My relatives there are reasonably well to do in a general sense. They have good land holdings.
But, I didn't find them as happy as they were may be 3 years ago.
I enquired for the reason and found that there was no farming that was going on for the past 1-2 years in their fields due to scarcity of water.
Farming was the only source of income for most of them (like salary was the only source of income for most employees) .
Whatever they saved until now was almost always invested in land as land prices were increasing.
They never assumed a situation where in there may be no water for farming ( i.e. assuming good times to continue forever ! like most employees who take loans to buy houses, things etc., that are out of their reach, ignoring the fact that their jobs may not be guaranteed)
My relatives are slowly eating in to whatever little cash that they have and know that it is not going to last for too long if the bad times persist .
Given the government's squeeze on black money and consequent lack of liquidity, they may not be in a position to sell part of their land either even if needed.
Now the question is how many of us are in a position to handle such a situation wherein most of our net worth is in land & buildings (illiquid and may not be useful when needed) if we lose our job , without much stress ?
Mutual funds may be volatile in their returns but their liquidity comes really handy in handling life's volatilities.
“If past history was all there was to the game, the richest people would be librarians” - Mr. Warren Buffett, Chairman, Berkshire Hathaway
“It's not supposed to be easy. Anyone who finds it easy is stupid”- Mr. Charlie Munger, Vice Chairman, Berkshire Hathaway
What the best investing minds in the world say from the above is that ‘just bookish knowledge’ may not be sufficient and investment may involve other complex skills (like mastering one’s own psychology so that one can execute what one learns etc.,)
Sure Mutual Funds are a great way to buy part ownership of businesses, to participate in 'India growth story' , to reduce glaring disparities in wealth distribution in the country. It is a ‘Great Idea’.
Is it sufficient to have just a ‘Great Idea’ to get the desired results ?
After all mutual funds are in existence for more than 25 years now! Did that change how people invest ? What percent of people's net worth goes in to Mutual Funds (Equity) even today ?
A 5% net worth in Mutual Funds or in Equity may satisfy the gambling tendencies of a person and may be useful in boasting to his friends that he too is savvy.
But, 5% net worth in Mutual Funds, does it make any material difference to the life of an investor when a overwhelming part of one’s portfolio is invested in instruments like FDs, Real Estate etc., ?
Getting more than 50% of net worth in to equity through mutual funds, might change an investor’s life to the better. But, is that easy ?
If that is easy how many people are doing it ?
Here is what one of the greatest entrepreneurs of all time and the creator of the ‘Apple inc’ , Mr. Steve Jobs, has to say about the complexity of getting a job done and what goes in to the ‘execution’ of an idea ‘however good’ the idea may be.
Here is the Source video :
And the edited transcript,
=============================
One of the things that really hurt 'Apple' was, after I left, John Scully got a very serious disease.
And that disease - I’ve seen other people get it too -it’s the disease of thinking that really great idea is 90% of the work.
And that if you just tell all these other people, you know, “here’s is this great idea,” then of course they can go off and make it happen.
And the problem with that is, there is just a tremendous amount of craftsmanship in between a great idea and a great product.
And as you evolve that great idea, it changes and grows.
It never comes out like it starts, because you learn a lot more as you get into subtleties of it and you also find there are tremendous trade-offs that you have to make.
I mean, there are certain things you can’t make electrons do. There are certain things you can’t make plastics do or glass do or factories do or robots do.
And as you get into all these things, designing a product is keeping 5000 things in your brain and fitting them all together and kind of continuing to push to fit them together in new and different ways to get what you want.
And every day you discover something new that is a new problem or a new opportunity to fit these things together a little differently.
A few days ago I read this interesting story about books and reading.
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What you were reading was the lees and scum of bygone men:
Duke Huan of Ch’i was reading a book at the upper end of the hall; the wheelwright (a person who makes or repairs wooden wheels) was making a wheel at the lower end.
Putting aside his mallet and chisel, he called to the Duke and asked him what book he was reading. “One that records the words of the Sages,” answered the Duke.
“Are those Sages alive?” asked the wheelwright. “Oh, no,” said the Duke, “they are dead.”
“In that case,” said the wheelwright, “what you are reading can be nothing but the lees and scum of bygone men.”
“How dare you, a wheelwright, find fault with the book I am reading. If you can explain your statement, I will let it pass. If not, you shall die.”
“Speaking as a wheelwright,” he replied, “I look at the matter in this way; when I am making a wheel, if my stroke is too slow, then it bites deep but is not steady; if my stroke is too fast, then it is steady, but it does not go deep.
The right pace, neither slow nor fast, cannot get into the hand unless it comes from the heart. It is a thing that cannot be put into words [rules]; there is an art in it that I cannot explain to my son.
That is why it is impossible for me to let him take over my work, and here I am at the age of seventy, still making wheels.
In my opinion it must have been the same with the men of old.
All that was worth handing on, died with them; the rest, they put into their books. That is why I said that what you were reading was the lees and scum of bygone men.”
===========================
Natural tendency of the mind ‘to avoid the hard work of reading and thinking’ , makes it ask the question ‘ if all that is important can’t be conveyed through books, what’s the point in reading books’ ?
The counsel of Wise men on reading,
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“The man who does not read has no advantage over the man who cannot read”-- Mr. Mark Twain
“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time –none, zero” -- Mr. Charlie Munger
“I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading. I don’t think any one book will do it for you” --Mr. Charlie Munger
“If you would tell me the heart of a man, tell me not what he reads, but what he rereads” -- Mr. Francois Mauriac
“A reader lives a thousand lives before he dies, said Jojen. The man who never reads lives only one” -- Mr.George R. R. Martin
“No one ever reads a book. He reads himself through books, either to discover or to control himself ” -- Mr. Romain Rolland
=====================
Overwhelmingly the wise recommend reading books.
Then what could be the answer to this puzzle that all of that that is important can’t be conveyed through books vs reading books is very important ?
Probably both of them are correct.
Writing a book may be best possible way for the masters to convey what they want to, even if they knew that they may not be able to convey all that they have.
And reading books is the best possible way to reach near perfection in ‘Seasoning the mind’.
‘Seasoning of the mind’ happens best when a ‘great amount of reading’ is interspersed with good amount of ‘practice’ of what one learns.
The question that we should ask ourselves is whether we are focussing on things that are really important or are we trying to pretend that we are busy?
Here is a wonderful extract on the importance of time management.
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On one such occasion we talked about the difference between wasting time and spending time.
Bruce (Mr. Bruce Lee - the martial artist) was the first to speak.
To spend time is to pass it in a specific manner he said. We are spending it during lessons just as we are spending it now in conversation.
To waste time is to expend it thoughtlessly or carelessly.
We all have time to either spend or waste and it is our decision what to do with it.
But once passed, it is gone forever.
Anyone who steals my time is stealing my life because they are taking my existence from me.
As I get older, I realize that time is the only thing I have left.
So when someone comes to me with a project, I estimate the time it will take me to do it and then ask myself, Do I want to spend weeks or months of what little time I have on this project? Is it worth it or is it wasting my time? If I consider the project time-worthy I do it.
I apply this same yardstick to my social relations. I will not permit people to steal my time.
I have limited my friends to those people with whom time passes happily.
There are moments in my life - necessary moments - when I don't do anything but what is my choice.
The choice of how I spend my time is mine, and it is not dictated by social convention.
As he left us, Bruce turned to stirling and said, “Today you were the teacher. I realised for the first time how much time I had been wasting with certain people. I never before considered that they were taking my existence from me, but they were.”
At that point in my life, I had many friends who were in the habit of dropping by to visit or telephoning me at whim.
Because I am a writer and my office is in my house, they assumed I was available for talk or advice on any subject.
But after that conversation with Stirling and Bruce, I realised that instead of spending time with them I had been wasting it.
I bought a large “Do Not Disturb” sign that I hung outside my office door and I installed a telephone answering machine.
Mr. Jason Zweig, Investing columnist for the Wall Street Journal, calls the following 'A much better way to think and live' .
People with high and well-grounded (well balanced and sensible) self-esteem, from social psychologist Prof. Elliot Aronson,
=========================
Are not invested in winning arguments for winning’s sake.
Do not need to believe they are always right.
Do not need to explain away failures and mistakes and
Do not need to engage in the almost frantic (conducted in a hurried, excited, and disorganised way) self-justification in which high and fragile (easily broken or damaged) self-esteem people constantly engage.
Instead, when they fail or make mistakes, people with high and well-grounded self-esteem can look at their failures and mistakes and learn from them.
For example, a person with high, well-grounded self-esteem can look at his or her errors and say, in effect, “ I screwed up. I did a stupid ( or hurtful or immoral) thing this time, this doesn’t make me a stupid (or hurtful or immoral) person.
Let me look at it. How did it come about ? How can I make it better ? What can I learn from this situation, so that I might decrease the possibility that I will screw up in a similar way again?”
Here is a wonderful treatise on ‘Risk Control’ from Mr. Howard Marks.
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Investors can calculate risk metrics like VaR and Sharpe ratios (we use them at Oaktree; they’re the best tools we have), but they shouldn’t put too much faith in them.
The bottom line for me is that risk management should be the responsibility of every participant in the investment process, applying experience, judgment and knowledge of the underlying investments.
While risk should be dealt with constantly, investors are often tempted to do so only sporadically.
Since risk only turns into loss when bad things happen, this can cause investors to apply risk control only when the future seems ominous.
At other times they may opt to pile on risk in the expectation that good things lie ahead.
But since we can’t predict the future, we never really know when risk control will be needed.
Risk control is unnecessary in times when losses don’t occur, but that doesn’t mean it’s wrong to have it.
The best analogy is to fire insurance: do you consider it a mistake to have paid the premium in a year in which your house didn’t burn down?
Taken together these six observations convince me that Charlie Munger’s trenchant comment on investing in general – “It’s not supposed to be easy. Anyone who finds it easy is stupid.” – is profoundly applicable to risk management.
Effective risk management requires deep insight and a deft touch.
It has to be based on a superior understanding of the probability distributions that will govern future events. Those who would achieve it have to have a good sense for what the crucial moving parts are, what will influence them, what outcomes are possible, and how likely each one is.
Following on with Charlie’s idea, thinking risk control is easy is perhaps the greatest trap in investing, since excessive confidence that they have risk under control can make investors do very risky things.
Thus the key prerequisites for risk control also include humility, lack of hubris, and knowing what you don’t know.
No one ever got into trouble for confessing a lack of prescience, being highly risk- conscious, and even investing scared.
Risk control may restrain results during a rebound from crisis conditions or extreme under-valuations, when those who take the most risk generally make the most money. But it will also extend an investment career and increase the likelihood of long-term success. That’s why Oaktree was built on the belief that risk control is “the most important thing.”
Lastly while dealing in generalities, I want to point out that whereas risk control is indispensable, risk avoidance isn’t an appropriate goal.
The reason is simple: risk avoidance usually goes hand- in-hand with return avoidance.
While you shouldn’t expect to make money just for bearing risk, you also shouldn’t expect to make money without bearing risk.
“Intellectual humility” (an awareness that one’s beliefs may be wrong) may influence people’s decision-making abilities in politics, health and other arenas, says new research from Duke University.
As defined by the authors, intellectual humility is the opposite of intellectual arrogance or conceit (excessive pride in oneself or egomania).
In common parlance, intellectual humility resembles open-mindedness.
Intellectually humble people can have strong beliefs, but recognize their fallibility and are willing to be proven wrong on matters large and small, Leary said.
People who displayed intellectual humility also did a better job evaluating the quality of evidence (Example: When an advisor points out with data that it was not bad luck but poor financial choices taken with in-adequate knowledge that lead to poor results, an intellectually honest client may be more inclined to accept and implement. Consequently the relationship will have lower friction when compared to others).
“If you’re sitting around a table at a meeting and the boss is very low in intellectual humility, he or she isn’t going to listen to other people’s suggestions,” Leary said. “Yet we know that good leadership requires broadness of perspective and taking as many perspectives into account as possible.”
Leary and his co-authors suggest that intellectual humility is a quality that could be encouraged and taught.
“Not being afraid of being wrong – that’s a value, and I think it is a value we could promote,” he said. “I think if everyone was a bit more intellectually humble we’d all get along better, we’d be less frustrated with each other.”
The Primary reason for the resistance of people to change or correcting their own mistakes from 'The Zurich Axioms'.
============================
The third obstacle to the Third Axiom's implementation is the difficulty of admitting you were wrong.
People differ widely in the ways they react to this problem. Some find it only a minor nuisance. Some find it the biggest obstacle of all.
Let's leave it at this: It is a tall obstacle for many.
If you feel it will get in your way, you should explore yourself and seek ways to handle it.
You make an investment, it turns sour, you know you ought to get out. But in order to do that, you must admit you made a mistake.
You must admit it to your broker or banker or whomever you've been dealing with, maybe to your spouse and other family members -- and, usually worst of all, to yourself.
You've got to stand there in front of a mirror, look yourself in the eye, and say, "I was wrong." For some, that is impossibly painful.
The typical loser tries to avoid the pain and, as a result, repeatedly gets trapped in bad ventures.
If he buys something whose price begins to sag, he hangs on in the hope that future events will vindicate his judgment. "This price drop is just temporary," he tells himself and maybe even believes it. "I was right to get into this speculation. It would be foolish to sell out just because of some initial bad luck. I'll sit tight. Time will show how smart I am!" Thus does he protect his ego.
He has evaded the necessity of saying he was wrong. He can go on believing he is smart.
His bankbook will record the truth, however (Obviously, stupid choices lead to bad investment results and the consequent poor or middle class lives that most people end up with ).
Years from now, perhaps, that sagging investment will struggle back to the price at which he bought it or will even go higher, and then he will feel vindicated. "I was right all along!" he will exult. But was he?
During all those years while his money was stagnating, it could have been out working. He could have doubled it or better.
Instead, he stands just about where he stood at the beginning of this dismal episode.
Refusing to be wrong is the wrongest response of them all.
Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain.
Here is what Mr.Vinod Khosla is urging us to be, when he asked us 'Do you have a belief system?' i.e. to be Authentic (of undisputed origin and not a copy; genuine)
Researchers from Harvard, Columbia, and Northwestern joined forces to measure this phenomenon scientifically. They found that when people failed to behave authentically, they experienced a heightened state of discomfort that’s usually associated with immorality.
People who weren’t true to themselves were so distraught that they felt a strong desire to cleanse themselves physically.
It’s clear that our brains know when we’re living a lie, and like all lies, being inauthentic causes nothing but harm.
Traits of Authentic people:
They help others to be their authentic selves.
Authentic people don’t expect others to play a role either.
They let go of negative people. Authentic people have too much self-respect to put up with people who treat them badly or have ill will toward them, and they have too much respect for other people to try to change them. So they let go—not out of anger, but out of their need to be true to themselves.
They express their true feelings and opinions, even when they’re not popular. Authentic people don’t live a go-along-to-get-along lifestyle. They’re simply not capable of acting in a way that’s contrary to what their principles dictate, even if there are repercussions.
They prefer not to lie to other people, and they especially can’t lie to themselves. This means that they’re willing to live with the repercussions of staying true to themselves.
They are confident. Much social anxiety stems from the fear we have of being “found out.” We’re afraid that somebody is going to discover that we’re not as smart, experienced, or well-connected as we pretend to be. Authentic people don’t have that fear. Their confidence comes from the fact that they have nothing to hide. Who they appear to be is who they really are.
They prefer deep conversations to meaningless chatter. Eleanor Roosevelt nailed this one. She once said, “Great minds discuss ideas; average minds discuss events; small minds discuss people.”
They don’t complain about their problems. Complaining is what you do when you think that the situation you’re in is someone else’s fault or that it’s someone else’s job to fix it. Authentic people, on the other hand, are accountable. They understand that they—and no one else—are responsible for their own lives, so there’s no point in complaining.
They don’t get stressed or upset when someone doesn’t like them.
“I had no idea that being your authentic self could make me as rich as I’ve become. If I had, I’d have done it a lot earlier.” – Oprah Winfrey
Here is a wonderful interview of Mr. Vinod Khosla, the founder and the first CEO at Sun Microsystems, by Stanford Graduate School of Business, on the importance of honesty and having a belief system in life.
Q: I have a few questions here, focusing on three things. Your leadership and management journey, your thoughts of investing and entrepreneurship. Where does this perseverance and conviction come from ?
Well so, I have a philosophy in life. Whatever I believe, I should make happen. It's that simple.
And if a customer's making a mistake, [LAUGH] the customer isn't always right. Trust me. And if you want to do great products, don't listen to your customers, by the way. Lots of bad lessons in business school I used to give a talk in the 80s on why not to listen to your customers and may be somebody will ask me a question that story is in fact true.
The point is if you actually believe something, you try your best to make it happen. It doesn't always happen, but it happens most of the time. But things do workout if you persist.
Not always, but I like to say, failure does not matter, it's success that matters. And nobody remembers what you failed at. So, everybody remembers Sun. Does anybody know a company I started before Sun that McNealy and I started together? My point is people don't remember your failures.
And I like to say my willingness to fail is what gives me the ability to succeed.
I find most people are so afraid of failing, they don't try and do the things that would be important enough to do. Anything worth doing is hard.
I am amazed at how few people have a belief system.What do they actually believe in?
90% of you will do what's expected of you as opposed to what you wanna do.
Why am I here? Why would I even bother to take an hour of my valuable time? I have to have a purpose. My goal is very simple. If I can convert one of you to follow your belief and have the guts to follow your belief, I'll have, I'll think of the hour as well spent. Right?
I don't speak, because somebody you know, will write nice things about it. I always sort of have a purpose, but I have a belief system.
But my point again is, have a belief system. Follow that compass.
Let me go back to this issue of Fortune 500 CEOs. I've talked to many over the years. If a New York Times writer writes an article, they want to change their strategy, they wanna respond. How silly is that, that some English major (a news reporter) who's never had a business job can determine the strategy of a Fortune 500 company? Why? Because they care about what's written, not what their belief system is.Do you know what Elon Musk would say to that writer? ‘Go get a real job’.
Having a belief system, Knowing what's driving you to do what you do, Not you're fitting in to do career enhancement, Or, making it look good to somebody else, Whether it's to your friends, or to your boss, or to shareholders.
Q: But I want to ask you about this, you are known for being for the lack of a better word somewhat blunt. But your website says we prefer brutal honesty to hypocritical politeness. What are the tradeoffs in doing this ?
Well there's lots of tradeoffs but. I'm again very clear. You know it started off earlier in my life.I was very successful, even before I started Sun, I started a company like Daisy that made me more money, which was only a million dollars back then, or little more than that than my dad had made in the, in his career cumulatively, so I was in a whole different place.
And I said, the one thing I'll do is not do what others want me do, or be polite, which generally means dishonest. There's a great book by Sam Harris, about lying, I recommend everybody read Sam Harris' book on lying, and why we all lie too much and too often?
We put this sort of slogan, I prefer brutal honesty to hypocritical politeness, on our website, because it's a real disservice to people.
But generally you can be constructive and very honest. And I prefer that brutal honesty, because it serves a purpose.
The receiver can do something about it, if it's a constructive criticism.
If you get, hypocritical politeness, you might lose a lot. So, again, it's about having enough confidence to say the other person will eventually appreciate it.
I was working on a company with another major rental firm, and I didn't believe their plan would work. They had $45, $50 million in their bank account, so everybody was comfortable, too comfortable, in my view. I talk to the founders why it wouldn't work, What my concerns were. The other VCs agreed with me in the board meeting, said all these polite things. You know, so 40 engineers wasted three or four years of their life because nobody was willing to tell them the honest truth about what they really thought.
Right and I swore I would never let anybody waste their life. At least give them the best advice I had to give and tell them I may be wrong, but I'm not gonna say something I don't believe in, I just won’t. In, and that's extremely valuable to the other thing.
But to be honest, look, there are situations you, it offends people, and I offend people often, but it helps them if they're really introspective. Right?
Once I was in a position that I didn't need a job, nobody could fire me. I've actually never worked for anybody, so it's actually sort of nice. I felt it was a indulgence or a luxury I could enjoy.
Some people, who get that financial freedom might buy a yacht. I bought myself the freedom of brutal honesty, and it's an indulgence. I get to do things others may not be in a position to do.
There is a downside for others, but I think generally constructive honesty and constructive criticism than hypocritical politeness will serve other people well.
That founder, by the way, in that company called me four years later after, after this company, this company got sold for $3 million four, three and a half, four years later. Sad story. And he called me a year after that. He said, I only wanna work for you on my next venture because I wish somebody had told me.
About venture capital: It's a lot more popular now. It wasn't back then, so the risk of going the entrepreneurial route was much higher. If you went entrepreneurial and it didn't work out you couldn't get a job at GE, right? Much harder. Today, if you've done a startup, GE would love to have you, even if it failed. In fact, would prefer you over somebody who spent two years at GE. Not 100% true. But generally, it's the learning experience of a startup,whether it's successful or unsuccessful, is recognized as extremely valuable.
Now, I'm not a big fan of planning careers. I'm much more about driving for the things you wanna do and go do them. You take any of the big successes. Google, Facebook, Twitter. You can't predict them.
On Business Plans: We don't allow any IRR calculations in our firm. In making investments, we never calculate an IRR. Because calculating an IRR, in my view, is creating the illusion of knowing, which big companies are very good at. You tweak some assumption. I did enough business plans to know I can make the business plan do whatever I want on the spreadsheet. You know, reality is different. I don't even think you can plan startups, so business plans are largely irrelevant other than in surfacing the key issues the entrepreneur is thinking about.How thorough is their thinking? What's the quality of their thinking? That's the only thing I use a business plan for.
Ours is different. It's about taking higher risks and higher upside. 90% chance of failure is not a problem. If there's a ten percent chance of 100 times your money, if it's the only thing that worked, then you're in pretty good shape.
Q: How do you get others to buy into your convictions ?
Sometimes they do after the fact, sometimes they don’t.
Capital preservation is important in other segments it's just boring to me, it's much more exciting to be on a roller coaster where the highs are high and lows are low. So risk taking is absolutely essential now.
There's very little really interesting stuff you can do in big companies.
It comes shockingly, it's shocking to people, but who invented, reinvented retail? It wasn't Wal-Mart. It was Amazon. Who reinvented media it wasn't NBC. It was YouTube. Who reinvented space it wasn't Lockheed. It was Space X.
I was hard pressed to think of one thing that had come out of a large company in the last 20, 30 years. That was materially changing the landscape. And the reason's very simple, and this is all interesting things have, eh, happened at the edges of the system.They don't happen in the solid core. And, all that you have to do where things are fuzzy, unclear, uncertain.
If there's a market forecast, it's not at the edge of the system.
If some analyst has a report, it’s not worth going into that area, right?
In the edges where things are uncertain is they're old evolutionists and there interesting changes in business or society happen.
And unless you're there and learning fast from being there and not being too out of it to believe you know what's going to happen you're not gonna be in that learning edge of the wave, where new things are happening. And that's where failure happens often.
You want failure to be small, and success to be very large, which is the characteristic of option value. That all happens at the edge.
You can join Medtronic, or DE Medical, and do incremental things, or you can try to learn that the edges, where your probability of failure is much high. But the consequences of success are really consequential, and most people in their life, in their business, reduce risk to the point where the probability of success goes higher, but the consequences of success are inconsequential, as opposed to reducing the probability of success and increasing the consequences of success which is sort of my life to start with. Trust me, it's a lot more fun than spending 30 years at Goldman.
On experts and their Predictions: Professor Tetlock when he was at Berkley did research on ‘expert opinion’. All the analysts you read all the Mackenzie reports, and by the way, Bain and PCG no different. And he followed all of their forecasts for 20 years, 28,000 individual forecasts from 250 experts. Where when the forecast was made, he classified what would be a success, what would be a failure, And the book is called "Expert Political Judgement." So, all these great studies, the 10-year studies McKenzie did for millions of dollars for AT&T on what would happen to the cell phone business, that's a fun story. Across 28,000 individual forecast in 84,000 possible scenarios. The average accuracy of the best experts, whether it was Henry Kissinger, Tom Friedman, McKenzie, your favourite economic forecaster, the average accuracy, was about the same, to use his words, ‘as dart throwing monkeys’.
So if you want to run your life on these forecasts and create an illusion of knowing, Great, go do it.You will follow a path that others will reinforce because you can give them a data quest study or a Bain forecast.
Or you can discover the edges where things are happening and changing, know that you don't know, and really change the world.
Now, again bringing back to leadership, it's about having a point of view. It's about having an internal compass. This is a great point in your life, to actually decide which one of those do you have a belief system? Or you gonna do what others tell you to do?
Whether it's written up in the New York Times, which somebody wrote up who doesn't understand the context, Whether it's the McKenzie report or a G-Forecast, or a Goldman analyst, or you gonna do what you believe in? And unfortunately, very few of you will do that. I hope I can work some of you to believing in yourself.
And the good news is, I actually believe five percent of the people is all that's needed to be even remotely innovative to change society.
I'd like to say you should try and be one of those people, and none of those people will follow any analyst's forecast. They will have an internal compass, they'll have self-confidence in a belief system, and they'll make change happen.
I'm very passionate about this, cuz frankly, it only takes a few people to change the direction of any industry or social trend.
my email address is vk@coastalventures.com if we don't get to your question, please feel free to send it. And I'll spend as much time answering it as, as much time as you spent thoughtfully asking the question. That, that's my rule on email. I try and judge how much, how thoughtful was somebody in sending the email.
Q: Can you talk about what exactly is your core belief system, and how do you foster that in your team and your company ?
You know, so I decided very early I wanted to work on interesting things. Is not well known but I started the first program, programming class at any IIT. In 1971, we formed a hobby club of four people to learn programming, and that was the first instance I know of a programming class at any IIT.
A few years later, I got interested in biomedical engineering, and I was 16 when I started the programming club at IIT Delhi, a few years later we started the biomedical engineering program, which was, we just convinced one professor to work with us, and there was three or four of us, and so I had this habit of saying, what do I want to do and how to make it happen.
But the core belief system I have is, I wanna work on interesting things. I don't wanna get bored. And it applies to what I'm doing today.
What I've learned since is, it's nice to do that, but it's even more rewarding to do interesting things that have a great impact. And so I measure impact a lot.
And, I've told my LPs if you get a lower rate of return but higher impact, we'll probably pick that, because I'm much more interested in that than feeding some pension fund a slightly higher rate of return as long as I cross a bar. It's very clear to me. So, it was cool stuff and interesting stuff, early I didn't have perspective when I was in 20s.
And over time I said, it's much more fun to work on things that make a difference. And so I only do that.
I also never cared what people thought, so I had that luxury very early on in my life. Mostly through my attitude, which was much more belligerent when I was young.
But then also, anytime you make a difference, you make money and I think when you make money as a consequence of trying to do really interesting companies, you make much more of an impact then if you do it as a transaction, buy/sell kind of thing.
In fact, if I get a plan, business plan that talks about exit in the first couple of pages, I almost never read the rest of it.
Q: I have a pointed question about you. I'm very impressed by the confidence you exhibit and obviously you have reasons to be that confident. Some people call it arrogance.My question is did you, when you were a kid, did you get support from your family that made you as confident as you are right now ?
You know, it's hard to remember. I always did my thing. I always did things most kids didn't do. And my parents always sort of, I guess support is probably the right word. Indian families are very different, you never did things your parents really oppose, but, I tended to do some of that but I always had great dialog with my parents, and they actually sort of, accepted me very early doing, going out of the bounds.
For those of you interested in my attitude and those of you who may have kids, I was asked to give a talk at Harker School and I did a presentation.
My first slide was something likewhy you should only color outside the lines.
My second slide was aboutwhy you should disregard your teachers.
My third one was why you should disobey parents.
Eh, and, and yeah, it was sort of funny and the kids loved it, but I'm dead serious about it.
I actually think, inculcating an attitude of exploration,not confirmation to a bound set, a bound set by others, is what creates this internal compass and belief system and confidence in yourself.
Again I say, 90% of you will do what's expected.
You know, after this you'll be motivated and then go back and say, oh, that Goldman job, it pays more. Okay.
Q: In your opinion, are we in the middle of a bubble?And if so, when do you foresee it bursting ?
I don't, I know that I don't know the answer. I also know anybody who tells you they know the answer is probably stupid.
Q: So I think your brand of swashbuckling is particularly effective if you show some vulnerability. So I'm gonna be your buddy and allow you to tell us a story about a time when you got crushed by somebody's brutal honesty and what you did with that ?
look it would take an hour to talk about all my mistakes. let me put it this way. What I would say is I'm never embarrassed about my failures. And so if you search in the web for my failures, you'll find lots of them and you'll find me talking about them. And it's important because, given my philosophy, where I screw up doesn't matter, because it's a long list. In fact, it's a longer list than my successes. But like I started with, nobody remembers the data dump here, everybody remembers Sun. Right?
And Cisco was born as an application on Sun, and we didn't see it. And I said to myself, duh, how stupid was I not to see it when it was happening? Even when I saw the application! A router was an application on a sun machine, we missed the largest opportunity Sun put out. I can find 100 such examples, the point is, try and fail but don't fail to try.
My, a couple of other favorite quotes along those lines, since we're coming to the end of our time. Robert F. Kennedy said, ‘only those who fail greatly can succeed greatly’. The classic example of that is Elon Musk. He said forget this bullshit about supplying batteries to GM. They're just too slow to make change happen. GM spent way more money than Tesla did.
Space, NASA and Lockheed spent way more money than SpaceX did.
I can go on and on, every major change.
So failure, try and fail, but don't fail to try.
I'm just not embarrassed about my stupid mistakes. I mean, I think that's the difference.
When did I get crushed? By brutal honesty. I mean, I've offended plenty of people. And that, so I won't go into the details because the public company, two public companies involved but, I was on a, on a panel with the CEO of this public company and I basically told them how stupid they were and then there was payback in a indirect way and that really hurt this other company and it you know, literally killed, almost killed the company. So that's an example where brutal honesty really hurt me.
There are plenty of people in the VC business that don't like me because I tell them they, they, they're sort of worthless. Eh, eh, I do! But again it's an indulgence on my part. The really good people I don't say that to. If I don't know somebody enough I won't say to that to them. But if I do know for sure I do make sure I tell them.But it's part of life.
Q: What matters most to you and why ?
I just find it's cool to disrupt things for the better. And so when I say impact, I sort of feel like I'm being a troll on various industries. It's a luxury I've earned to, because I don't need to pay my mortgage and so, I like taking on new things.
And let me end on the note that I actually like working on things that my four kids would be proud of me working on, right.
And there's this question that all of you will face of work, life balance so let me end on that note. Working on cool things excites me, keeps me motivated, I like to say, you grow old when you retire, you don't retire when you grow old.
And as long as you are stimulated and excited and whatever your passion is, and it can be what I do
So I like hard challenges, I like difficult things, I like working against the odds and that brings out my competitive spirit and now I happen to constrain it to areas where I think I can have a positive impact.
Through all of the 90s when my kids were young, I had one rule. This 15 minute thing, managing my time came from the following.
I realized it was easy for all of us to say things and then, and mean them and not stay true to them.
The most important? Family.
Everybody says the right words, they don't live by them. So, what I decided I would do is get a monthly report of every category of time I spent time on. It could be working with entrepreneurs, evaluating new companies, being polite talking to journalists, being polite because somebody said, here my son wants to talk, have a conversation. I classified my time into 20 categories, one of the most critical lines from that was the number of times I had dinner with my kids at home.
I set an impossible goal of 25 times, a month and it took me a year or so, but eventually I met it.
But more importantly, every month I had to report on whether I did or didn’t.
I do believe work, life balance is possible. You just have to be extremely disciplined about it.
I no longer went to the pub, right, or the. I no longer did baseball games with friends, I only did it with my kids. I decided what my priorities were explicitly and then measured it to meet the requirements.
I highly recommend you come up with your own priorities and measure them.
