Har Ghar Lakshmi: Wealth, Women and Web3 (Part 1)

A New Movement

As India celebrated 75 years of Independence, Har Ghar Tiranga (the national flag in every home) was all the rage, little realising that the nation may be free from the British, but the British Raj 2.0 mindset of control and division, extraction and exploitation still pervades every party and government with the result that the people are still slaves to those in power. With the politicians running an anti-prosperity machine, it is little surprise that India is still a poor nation with vast swathes of the country resembling sub-Saharan Africa. Given freedom, Indians prosper as those outside India in countries with economic freedom have demonstrated.  The question that every Indian should be asking is: why are we poor?

What India needs is a new mass movement: Har Ghar Lakshmi. Lakshmi is the goddess of wealth and prosperity. Translated, this would mean prosperity for every family. Without prosperity, a billion Indians continue to suffer in silence, living life on government handouts even as the politicians debate what constitutes freebies and what is welfare. The question that should be debated is what it will take to make Indians rich, but no one is even asking that.

Har Ghar Tiranga works because it inspires nationalistic pride. The national flag is a visible symbol. It also serves as a good distraction from day-to-day troubles. In contrast, Har Ghar Lakshmi has no symbol. Freedom and prosperity are felt in actions; there is no easy demonstration effect that can go viral. Maybe freedom from government dole is the answer because all that the handouts succeed in doing is keep people poor for another generation.

And yet, Lakshmi is what Indians need – for a future which can be dramatically better than the present. Lakshmi’s conjoined twin is Swatantra (freedom). The two come together. With Indians believing that we are a free people just because the British handed over power and exited the country is perhaps the biggest falsehood perpetrated on a nation. India’s new rulers after 1947 simply continued what the British did, and therefore the outcome has not changed dramatically. India could have been at $20-30,000 per capita income; Indians languish at a tenth of that. Just because a small fraction of Indians have a lifestyle comparable to that of Americans does not mean that all Indians are rich.

This is why we need a movement that unites all Indians behind a single mission: freedom and prosperity. Har Ghar Lakshmi is that idea, where people unite to oust the real enemies of India (the politicians and their parties), install a new set of leaders who dismantle the anti-prosperity machine, set the people on an irreversible path to prosperity, and finally, create new rules for the nation to ensure no future politicians and governments can take their freedom and prosperity away.

Har Ghar Lakshmi needs a new understanding of what creates and destroys wealth, how a new political platform is needed with women at the forefront, and how the ideas of Web3 can play a pivotal role in the Indian Revolution.

Thinks 641

FT: “Despite the retreat in tech stocks, the long-term investment opportunities in the rise of the digital economy haven’t changed. But the appetite for lofty claims has diminished, as backers focus on shorter-term questions such as whether there is a demonstrable demand for a new idea and whether it has a sound economic foundation. The winners in a less overheated investment climate will be the companies that keep the long-term opportunity squarely in their sights, but also find a new way to convey how they plan to get there.”

Shankkar Aiyar: “India is at an inflection point. The momentum for India’s next growth push depends largely on how well the states deliver. Nearly every square kilometre of India is governed by the states. India’s states are as large and populous as independent nations. The evolution in scale and complexity calls for a review and overhaul of how the world’s largest democracy conducts governance. India’s aspirations rest on how well the political class resets oversight, transparency and accountability.”

Watched: Ponniyin Selvan – 1, a historical set in the times of the Cholas (a thousand years ago). A Mani Ratnam movie. Very well made.

The Capital Allocation Playbook (Part 13)

Learnings – 3

Org Structure: As a company grows, it becomes harder to manage in the same way. Netcore at $100 million is twice the size of what it was three years ago. The management structure we created then is perhaps not what will take us to $300-400 million in the coming years. We may need to look at a more decentralised structure with operating units because we have different businesses even though all are aligned to the core objectives of customer communications, engagement and experience. Our platform business operates at very high gross margin while our messaging business (SMS primarily) is at much lower GM. Our platform and messaging revenues come largely from India and emerging markets, while Unbxd’s revenues come from the developed markets. Companies like Berkshire Hathaway and Transdigm have created a lean HQ with decentralised decision making in the operating units. We may also need to consider such a structure in the near future. This will mean bringing in business leaders who think like owners and have P&L responsibility. Profits generated can either be deployed in the same business (provided they meet the hurdle rate for return on investment) or sent back to HQ for allocation.

Management: Every growing company needs to build depth in top-level leaders. As we grow, we need leaders who can think like entrepreneurs and owners to take up new opportunities – organic or inorganic – and build them. What got us here (to $100 million) will not take us ahead (to $300-400 million). This is where every one of the top leaders needs to evolve, and think strategy and capital allocation. Many leaders rise through the ranks and capital allocation is not something which they learn. At HQ, the two most important decisions are therefore those related to people and capital.

Kaizen: Continuous improvement has to become an integral part of the culture. Going back to compounding, becoming 1% better daily means than one can see a 37X improvement in a year. Complacency is one of the biggest reasons for the decline of once-good companies. Fatigue and hubris are both company killers. In spaces which are fast evolving – and most spaces are – there is no room for mental lethargy. Inefficiencies need to be constantly rooted out. Each day must feel like “Day Zero” with the energy and hunger of a startup to succeed.


Capital allocation is first and foremost about capital – the generation of surplus cash which can be deployed for new growth opportunities. As we have seen, the most successful companies are also among the best at capital allocation. My hope is that we can make Netcore into such a company, combining good strategy and flawless execution with the best techniques of capital allocation to deliver high multi-decadal growth to make the magic of compounding work. Like a batsman taking a fresh guard on reaching a century, we at Netcore need to do the same to prepare for the next phase of growth from our current $100 million revenue.

Thinks 640

FT on Tiktok’s popularity: “First, the platform is extremely easy to use and highly addictive to view. With its tools and filters, TikTok’s app enables users to make short videos, ranging from 15 seconds to 10 minutes, and helps them monetise their content by steering advertising their way…Second, TikTok promotes videos through a content graph rather than a social graph, as commonly used by other platforms. In other words, AI-trained algorithms promote content to those on the platform with similar interests rather than it being mostly spread via networks of followers. In theory, at least, the app allows more “nobodies” to become “somebodies”.” NYT adds: “Welcome to the era of the audio meme, a time when replicable units of sound are a cultural currency as strong as — if not stronger than — images and text. Though TikTok didn’t invent the audio meme, its effortless interface may have perfected it, and the platform, which recently ended Google’s 15-year-long run as the most visited website in the world, would be nothing without sound.”

Arnold Kling: “David McRaney’s latest book is How Minds Change. A theme of the book is that it is difficult to reason people out of their beliefs. The examples of beliefs that get the most focus are oddball ones, such as the belief that the moon landing in 1969 was faked. My main takeaway is that you change someone’s mind by changing their heart. A change of heart that enables you to switch from believing X to believing Not X comes from becoming comfortable enough among people who believe Not X to give up your attachment to the group that believes X.”

Anticipating the Unintended: “There is a high likelihood of a golden decade ahead for MSMEs in India if it plays its cards right. A long overdue factor market reforms (possible at the state level), kickstarting a government capex cycle that will instil confidence in the private sector to follow suit, not overdoing aatmanirbhar Bharat beyond the rhetoric and remaining an open and liberal democracy that convinces others that it will have sufficient checks and balances to not lose its way. These are the basic block and tackle moves to capitalise on the opportunity. Because the only lesson to learn from a possible China misstep is that overdetermined leadership and top-down economic thinking eventually fail.”

The Capital Allocation Playbook (Part 12)

Learnings – 2

Free Cash Flow: The most important element in capital allocation is the generation of capital. The best way is by being profitable. Netcore has been profitable for the past 15 years. The free cash generated is what we have used for our business growth, investments and acquisitions. To generate free cash predictably for long periods of time, a business needs some combination of monopoly and moat. In Netcore, this comes via our email and SMS business. The cash generated has helped us invest in building the martech stack and expanding to new geographies, our acquisitions of Boxx, Hansel and Unbxd, and our investments in Profitwheel, EasyRewardz and Comsense.

New Growth Engines: To keep increasing free cash flow, new growth engines need to get created. Competition is never far away. Innovation is necessary to keep creating additional value for customers. Ideas like Email 2.0 and Loyalty 2.0 offer the potential to create new growth engines for Netcore. Email has not seen much innovation in the past decade or so. With ideas like AMP and Atomic Rewards, we should be able to make inroads into global customers and also switch spending from adtech (new customer acquisition) to martech (existing customer retention and growth).

Acquisitions: We will never be able to build everything that customers want internally. Hence, acquisitions will be an important mechanism for future growth. Getting acquisitions right is very important as companies like Danaher have shown, else they can be destroyers of capital. In future, we will need to think of Netcore as a “House of SaaS” – by building a large customer base, we will be able to continuously add new products (built internally or bought) and reduce sales and marketing costs by selling to the same buying centre in a company. Research has shown that two out of three acquisitions do not deliver the value that is anticipated. This is what we need to guard against. Every acquisition is a risk, but done in the right way and at the right price, it can be a powerful mechanism of growth and a new source of free cash in the future.

Going Public: Netcore is a private company. We also don’t have external investors. As such, it becomes hard to place a value on the stock. Becoming a public company will give us greater flexibility in capital allocation decisions. We can then use stock as a currency for acquisitions rather than just cash. This will help us think bigger in terms of scale.

Thinks 639

Sasha Chapin on making normal conversations better: “Some people get frustrated with small talk because the words themselves are not enlightening. But they’re focusing on the wrong thing. The spoken content of small talk is, it’s true, mostly vapid. However, the relevant information underneath the spoken content is fascinating if you learn to care about it. What you’re doing is mutually establishing tone and finding boundaries. You’re getting a sense of the person’s mood, energy level, vibe, willingness to talk to you, style of talking, and so on, and they’re getting the same from you. Also, it’s a basic sanity check. The person you’re talking to, implicitly, is assessing whether you can do basic social norms—in this case, small talk. If you can’t pull it off, it’s probably not safe for them to share anything beyond their feelings about the weather.”

FT: “Just a decade after Crispr was invented, the first drug to make use of the revolutionary gene-editing technology will be with regulators by the end of the year, with the promise that it will eventually transform the treatment of genetic diseases. In 2012, Nobel Prize winners Jennifer Doudna and Emmanuelle Charpentier published a scientific paper proving a key part of the bacterial immune system could be used to cut DNA: disrupting, deleting or correcting genetic errors. Their discovery started a race by start-ups to create transformative — and possibly even curative — treatments, which has developed much faster than previous advances in biology.”

Tim O’Reilly: “Instead of thinking of the metaverse as a set of interconnected virtual places, we think of it as a communications medium? Using this metaphor, we see the metaverse as a continuation of a line that passes through messaging and email to “rendezvous”-type social apps like Zoom, Google Meet, Microsoft Teams, and, for wide broadcast, Twitch + Discord. This is a progression from text to images to video, and from store-and-forward networks to real time (and, for broadcast, “stored time,” which is a useful way of thinking about recorded video), but in each case, the interactions are not place based but happening in the ether between two or more connected people. The occasion is more the point than the place.”


The Capital Allocation Playbook (Part 11)

Learnings – 1

Compounding: One of the greatest secrets in the world is the power of compounding. A 10% annual growth over 10 years means that $100 dollars becomes $260 – 2.6X. A 20% annual growth for the same period results in $620 – 6.2X. Over 20 years, the difference is stark; $670 vs $3700, over five times greater. In Netcore, we have grown per share value at 26% compounded over the past 10.5 years which has meant that $100 has become $1000 – 10X. If we can do this for another decade, that would mean 100X. So 10% over 20 years is 6.7X, 20% is 37X and 26% is 100X. Understanding the power of compounding is a must for entrepreneurs. As Morgan Hansel writes in his book “The Psychology of Money”: “If something compounds—if a little growth serves as the fuel for future growth—a small starting base can lead to results so extraordinary they seem to defy logic. It can be so logic-defying that you underestimate what’s possible, where growth comes from, and what it can lead to.”

Longevity: High growth can be done for a few years. The challenge is to sustain it over long periods of time. As a friend wrote to me recently, “The compounding formula is (1+r%)^n. People forget the “n” of compounding actually matters more than the “r”. Too many people focused on “r”, too few on “n”.” Compounding growth over long periods of time is what creates value. For that, a process and discipline is required not just in strategy and execution, but also in capital allocation. A few mistakes can wipe out years of growth. In Netcore, we have made our fair share of mistakes – which have hurt us. We could have done much better than our 10 years, 26% CAGR in per share value had we got martech automation right early on, and used the SaaS mindset to expand globally much before we did.

Luck: While one has to be smart to succeed, luck also plays an important role. Timing for decisions matters. In 1999, when I sold IndiaWorld for Rs 499 crore ($115 million), the timing was just right. Had I wanted a few months, I do not know what the value of the business would have been because the dotcom bubble burst. In fact, had I sold a few months earlier, I would have probably realised only a fraction of the value. The right timing meant that my initial investment of Rs 20 lakhs in IndiaWorld grew almost 2500X in five-and-a-half years, a CAGR of almost 300%.

Thinks 638

Nikki Haley: “America knows how to prosper; we’ve done it better than any other country in history. Far from letting politicians control the economy from the top down, we’ve empowered citizens to create from the bottom up. We lead the world in science, technology, military strength and so much else not because Washington knows best, but because the American people have the freedom to constantly dream and do better. The last thing our leaders should do is direct the economy, subsidize special interests and tie strings to entire industries. Instead, we should make it easier to start businesses, clear hurdles that stifle innovation, and let job creators and families keep and spend their own money. Economic freedom is the proven path to beat communist China. If Washington keeps trying to pick winners and losers, America will lose.”

Rita McGrath: “We have a category of competition that is particularly germane today. These are oblique, or indirect, competitors. They may not make the same product or service you do. They may not be in your traditional “industry.” They may not be in your line of sight at all. And yet, they can make what you do unnecessary, unattractive or irrelevant. And they can do it in surprisingly short order. For instance, most newspaper companies were caught entirely by surprise by the rapid erosion of their classified-ads business once Internet-based advertising and free resources such as Craigslist provided the same benefit to users in a more convenient and easy to use approach.”

Gurcharan Das on India: “India’s greatest challenge is bad governance and weak institutions. Why should it take 15 years to get justice? Why are three-fourths of the persons in jail still awaiting trial? Why am I afraid to go near a police station? Why do one-third of India’s MPs and MLAs have a criminal record? The truth is that India at 75 is a sweet and sour story of private success and public failure. India has risen from below, through the energy and ingenuity of its people, almost despite the state. It is quite unlike the top-down success of East Asian countries, which was steered skilfully by the state. Unless India fixes its governance institutions, it will not become a developed country.”

The Capital Allocation Playbook (Part 10)

Constellation Software – 2

Auri Hughes in May 2022: “This was started by a gentleman named Mark Leonard in ’95 and he was a venture capitalist 11 years and he acquired small software plays. Then he continuously did this for long periods of time and the business has just grown tremendously. Over years, it compounded something like, I think in the high 20 or 30 percent for over 10 years. He’s done this with a M&A strategy. I think this is profound because a lot of companies essentially destroy value with M&A and they’re not great capital allocators or they overpay or they promise synergies and things that don’t materialize and we see that later. But he has this wonderful strategy. One of the things that I think is unique is in CapIQ the share count when they went public was 21 million shares and today it’s still 21 million shares. They’ve earned a return on equity in the high 30s for a consistently long period of time. I think this is one of the best companies in the world a lot of people don’t know about. They are very disciplined and they have this process as well. I think the other unique thing to mention is as you get larger, you have to do more acquisitions to generate the same amount of earnings and return on equity because your capital base is growing. They’ve consistently been able to do this for a long period of time so I think Mark Leonard is just a master capital allocation.”

Bill Mann (continuing the same conversation): “If you ever get a chance to go to the Constellation Software front page of their website, they are first and foremost interested in getting introductions to vertical management software companies that are interested in selling. This company is built for capital allocation. Because if you think about it, there’s no such thing as let’s go upload the Constellation Software suite. It doesn’t exist. They’re a series of small companies and they use the returns from those companies as force multipliers for other companies that they are interested in buying. They do them by the dozens each year at this point.”

Simon Handrahan in October 2021 aggregated wisdom from the shareholder letters written by Mark Leonard. A sample:

“We have an objective of generating average annual revenue growth per share and average annual EBITDA growth per share of at least 20% for the five year period… I recently ran a screen of public companies… that met these criteria for the last 5 year period. I discovered that less than 1% of companies qualified.”

“We’ve handled our geometric growth to date by largely abdicating management to the general managers of each of our vertical businesses. CSI. We count on the fact that with each new acquisition will come general managers who are steeped in their verticals…”

“… our senior managers consistently generate rates of return in excess of 25% on the capital that they deploy. As investors you’ll know that this is wildly difficult to achieve. How do we keep these multi-talented managers? Hopefully we provide an environment that is fulfilling, colleagues that are both challenging and entertaining, and work that is meaningful. We also pay them well.”

“When we acquire an underperforming company Growth suffers. …we generally grow our acquired businesses, frequently providing additional products for them to sell into their installed base, and bringing our increased scale and best practices to bear upon their business…. the reduction of an acquired business to a profitable Core will leave us with a smaller, but usually more profitable business.”

There is a lot to learn from the likes of Berkshire Hathaway, TransDigm, Teledyne, Constellation Software and businesses like them. As a latecomer to the world of capital allocation, I will summarise my learnings and how these could be applied to Netcore to deliver exceptional returns in the years to come.

Thinks 637

Mohit Satyanand: “How independent are the 80% of our citizens who depend on the government for food grain? How independent are we when we depend on China, an active aggressor at our borders, for Active Pharmaceutical Ingredients, for our mobile phones, and the flags fluttering in our streets? How independent are we when depend on a rogue nation for the bulk of our ordinance goods?”

Niranjan Rajadhyaksha: “One way of looking at the Indian development journey over the past 75 years is in terms of breaking structural shackles to growth. India has broken free of three important constraints—the food constraint, the domestic savings constraint and the foreign exchange constraint. One major structural constraint that persists is energy. India is deficient in energy, and prone to economic stress whenever global energy prices rise. The planned switch to green energy in response to climate change offers a window of opportunity to break the energy constraint. —The final question is one of political economy—will India resemble East Asia or Latin America? The countries in East Asia have managed to achieve inclusive growth through the creation of competitive enterprises as well as quality jobs for citizens. Public finances have been managed well. Latin America has tended to grow with wide income disparities, macroeconomic imbalances and social tensions. Where will India find itself in 2047? The answer is not yet clear.”

Ruchir Sharma: “To grow faster than 5 per cent, India would have to adopt more radical reform. Only 20 per cent of women are formally employed and doubling that to 40 per cent — merely average for a lower-middle income country such as India — would be transformational. So would encouraging internal migration to better jobs, as China did, given that nine out of 10 rural Indians still live in the district where they were born. But India is as diverse and democratic as China is homogeneous and autocratic: imposing disruptive reform is not on the cards. More likely, 5 per cent growth is now the base case. Even at that pace India will be a breakout star in a slowing world: on track to surpass the UK, Germany and Japan to become the third-largest economy by 2032. At that point India may not yet be a middle-income country, but it will be moving in the right direction, rising gradually in the world.”