Thinks 13

The Barry Diller Playbook: About IAC. “Diller’s anti-conglomerate is an uncommon and (often) unwieldy beast, but it has a clear focus, a singular purpose. It exists not in service of a particular market or technology, but a process, a playbook.”

17 Investing Lessons: By . One of the lessons: “It is possible to overpay for a company’s shares. This is why we need to think about the valuation of a business. But I think it is far more important to focus on the quality of a business – such as its growth prospects and the capability of the management team – than on its valuation.”

Investing Book List

Talk Radio: Voice of the People (Part 4)

Rush Limbaugh

In the US, talk radio centred around politics exploded after the repeal of the 1949 Fairness Doctrine in 1987. The Fairness Doctrine mandated that the programming ensure a diversity of viewpoints. After its repeal, the US saw the launch of many conservative talk radio hosts to counter what they saw as the liberal print and TV media. The conservative talk radio counter-revolution was led by Rush Limbaugh.

Matthew Lysiak, writing in “The Drudge Revolution”, takes up the story of Rush Limbaugh:

With the radio waves unchained, the stage was now set for an explosive new voice: Rush Limbaugh.

…With the fairness doctrine gone, and stations beginning to do away with the general advice chat shows in exchange for large blocks of programming, it opened the door for more political talk . . . and Limbaugh.

By tapping into the frustration of a growing number of people who felt their points of view were being underrepresented, Limbaugh was able to offer an alternative narrative to the one being offered by the print media or the Big Three: ABC, CBS, and NBC.

Daniel Henninger wrote, in an editorial in the Wall Street Journal, “Ronald Reagan tore down this wall [the fairness doctrine] in 1987 . . . and Rush Limbaugh was the first man to proclaim himself liberated from the East Germany of liberal media domination.”

Limbaugh believed that the majority in this country were being misrepresented by the mainstream media and had data to back up his argument. In a 1988 Gallup poll, people identified as conservative or liberal at a ratio of 2:1, whereas more than 90 percent of the journalists and newscasters had donated money to the Democratic Party.

And Limbaugh’s audience agreed. Listeners across the country tuned into Limbaugh in unprecedented numbers. In 1988 Limbaugh began broadcasting his show nationally from radio station WABC in New York City.

… By June 24, 1994, Rush Limbaugh had an audience of twenty million listeners a week, a television show, a bestselling book in the works, the courtship of aspiring presidential candidates, and the commander in chief calling him out publicly as a threat to democracy from Air Force One.

In 6 years, Rush Limbaugh had gone from zero to reaching nearly 10% of America’s population – all the while sitting in a studio and speaking.

Tomorrow: Part 5

Thinks 12

The Nietzschean Ladder: by Atanu Dey. “Technology is repurposable. Faced with a problem, people usually figure out a solution eventually. In other words, they develop the technology (which is best understood as knowledge of how to get something done) that addresses the problem. Once developed, the technology finds application in entirely different areas and thus leads to improvements in the system that would not have happened had the original problem had not arisen. Civilization advances by climbing the Nietzschean ladder which goes thus: Civilization is at state C1; problem P arises; solution S found that addresses P; solution S applied to other domains which move civilization to state C2 which is superior to state C1; etc.” An example Atanu gives is of Covid-19 pandemic induced advances in mRNA technology.

Which Developing Economies Will Rise After the Pandemic? Ruchir Sharma: “It’s also worth noting that although the path to prosperity through manufacturing is narrowing, it hasn’t closed. In the past, manufacturing accounted for more than 15 percent of G.D.P. in export powerhouses. Today the economies in this class include Vietnam, Bangladesh, Poland and the Czech Republic. They are among the big winners as companies seeking lower wages and shorter supply lines move factories out of China.”

Raamdeo Agrawal: “There were only 100 companies that beat the Sensex’s return of 9.2% in the last 25 years. This shows how difficult it is to be successful on a long-term basis. But the good thing is that a lot of companies got listed along the way after 1995. These new companies now make up as much as 50% of the current total market capitalization. This proves that you will keep getting new opportunities.” More.

 

Talk Radio: Voice of the People (Part 3)

Hosting Talk Radio

Let’s start our journey into the world of talk radio by understanding what it is. From Wikipedia: “Talk radio is a radio format containing discussion about topical issues and consisting entirely or almost entirely of original spoken word content rather than outside music. Most shows are regularly hosted by a single individual, and often feature interviews with a number of different guests. Talk radio typically includes an element of listener participation, usually by broadcasting live conversations between the host and listeners who “call in” (usually via telephone) to the show. Listener contributions are usually screened by a show’s producers in order to maximize audience interest and, in the case of commercial talk radio, to attract advertisers. Generally, the shows are organized into segments, each separated by a pause for advertisements; however, in public or non-commercial radio, music is sometimes played in place of commercials to separate the program segments. Variations of talk radio include conservative talk, hot talk, liberal talk (increasingly known as progressive talk) and sports talk.”

An article in The Atlantic by David Wallace in 2005 describes what it is to be a talk show host:

Hosting talk radio is an exotic, high-pressure gig that not many people are fit for, and being truly good at it requires skills so specialized that many of them don’t have names.

To appreciate these skills and some of the difficulties involved, you might wish to do an experiment. Try sitting alone in a room with a clock, turning on a tape recorder, and starting to speak into it. Speak about anything you want—with the proviso that your topic, and your opinions on it, must be of interest to some group of strangers who you imagine will be listening to the tape. Naturally, in order to be even minimally interesting, your remarks should be intelligible and their reasoning sequential—a listener will have to be able to follow the logic of what you’re saying—which means that you will have to know enough about your topic to organize your statements in a coherent way. (But you cannot do much of this organizing beforehand; it has to occur at the same time you’re speaking.) Plus, ideally, what you’re saying should be not just comprehensible and interesting but compelling, stimulating, which means that your remarks have to provoke and sustain some kind of emotional reaction in the listeners, which in turn will require you to construct some kind of identifiable persona for yourself—your comments will need to strike the listener as coming from an actual human being, someone with a real personality and real feelings about whatever it is you’re discussing. And it gets even trickier: You’re trying to communicate in real time with someone you cannot see or hear responses from; and though you’re communicating in speech, your remarks cannot have any of the fragmentary, repetitive, garbled qualities of real interhuman speech, or speech’s ticcy unconscious “umm”s or “you know”s, or false starts or stutters or long pauses while you try to think of how to phrase what you want to say next. You’re also, of course, denied the physical inflections that are so much a part of spoken English—the facial expressions, changes in posture, and symphony of little gestures that accompany and buttress real talking. Everything unspoken about you, your topic, and how you feel about it has to be conveyed through pitch, volume, tone, and pacing. The pacing is especially important: it can’t be too slow, since that’s low-energy and dull, but it can’t be too rushed or it will sound like babbling.

Phew! Try doing that, every day, year after year.

Tomorrow: Part 4

Thinks 11

The Erosion of Deep Literacy. Adam Garfinkle: “Deep literacy has wondrous effects, nurturing our capacity for abstract thought, enabling us to pose and answer difficult questions, empowering our creativity and imagination, and refining our capacity for empathy. It is also generative of successive new insight, as the brain’s circuitry for reading recursively builds itself forward…We ask our stone-age brains to sort, categorize, parse, and prioritize torrential data streams it never evolved to juggle, while in the background we have to stay ever vigilant to change in every sensory channel….Screens of all sorts serve up rapidly changing images, jump cuts between scenes, erratic motion, and non-linear narratives that spill out in fragments….Is it any wonder people today complain of mental fatigue? Fatigue makes it even harder to sort the trivial from the salient and navigate the glut of decisions modern life throws at us.”

Naushad Forbes: “[The government should] announce a huge privatisation programme, and don’t shy away from calling it that. Our current stock market boom says that buyers are ready to invest. But public-sector stock values are still depressed. I think the best way to see them take off is to announce that the government intends to reduce its share-holding to 26 per cent across public-sector banks, steel companies, oil companies, and every manufacturing company and hotel it currently owns.”

Six ‘freedom’ reforms to bolster job creation and employability: by Manish Sabharwal. “India is fifth in the world in total GDP, but 138th in per capita GDP. Our problem is wages, not jobs (unemployment has hovered between 5-9% since 1947). We don’t have a shortage of land (we can give every Indian household half an acre and they would fit into Rajasthan and half of Maharashtra), labour (about 100 million people could shift off farms without impacting food security), or capital (domestic savings and foreign investors can supply the money required), but our challenge is how these three inputs combine.”

Talk Radio: Voice of the People (Part 2)

Radio’s Rise

The story of talk radio cannot be discussed without understanding first the power of radio. The first radio broadcast happened almost a century ago. Bruce Lenthall’s book, “Radio’s America”, traces the history of radio in the US and its deep roots into mass culture:

The rise of modern mass culture and individuals’ efforts to find their places within it resonated through much of the century. Making radio a part of their lives in the Depression, Americans began a process of helping to shape the meanings of their mass culture. In doing so, they turned to a medium of that culture to help them seek a degree of autonomy within it. That was part of an ongoing process, one that continued throughout the era of a mass-produced, mass-consumed culture’s ascendancy. Starting in the late twentieth century, though, the shape of mass culture began changing in multiple ways. Control of production narrowed further as ownership of media outlets consolidated—a point the Internet as it develops theoretically might challenge. Simultaneously, the proliferation of stations and outlets through cable television, the Internet, and other media may have enabled audiences to personalize their consumption—unless we consider the relatively uniform consumer messages the heart of what is conveyed. Even in flux, though, our culture still blurs the lines between public and private, still pushes us to consider the value of mass communication, and still opens up the meaning of democracy in contemporary life. We continue to seek self-control and ways of being heard in our world, and we continue to look to mass culture’s own vehicles for help. The journalist Dorothy Thompson, writing on Orson Welles’s War of the Worlds, was right: the story of the twentieth century—and perhaps of the twenty-first as well—is, in significant part, the story of the balance between individual authority and mass culture. And how Americans made sense of radio is the first chapter.”

Perhaps India’s political leaders realised the power of radio to shape and change minds and culture. Little wonder then that government control exercised on radio has been absolute – something that has never changed. India’s first private FM station commenced operations in 2001. To this day, private radio stations can give us songs but not news. In India’s radios, we can get government commentary but not independent commentary on the government. It is in this context that talk radio over mobile internet can be the ultimate disrupter. Talk radio has the potential to do to conversation and culture what mobile telephony did to landlines and person-to-person communications.

Tomorrow: Part 3

Thinks 10

Teledyne and Capital Allocation: “Dr.Henry Singleton was more than just a great capital allocator, he was a visionary, entrepreneur, and excellent business person who believed that the key to his success was people—talented people who were creative, good managers and doers. Once he had those managers in place, he gave them complete autonomy to meet agreed upon goals and targets.He and his co-founder and initial investor, George Kozmetsky, bootstrapped their investment of $450,000 into a company with annual sales of over $450 million, an annual profit of some $20 million, and a stock market value of about $1.15 billion.”

India’s PLI schemes may herald the return of rent-seeking. An editorial in Business Standard. “If the government really wishes to improve investment in manufacturing, it needs to ensure that the regulatory and tax climate is such that investors are more comfortable. Direct subsidies and picking winners help nobody but bureaucrats and vested interests — India has several decades of experience to prove this.”

The Great Courses: Must consider doing a few.

Talk Radio: Voice of the People (Part 1)

Growing up with Radio

I grew up listening to BBC World Service on the radio. Because of my eyesight troubles, the doctor had suggested that I don’t read at night. (And there wasn’t much TV to watch in late 1970s India.) For a 12-year-old, that was a hard decision. It was then that I discovered the joys of radio, and especially BBC. I had a big Philips radio, which I would position in the balcony to ensure good reception. The short waves brought the distinctive British accent into my room. For many years, the radio was my best friend. I spent hours listening. The only competition BBC faced was when cricket matches were played, and I would tune in to whichever broadcaster was doing the ball-by-ball commentary.

BBC World Service brought me news, analysis, quizzes, humour, science, plays and more. It became my window to the world. I could close my eyes and be anywhere in the world. I knew the voices of all the news announcers and presenters. The diversity of BBC programming gave me an education beyond the classroom. One of my happiest moments was when a letter I wrote got read in their Letterbox programme. And when I went to IIT as a 17-year-old, I took the radio with me. Much later, with my first salary working for NYNEX, I went and bought a Sony shortwave radio for about $250. Even in the US, the radio was my constant companion.

During my stay in the US, I also discovered AM and FM radio. Having been raised in India on the meagre offerings of government-controlled All India Radio’s Akashvani and Vividh Bharti, the sheer diversity of content available in the US was amazing. News, weather, conversations were all there with the turn of a dial. It was later that I discovered that in India, the government has a monopoly on news over radio – and that is still true in 2020s India!

Much has changed when it comes to entertainment in the past generation in India. Hundreds of TV channels have sprung up. Dozens of apps offer streams of (uncensored, at least for now) content. Podcasting is starting to grow in India. But there is one missing element in all this – talk radio.

Talk radio (think of it as talkback radio) is about interactivity and conversations. A host talks and listeners can call in, ask questions, discuss and debate. In India, what’s missing is the interactivity. TV has its monotonous talking heads and shouting panels. But radio? All it has are songs and music. No news, no conversations, no interactivity. Can talk radio streamed via a mobile app be the next innovation on the Indian media front? Can talk radio change our minds – or even open them?

Tomorrow: Part 2

Thinks 9

2021 Strategic pearls on email and content marketing: “Email marketing has an average ROI that is 4X higher than any other channel.”

8 Themes For The Near Future Of Tech: by Scott Belsky. “More and more niche functions of the enterprise will become multi-player, powered by a next generation of highly specialized, AI-bolstered, enterprise companies with consumerized product experiences.”

20 Myths about Markets. From Tom Palmer (2007).”Most, but not all, such myths are spread by those who are hostile to free markets. A few are spread in much smaller circles by people who are perhaps too enthusiastic about free markets.”

My Proficorn Way (Part 60)

Acquisitions

Some years ago, I had gone to seek advice from a wise and successful business person. My question to him was: how can Netcore grow faster? His one word answer was: Danaher. (Of course, he elaborated on it later.) I had not heard of Danaher till then. His key point was: to grow, you will need to think of acquisitions. You will not be able to build everything in-house. Danaher is one of the world’s best companies that has figured out how to make acquisitions work.

Here is a brief from Andrew Banovic: “Danaher’s business model is pretty simple, despite its continued success.  It basically acquires and operates manufacturing companies.  And not just one or two acquisitions each year.  Over the last 30 years, Danaher has completed over 400 acquisitions.  Not necessarily shiny brand-name companies, rapidly growing companies, or companies that need turning around.  Simply companies in growing markets, without large competitors, where they can use their operating model to provide a competitive advantage. Because of their specific brand of value investing, they typically stay away from flashy markets and well known companies, basically because they don’t want to pay a premium for a name.”

This is from a strategy+business article in 2015 where Danaher’s executives speak about their approach to acquisitions:

Our approach to finding acquisition targets was 20 years in the making. It started when we decided we would not wait for Goldman Sachs to call us with their prospects. Instead, we did our own up-front research into prospective markets and started to build funnels of names of companies to buy and industries to enter.

Other companies try to make one perfect bet. That’s a risky way of letting senior executives with no experience sit on a lot of cash. Instead, we continue to explore many acquisitions and bring a significant number to fruition. When you acquire frequently enough, you learn what to do and what not to do. You develop skill at assessment and integration, and you learn to hold these assets over a longer time than might happen in private equity.

Our main criterion: Through this acquisition, can we ultimately become one of the market leaders in that industry? That typically requires that we pick up one of the stronger brands or assets within that industry, and that we generate at least as much value as, if not more value than, the current owners do.

We have a very disciplined M&A process. It starts with having a clear sense of what markets we find attractive. We look for large global markets with good growth profiles and generally low cyclicality. We also look for the ability to develop sustainable competitive advantage through a brand and intellectual property. We also look, obviously, for good profitability and low capital intensity. If we don’t like the market, we don’t bother looking at specific companies.

We do 12 to 14 deals a year and turn down 10 times that, so we’re doing 150 due diligences a year all over the world. We do extensive due diligence on each one. Our pre-acquisition investigations, especially on the finance side, are designed to dig up, expose, and share every bit of risk, making sure we all know what we’re getting ourselves into. If something looks scary, let’s make sure we sit around the table and figure it out or walk away. We try to be patient and not to get emotionally tied to any particular investment.

For proficorns, acquisitions can become a powerful lever of growth. Danaher is perhaps one of the best companies to learn from on how to do acquisitions right. Just one piece of advice: as you evaluate companies, look for a cultural fit also, especially with the founders of the target companies.

Will be continued soon.