployment and by increasing tax collection his income further reduces
2. Print more money - this would certainly increase inflation and hence hurt the pockets of common man
3. Borrow from other countries - Borrowing comes with a servicing cost, US economy has already borrowed huge money to fund the wars, additional borrowing for these bail outs would further increase the servicing cost and hence the budget deficit.

Hence the question, is bailout a permanent solution to this? I strongly feel that by doing this US govt. is just postponing the problem. It is a myopic view being taken by Fed. Only time will tell who is right?

Financial Mess

Lot has been written about regarding the current financial mess in the economy. Prof. Subra shared a very useful link with all of us which gave a detailed analysis on the hows and whys of the condition, you can access it on

http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/

I am not going to repeat any of these things as there would be nothing new. However looking at this financial mess a bigger question that arose in my mind is how can this happen? All these companies who are either no more or have faced the turmoil had the so claimed best brains in the world. Inspite of having the most envied talent pool they were neither able to foresee such an event nor they were able to prevent any of such things...

Isn't this surprising!!! Is it time to question the definition of best brains and do a check on the source from where these best brains come from.

Is the education system so hollow or can we say that the education institutions are creating literate heads but illiterate hearts.

Just a thought to ponder upon...

Tata Singur

It has now been concluded that Tata will move out of Singur and Nano will not be rolled out from the state of West Bengal.

If we just look back and think about the events we find that the entire process is quite disturbing. I do not have anything against Tata or for that matter against industrialisation. If we want to bring the masses out of the vicious cirle of poverty, economic growth is a must and for economic growth, industrialisation is a must.

But suppose someone comes tomorrow and tells me that he wants to buy my home and he will pay twice its current market value. Will I be Ok giving it away. I do not think so and hence how can I expect a farmer who has an emotional attachment with the piece of land part away with it for the sake of industrialisation and economic growth. This is irrespective of the price being paid. One can argue that it is against the right to property.

However our govt. has been doing this under the law of 'eminent domain' and i do not think this is good for long term. This would further increase the income gap and create unrest in future. I certainly think that buying land after the concent of owner and that too not only for a price but for a share in profit from industrialisation will be the best way to economic growth. Suppose if every farmer of Singur was offered shares in Tata motors so that the upside of industrialisation is also shared among poor farmers, it would have been a better solution.

Lets ensure that we do not go against the 'right to development' in our bid for economic development.

First PE Conference at ISB

We had our first PE conference at ISB on September 6, 2008 and I was in the core team for organising the same. It was great fun, made new friends working for the conference. At the conference I was shadow to Mr. Deepak Shahdadpuri from Beacon. It was the first time I was supposed to spend atleast 6 hours with a man of such caliber. Was a bit nervous but did pretty good job. Also got some good insights into PE industry from him.

All in all it was a good experience.