Rajesh Jain

Why China Can Kill and India Cannot (Part 2)

There are many explanations about how China became rich and powerful. One of the best books on China’s transformation is “How China Became Capitalist” by Ronald Coase, winner of the Nobel Memorial Prize in Economic Sciences in 1991, and Ning Wang (published in 2012). From its introduction:

How China Became Capitalist details the extraordinary, and often unanticipated, journey that China has taken over the past thirty five years in transforming itself from a closed agrarian socialist economy to an indomitable economic force in the international arena. The authors revitalise the debate around the rise of the Chinese economy through the use of primary sources, persuasively arguing that the reforms implemented by the Chinese leaders did not represent a concerted attempt to create a capitalist economy, and that it was ‘marginal revolutions’ that introduced the market and entrepreneurship back to China. Lessons from the West were guided by the traditional Chinese principle of ‘seeking truth from facts’. By turning to capitalism, China re-embraced her own cultural roots.

I want to focus on what I think is the single biggest determinant of why countries prosper or flounder: political leadership.

Consider China in the late 1970s. Battered by Mao’s Great Leap Forward and the Cultural Revolution. Communism, famines and government action has killed tens of millions. And then Mao dies. A new leader emerges. Deng Xiaoping. He begins the process of transforming China. Step by step. He sees a future very different from China’s past. He lays the foundation for a rich China. Which in turn creates a powerful China.

What does Deng Xiaoping do? Many things. Deng junks the old policies that kept the Chinese poor. He opens up the Chinese economy to foreign investment in manufacturing. The Chinese people respond. And so does the world. Manufacturing shifts to China. That creates jobs and lifts hundreds of millions out of poverty. It lays the foundation for China’s military prowess as China becomes prosperous.

Rarely is economic change bottom-up. People can overthrow governments but cannot create prosperity. For that, there needs to be a leader who overturns policies that had kept people poor. (In the case of the US, leaders like James Madison, Alexander Hamilton along with others crafted the rules via the American Constitution in 1789 that created the conditions for growth and prosperity.) Deng was that leader for China.

And what were India’s leaders doing while China was booming? They were keeping Indians poor.

Tomorrow: Why China Can Kill and India Cannot (Part 3)

Why China Can Kill and India Cannot (Part 1)

China killed 20 Indian soldiers. India also probably killed some Chinese soldiers, but we will probably never know that. Even as anger rises in India, there is also the realisation that in a straight contest between the two, China’s military superiority will overwhelm India. China is more powerful than India. Hence, China can bully India and get away with it. It is not a good outcome. It should make us rightfully angry. The question is: who should we be angry against? The Chinese leaders who made China powerful or the Indian leaders who kept India weak?

Until the late 1970s, India and China had very similar per capita income and problems. Both had large populations and both had been impoverished by singularly bad leadership over the previous 30 years. And then, as we know, something extraordinary happened. China transformed itself; India did not. Today, the average Chinese has a per capita income that is five times that of the average Indian. This chart below from Hindustan Times (Jan 18, 2020) shows the diverging fortunes of the two nations over the past 40 years.

Since India and China are comparable in population, the per capita GDP difference is also the difference in total GDP: China’s income is five times India’s GDP. China’s consistent higher income over the past four decades also means that China is certainly over 10 times wealthier than India.

Therefore over the decades, the might of the Chinese economy has enabled it to invest in a very powerful military. India’s defence investments have languished on the back of a weaker economy. And with power has come China’s aggression – knowing full well that none of its neighbours can fight back. That is why China can bully and kill, and all India can do is to meekly watch. We can fret and fume, but we know we cannot hit back. China is simply too strong for India.

How did it happen? How did China become so dominant? Why did India not do? What did China do right, and what did India do wrong? This is the introspection we need to be doing. We lost our past and fumbled our present. What will it take for India to win in the future?

Tomorrow: Why China Can Kill and India Cannot (Part 2)

My Proficorn Way (Part 5)

The Profits Flywheel

I first came across the idea of a flywheel in Jim Collins’ book, “Good to Great.” Here is an excerpt:

Picture a huge, heavy flywheel—a massive metal disk mounted horizontally on an axle, about 30 feet in diameter, 2 feet thick, and weighing about 5,000 pounds. Now imagine that your task is to get the flywheel rotating on the axle as fast and long as possible.

Pushing with great effort, you get the flywheel to inch forward, moving almost imperceptibly at first. You keep pushing and, after two or three hours of persistent effort, you get the flywheel to complete one entire turn.

You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. You keep pushing in a consistent direction. Three turns … four … five … six … the flywheel builds up speed … seven … eight … you keep pushing … nine … ten … it builds momentum … eleven … twelve … moving faster with each turn … twenty … thirty … fifty … a hundred.

Then, at some point—breakthrough! The momentum of the thing kicks in your favor, hurling the flywheel forward, turn after turn … whoosh! … its own heavy weight working for you. You’re pushing no harder than during the first rotation, but the flywheel goes faster and faster. Each turn of the flywheel builds upon work done earlier, compounding your investment of effort. A thousand times faster, then ten thousand, then a hundred thousand. The huge heavy disk flies forward, with almost unstoppable momentum.

Now suppose someone came along and asked, “What was the one big push that caused this thing to go so fast?”

You wouldn’t be able to answer; it’s just a nonsensical question. Was it the first push? The second? The fifth? The hundredth? No! It was all of them added together in an overall accumulation of effort applied in a consistent direction. Some pushes may have been bigger than others, but any single heave—no matter how large—reflects a small fraction of the entire cumulative effect upon the flywheel.

The flywheel image captures the overall feel of what it was like inside the companies as they went from good to great. No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process—step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.

The flywheel is what a proficorn entrepreneur looks for. What are the series of small steps and actions that can create a profit machine?

In IndiaWorld, it was the twin combination of our own portals and website development. The services business of developing websites kept the cash coming in. Advertising on our own portals for these new sites to get their own traffic helped accelerate the flywheel. The additional profits helped us build even more of our own sites and get more traffic. Each step helped make the flywheel go faster.

As I think about Velvet Rope Marketing, it can become a similar profitability flywheel for businesses – get more revenue from the Best Customers, acquire more like them, help them get to their maximum thresholds faster. What I still need to think about is how to make it even better – perhaps our owned properties which can reduce cost of acquisition even further.

Every entrepreneur needs to find their profitability flywheel – that is the difference between a good business and a great built-to-last business, one that can grow with its customers. When one sees a proficorn, there will inevitably be a flywheel as the secret to its success.

Will be continued soon.

My Proficorn Way (Part 4)

Living in the Future

One of my defining memories is reading CK Prahalad and Gary Hamel’s book, “Competing for the Future,” when it was published in 1994. That was a very difficult time for me. I had failed multiple times in various ventures that I had tried over the past two-and-a-half years. The realisation had dawned on me that my most recent foray into creating an image processing solution was headed the same way and had to be shut down. I was staring at an abyss.

It was at that time that I picked up the Prahalad-Hamel book and started reading it. The book transformed me. I made notes on Post-Its through the book – these notes became the eventual business plan for IndiaWorld. There is one particular passage that struck a chord and has stayed with me through the years:

There is not one future but hundreds. There is no law that says most companies must be followers. Getting to the future first is not just about outrunning competitors bent on reaching the same prize. It is also about having one’s own view of what the prize is. There can be as many prizes as runners; imagination is the only limiting factor. Renoir, Picasso, Calder, Serat, and Chagall were all enormously successful artists, but each had an original and distinctive style. In no way did the success of one preordain the failure of another. Yet each artist spawned a host of imitators. In business, as in art, what distinguishes leaders from laggards, and greatness from mediocrity, is the ability to uniquely imagine what could be.

To build a proficorn, an entrepreneur must imagine the future and get there first. One is not building just for the next few months – one has to imagine tomorrow’s world and create that future. If you get there first, you win. This journey is what makes entrepreneurship so exciting. It is a race – where there are many competitors, known and unknown. But there is a second race – in the entrepreneur’s mind, to create and craft a future that isn’t yet unknown. The entrepreneur then also has to persuade others (employees, partners and customers) about that future. It is the ultimate reality game!

Even now, as I sit at home, I am trying to imagine the new future – one where every offline business needs an online business, where hundreds and thousands of new online-only brands will get created. All of them will need help with their customer relationships – identifying their best customers and ensuring they reach their full spending threshold. What kind of tech solutions will they need? How can I as an entrepreneur fill this gap? The future beckons, and that’s where proficorn entrepreneurs live.

Tomorrow: My Proficorn Way (Part 5)

My Proficorn Way (Part 3)

Open-sourcing Ideas

One of the approaches I have followed in life is to be very open with my ideas. Whether it was IndiaWorld in 1994 or Velvet Rope Marketing in 2020, I have always been of the view that sharing and discussing ideas with others improves the ideas. I go into meetings thinking that if there is one new thing I can learn then the meeting will have served its purpose. And since I will never know until I do a meeting whether I will have learnt something or not, I tend to be open to doing meetings. And in these meetings, I talk about my ideas and thinking – even though they may not be fully baked. The feedback I get from others helps me refine the ideas. The more the inputs, the better the idea becomes.

In the fall of 1994 when I first thought up the idea of how an Internet portal could bridge the news and information for NRIs, I discussed the idea with dozens of people. I had a Visit-USA ticket on Delta – which allowed me to fly standby for a period of two months for a fixed price. It was an entrepreneur’s dream! I would talk to people and anyone who agreed to meet, I would tell them, “How about I meet you at your office tomorrow so we can discuss this in depth?” (That was, of course in the pre-Zoom days!) Go the airport, take the first available flight, and do the meeting. No cost-benefit analysis; just meet. The travel time would allow me to read and think. The different settings would trigger new ideas. And the meetings themselves were link hyperlinks which opened up new windows. I became better each day – one meeting at a time.

I find too many entrepreneurs now are very cagey about sharing their ideas. What they don’t realise is that someone somewhere is likely to have the same idea anyway. The idea is just the starting point. It is a key that opens a door. After that, it’s all about the way one executes and creates the new world. And in execution, a million things have to go right for eventual success.

So, to build a proficorn, start by sharing ideas – every person you meet and discuss it with will add value and make the idea better. Open your mind, open-source your idea and learn from the wisdom of others.

Tomorrow: My Proficorn Way (Part 4)

My Proficorn Way (Part 2)

Journey not Money

My wife, Bhavana, once told me, “The more you chase money, the further it runs away from you.” As an entrepreneur, I have never obsessed about money. I have done things because I saw a problem and gap in the market, and I tried to solve it. At times, it has worked. At other times, it has failed. The journey of discovering the opportunity, thinking through the solution and taking it to customers is what has been the driver. It cannot be about the valuation and exit one will get – focusing on these will distract and make for short-termism which will necessarily hurt the growth and profitability of the business.

At this point, it is useful to understand what an entrepreneur does. Israel Kirzner has this to say:

We have to recognize that when the entrepreneur discovers the automobile, he is not simply disrupting the calm. He is identifying what was in fact waiting to be introduced. Technological knowledge was being misapplied. Resources were being wasted on trains, carriages, and bicycles, when, in fact, what was waiting to be put together was this new gadget called the automobile. A person who recognizes this is responding to a preexisting, gaping hole in the market.

[I]n a more fundamental sense, he is correcting an already existing discoordination. He is redirecting resources that are already misplaced. People do not have to go on for years and years behaving in ways that are socially inefficient. The person who abruptly draws their attention to this inefficiency is assisting in the process of economic coordination.

While entrepreneurs may not know it, it is exactly what they do. This journey of filling in gaps in the market is what has to create the excitement. The financial reward that lies in store for success is just icing on the cake.

For me, when I launched IndiaWorld, the gap was in the flow of information from India to NRIs globally and the recognition that the Internet could play an instrumental role. The excitement was in making this happen – and not that one day I would sell the business and make a lot of money. It was this desire to make lives better that drove me – starting with news, then cricket scores, recipes and much more. The thrill lay in solving one problem and then the next and so on. Proficorns are built thus – one solution at a time.

Tomorrow: My Proficorn Way (Part 3)

My Proficorn Way (Part 1)

In my previous two essays on proficorns, I wrote about building a proficorn and compared proficorns and unicorns. In this series, I want to share some of my learnings through my 28 years as an entrepreneur who has focused on profitability, never raised external capital and yet created significant value through two successful enterprises – IndiaWorld and Netcore.

Even though I coined the word ‘proficorn’ a few months ago, I realised that there are many common threads in my approach to doing business. The need for profit was drilled into me early on by my father – because without profits one has to either shut down or be dependent on a continuous inflow of external capital which would mean sacrificing decision-making freedom at some point of time. To be profitable and maintain a track record of profitable growth in a business is never easy, especially in the world of technology where obsolescence and disruption are never too far away.

As I have been thinking about proficorns, I have realised that there is a mindset which defines one’s approach to business. For me, getting to cash flow profitability on a monthly basis was the most important requirement – the spectre of continuing cash burn was too horrific to contemplate. As such, the decisions I made were driven by the desire to get to profitability and keep it that way. It also meant creating a cash reserve during the good times which could serve one well during difficult times – like the present times where most businesses are facing declining revenues.

Like the Feeling

An entrepreneur’s life is never easy. There is no switching off Friday evening. The business and its future consumes you because failure is just one mistake away. It is also a lonely perch because no one else can fully understand today’s challenges and tomorrow’s uncertainties. Decisions made cannot be easily unmade; the rear view mirror exists only for post-mortems. And through all these times, one must always maintain a positive outlook because pessimism can create a negative spiral.

These words from Dan Bricklin that I read a long time ago have stayed with me through the years and beautifully capture the essence of being an entrepreneur:

Being a successful entrepreneur is tricky. You have to live with having control and not having control at the same time. It’s like this: In big business, when you need to cross a river, you simply design a bridge, build it, and march right across.

But in a small venture, you must climb the rocks. You don’t know where each step will take you, but you do know the general direction you are moving in. If you make a mistake, you get wet. If your calculations are wrong, you have to inch your way back to safety and find a different route.

And, as you jump from rock to slippery rock, you have to like the feeling.

That is the feeling I have liked and lived through for 28 years.

Tomorrow: My Proficorn Way (Part 2)

India needs War Cabinets (Part 8)

How can India’s political leaders go about creating their war cabinets? To start with, they need to be humble and set aside their ego. These are not qualities that get a person to the top of the political ladder. And yet, the war-like crisis that the nation faces calls for humility. Only when the leaders are willing to accept that they (or their surrounding bureaucrats) do not have the answers will they open their minds to inputs from the outside. Only when the leaders are willing to start trusting people from the outside will they be able to attract the best talent. Only when they are willing to listen and give freedom to this new team will our nation transform.

The alternative is too depressing to even contemplate. The healthcare and economic crises will get compounded by government actions which worsen the problem – as we have seen in the past two months. Indians will be set back many years in their slow walk forward to prosperity. Indian businesses (especially the small and medium enterprises) will take many years to recover – if they can survive.

Here is a 10-point war cabinet plan for India’s political leaders to take India forward:

Create two primary missions – for healthcare and the economy
Identify a leader for each of these missions – a leader who is not a politician or a present or past bureaucrat
Give freedom to the leaders to build their teams
Meet with the team every few days initially so there is a complete alignment in objectives
Have a daily 15-minute review with the leaders – the equivalent of a ‘stand-up meeting’
Ask the teams to deliver an action plan within 30 days – not difficult because the good ideas are already out there
Create a mechanism inside government to ensure execution of these plans – without bureaucratic roadblocks
Create public dashboards to ensure transparency on outcomes
Speak to the people weekly to keep them updated on the thinking and actions taken
Keep the team in place for the next two years

India needs a new beginning. Business as usual will not work in the wake of the devastation caused by the virus. Creating war cabinets is a way to convert the crisis into an opportunity, and put Indians on an irreversible path to prosperity.

Additional Reading (from the past two months):

India needs War Cabinets (Part 7)

India’s politicians and bureaucrats represent the institution of government of the nation. It is very instructive to know what Lee Kuan Yew said about them. I have excerpted these quotes from the book “Lee Kuan Yew: The Grand Master’s Insights on China, the United States, and the World.” Lee Kuan Yew said this many decades ago – and yet, the words ring so true even now.

India has wasted decades in state planning and controls that have bogged it down in bureaucracy and corruption. A decentralized system would have allowed more centers like Bangalore and Bombay to grow and prosper…The caste system has been the enemy of meritocracy…India is a nation of unfulfilled greatness. Its potential has lain fallow, underused.

There are limitations in the Indian constitutional system and the Indian political system that prevent it from going at high speed…Whatever the political leadership may want to do, it must go through a very complex system at the center, and then even a more complex system in the various states…Indians will go at a tempo which is decided by their constitution, by their ethnic mix, by their voting patterns, and the resulting coalition governments, which makes for very difficult decision-making.

The average Indian civil servant still sees himself primarily as a regulator and not as a facilitator. The average Indian bureaucrat has not yet accepted that it is not a sin to make profits and become rich. The average Indian bureaucrat has little trust in India’s business community. They view Indian business people as money-grabbing opportunists who do not have the welfare of the country at heart, and all the more so if they are foreign.

More from Lee Kuan Yew on leadership and societal transformation:

Civilizations emerge because human societies in a given condition respond to the challenge. Where the challenge is just about right…the human being flourishes.

There are three basic essentials for [the] successful transformation of any society. First, a determined leadership…two, an administration which is efficient; and three, social discipline.

It is a very tough job, especially in political leadership. Being a CEO or the general of an army is different. You do not have to persuade people who can say “boo” to you to get them on your side. When campaigning, no one has to listen to you at all. And when the campaign is over, people have to believe that you have got something for them that you can do that will make them cast their vote for you. It requires a totally different set of skills. Those skills can only be developed if you have a natural urge, a natural interest in people, in wanting to do something for them, which they can sense and feel. If you have not got that and you just want to be a great leader, try some other profession.

I have spent 40 years trying to select people for big jobs…I have gone through many systems, spoken to many CEOs…I decided that Shell had the best system of them all, and the government switched from 40 attributes to three, which they called “helicopter qualities”…What are they? Powers of analysis; logical grasp of the facts; concentration on the basic points, extracting the principles. You score high marks in mathematics, you have got it. But that is not enough…They must have a sense of reality of what is possible. But if you are just realistic, you become pedestrian, plebeian, you will fail. Therefore, you must be able to soar above the reality and say, “This is also possible”—a sense of imagination.

How many in India’s present political leadership and bureaucracy fit what Lee Kuan Yew has outlined? Yet, they are the ones we have got. And that is why it is important for us to get in the best talent from the outside – people who can imagine and create a new India. These are the war cabinets India needs – at every level.

Tomorrow: India needs War Cabinets (Part 8)

India needs War Cabinets (Part 6)

Doris Kearns Goodwin’s book “Leadership: Lessons from the Presidents for Turbulent Times” chronicles the lives, times and decisions of four American Presidents (Abraham Lincoln, Theodore Roosevelt, Franklin Roosevelt, Lyndon Johnson) – each of who lives through great challenges during their tenures. In the words of Goodwin:

[In the White House], at their formidable best, when guided by a sense of moral purpose, they were able to channel their ambitions and summon their talents to enlarge the opportunities and lives of others. Specific stories of how they led will explore the riddle: Do leaders shape the times or do the times summon their leaders?

“If there is not the war,” Theodore Roosevelt mused, “you don’t get the great general; if there is not a great occasion, you don’t get the great statesman; if Lincoln had lived in times of peace, no one would have known his name now.” Roosevelt’s debatable notions voice opinions heard from the beginning of our country. “It is not in the still calm of life, or the repose of a pacific station, that great characters are formed,” Abigail Adams wrote to her son John Quincy Adams in the midst of the American Revolution, suggesting that “the habits of a vigorous mind are formed in contending with difficulties. Great necessities call out great virtues.”

The four leaders presented in this book confronted “great necessities.” All took office at moments of uncertainty and dislocation in extremis. Abraham Lincoln entered the presidency at the gravest moment of dissolution in American history. Franklin Roosevelt encountered a decisive crisis of confidence in our country’s economic survival and the viability of democracy itself. Though neither Theodore Roosevelt nor Lyndon Johnson faced a national crisis on the scale of secession or devastating economic depression, they both assumed office as a result of an assassination, a violent rupture of the democratic mode of succession at a time when seismic tremors had begun to rattle the social order.

While the nature of the era a leader chances to occupy profoundly influences the nature of the leadership opportunity, the leader must be ready when that opportunity presents itself. One leader’s skills, strengths, and style may be suited for the times; those of another, less so.

…Four case studies…reveal these vastly different men in action during defining events of their times and presidencies. These four extended examples show how their leadership fit the historical moment as a key fits a lock. No key is exactly the same; each has a different line of ridges and notches along its blade. While there is neither a master key to leadership nor a common lock of historical circumstance, we can detect a certain family resemblance of leadership traits as we trace the alignment of leadership capacity within its historical context.

All our leaders in India occupy their positions at the hour of the country’s greatest crises in the past 70+ years. They need to summon that same courage, confidence and wisdom to lead India to prosperity. India’s politicians have been singularly responsible for our lack of prosperity. This is a moment when they can together redeem their ilk and put the nation on a path of glory. But for that, they will need to rise above ego, mistrust and small-minded thinking. It is a journey they cannot do alone. Like Frodo Baggins in “The Lord of the Rings”, each of them needs to create a “Fellowship” – their own war cabinets.

Tomorrow: India needs War Cabinets (Part 7)