Sunday, February 26, 2017

The Importance of Second Level Thinking

The biggest task for us when we moved to our new house was to get everything in order. Now, my main task was to get my books in order - have a library created (and create a rudimentary catalog for books I have). In my garb of buying books that seem interesting, I have now the unenviable task of reading 30+ books that are unread for the year..(I am making a mental note not to buy more until I clear most of unfinished ones.. I know I am going to fail this one).

Anyway - I just started re-reading the wonderful book by Howard Marks - "The Most Important Thing". The beauty of reading old ones you know, like and concur is like watching that old favorite movie of yours... you know whats going to come; but sometimes, just sometimes something new pops-up. You realize that you never thought about that before..

Second Level Thinking:

Let me give you some thoughts regarding this. First level thinking is when you take a first dab at anything.. Simplistic, almost superficial and usually not going to turn out the way you thought in complex situations.

Example: Oil prices are too high (flashback 2007), so they will continue to go up.. (we have reached a stage of peak-oil) or oil prices have fallen down (now in 2016 or 2017) and they will continue to go down or stay there... not really knowing the dynamics behind why the prices reached there in the first place (shale oil, horizontal drilling / fracking; geo-politics of trying to bleed Russia with low oil prices).

Now, any layman can have a "opinion" about any event that will or can happen. This is classic first level thinking.

However - second level thinking is more deliberate and something which takes more in-depth study of subject. For the example above on oil prices or commodity price behavior - one can learn a lot by reading about Shale revolution (read - The Green and The Black), geo-politics in middle east (I recommend books on - 6 Days War, Saddam Hussein - Debriefing the President, OPEC: the failing giant, among others) and biography of John D Rockefeller (the original robber baron :-)). Once someone has a understanding of the background, and understand the dynamics of what's happening - you can take a balanced view on topics where complex variables are involved.

Predicting Complex Events and a Look at Alternate History:

Most such situations are too hard to predict anyway even after understanding the dynamics at a high level (there is always a range of outcomes that are possible for any situation with probabilities for each outcome). Sometimes if the variables are limited - one can take a calculated guess at the outcome, in few others its too difficult to predict one single outcome.

So, this train of thoughts led me to have a look at what I would call as "alternate history". What could have happened if the roll of dice or favorable set of conditions existed for something that has happened in history. As an example: for the World War II aficionados, its generally agreed that Hitler's defeat was sealed when he attacked Russia in the June of 1941 (Operation Barbarossa). What is not usually known is that he had the right ingredients to succeed - and how close he came to succeed.

When the Wehrmacht invaded the Soviet Union, they were received as liberators by the common people. The Ukrainians considered Hitler as the savior of Europe. The Bielorussians were eager to fight on the German side. Many regiments of Cossacs deserted to their enemy while Georgians, Armenians, Turkomans, Tartars and Uzbeks surrendered en masse. As Erich Kern an NCO in the Leibstandarte Adolf Hitler wrote in 1948 ("Dance of Death"), "All over the city there were people waiting on the streets ready to cheers and welcome us..... Never before had I seen such sudden transformation…. Of Bolshevism there was no more."

At that point, Hitler only needed to cooperate with the Ukrainians and others and make the necessary political alliances to conquer the Soviet Union.

But Hitler had become intoxicated with power and by then disregarded this and forged ahead expecting that the Soviet Union would collapse as France and other countries had. Then, after the Wehrmacht overran the western Soviet Union, Himmler and his assassins started roaming the territories under control, murdering people - Jews and others left and right. This made the various nations within the Soviet Union realize that the Germans were not so interested in destroying Bolshevism, but to enslave them. They then changed their hatred for Stalin and channeled it into a holy war, and saw their sole duty to defend the Soviet Union in what was viewed and characterized as a "Patriotic War".

So - there goes our alternate history. So near if you look at it from this angle. Anyway - a learning for you and me is that things are not so straight-forward as they seem to be when you look at the rear-view mirror.

Things are always easier to justify when its in the past.

What Will Work? How to Look at Things?

Superior thinking is never easy. Nothing is black or white. Everything in life is in shades of gray. Some darker than others. Most things in real world depend on either - "superior skills that can be quantified" or "superior insights"

In the end superior decisions and well thought out approaches can add more positives over the long run. But - even that can be hardly perfect. The best you can hope for is that you will be more often right than wrong and successful decisions add more than mistakes subtract.

At the end - its important to develop a sense of "being humble" and "ability to learn from our mistakes and those of others" as you will realize that you "don't completely own your successes" and a lot sometimes is dependent on a range of factors.

Ciao till next time...Harsha

Tuesday, December 27, 2016

Thoughts on demonetization

It was few days after Diwali, India's festival of lights - celebrating the mythic victory of Rama over Ravana - the symbolic victory of good over the bad. Trump was kicking ass in our part of the world in the US of A. As one sixth of world population in the second most populous country were getting ready to hit the bed - something akin to the diwali pataka woke them up with shock and awe.

Modi declared in his characteristic, rustic charm on live TV that Rs. 500 and Rs. 1000 notes would no longer be legal tender. He did share that this exercise would address the topics of counterfeit currency, cross border terrorism, black money hording and corruption. The honest tax payers would be spared - Modi thundered.

In one sweep - over the next month - as common man was struck between - standing in the ATM queue to supporting the move, one way or the other every one was impacted. In one way or other - every Indian - resident or non resident got impacted (or do not yet know that he/she has been impacted).

Let's put things in perspective. I am not writing this article as an argument against or for demonetization. As far as possible I am trying to put a structure to my thoughts as I feel more comfortable with my thoughts after putting pen on paper; these thoughts are made more as an NRI - having seen the effects on my parents, friends and my personal investments.

This has impacted me as anyone else invested in the Indian stock market (this would bring in an element of bias in my analysis - knowingly or unknowingly).

First things first - what's the historical perspective for demonetization:

Germany after world war 1 was reeling under tremendous inflation. The Weimar republic was on the last gasps of breadth. The currency had totally lost its value. 100 million deutsche mark or even a billion deutsche mark was a common currency used to buy groceries, etc. Here's a pic of 100 million mark that you can buy for 25 euro cents in any flohmarkt in Germany.

Demonetization was the only way for the country to proceed. So was the case with Soviet Union when they broke up post socialism. These historical perspectives don't really chime / make a case for demonetization in India.

Mostly - demonetization was used as a tool to wipe a bad dream and start afresh. Only other large scale example of recent demonetization to curb black money proliferation was in Burma in 1988 (refer - book by Sean Turnell) which ended up as coup by the military. Only failed states can try to use this as a tool.

Why was this not thought of by Govt of India before? 

It is a rational question according to me. Why did other governments before not think of something so simple to curb black money proliferation and curb the parallel economy?

Actually I searched around on the web and found this is not true. In 2012 - the ministry of finance had made a detailed study and made recommendations on tackling black money in India and abroad. For those really interested in reading more can get a copy of the pdf here: Link to ministry of finance study.

Why was this study not taken seriously is a question one needs to ask. Did Modi and his men know about this study which was done as recently as 2012 that strongly advocated against demonetization? I am actually asking the same question. Its scary to think that Modi has come up with the biggest monetary policy shift (taking out 86% of legal tender out of the system) sitting in his bungalow with rookie political analysts who over simplified the problem at hand and came to the conclusion - "any action is better than no action". I, for one - as an investor would be scared by the thought. Various newspaper articles since have come up to support this theory.

It also brings to question what the new RBI governor Urjit Patel really doing? Again - an indication of a toothless governor of RBI - given the fact that an elected prime minister does not feel comfortable taking opinion from him on monetary policy. Is this why Raghuram Rajan was brushed aside and not given a second term? This makes me wonder if this move was already thought of when pushing aside Rajan from the scene as a road-block.

Will this help India?

That is - I think; the most important question. What's done is done. But - will this help India? Atleast - will this a) fight counterfeit currency, stop cross border terrorism b) put fear in minds of people c) bring a tax windfall (equal to the original estimates of 3-4 lakh crores).

Among India's middle class, Modi's surgical on corruption and black money appears to be very popular (atleast among the media and in the cities it seems popular). I think this is also the "bitter medicine" theory - if the medicine tastes terrible - it must be good for you. If something tastes good (let's say - Ice cream), it must be bad for you. And - again its the "common suffering" theory. If something affects your neighbor and not you - you feel its singling you out and you rebel. But - what it affects everyone alike? Then you rationalize this as something you do for the "greater good" of the nation.

For an example of how we (or our far cousins - monkey's) dislike discrimination, see this -

Since enough Indian's are now suffering, we would like to believe that its for a greater cause. It's a moral project, not just an economic project. Stand-in-line (literally at ATM stations), you would be told - you honor our brave soldiers at the border.

a) fighting counterfeit currency:

Here's something to quote from Prof Arun Kumar -

"Not at all. In fact, our macro-economic indicators were reasonably good. But the real point is, what does this move achieve? According to the prime minister, there are two objectives. One is (curbing) terrorist financing and counterfeit currency—and the second is that the black economy has become very large and it is the source of poverty and all the problems in India so we need to get rid of the black economy.

The question is—does demonetization overcome these two problems. As far as counterfeit notes are concerned, they are only 400 per million, which is very tiny. And according to RBI, there is only Rs 400 crore worth of counterfeit currency.

Total currency in circulation is Rs 17.5 lakh crore. It’s not even “oont ke muh me zeera”, as they say in Hindi. It’s negligible.

Terrorists need financing. So they print these fake notes and circulate it. But once they have given the money to another person, it’s circulating within the economy. So they have to print more and more money. That is what you have to stop. And how do you stop that? Not by demonetization, because there are state actors involved in counterfeiting. They can counterfeit the new currency notes also."

b) put fear in minds of people:

I think this move will definitely help in this regard. However, I think this can affect the honest people as much and in most cases even more than the dishonest.

It may affect the honest citizen more than the convoluted hoarder who's built up huge wealth (that is mainly in real estate and gold).

There is a story that Abraham Lincoln narrates when he was fighting to end slavery -

"If I saw a venomous snake crawling in the road, any man would say I may seize the nearest stick and kill it. But if I found that snake in bed with my children that would be another question. I might hurt the children more than the snake, and it might bite them."

c) bring a tax windfall (equal to the original estimates of 3-4 lakh crores)

This is highly debatable. Out of the 15 Lakh Crore Rs (500 Rs and 100 Rs) in circulation which amounts to 86% of the currency in India by value - 12 - 13 Lakh Crore Rs. are already back in the banking system.

This seems to be a miscalculation of the highest order. It makes this move look childish in retrospect if less than 1 Lakh Crore Rs is brought back as tax windfall. The cost of taking an entire nation through this exercise would be more than the benefits this ensues. Even basic government run corporations would like to get a decent return on tangible capital before moving on a new product introduction.

Where is the black money? Is this the first step in a series of steps?

As per the last study of the finance ministry - 3/4th (or more) of the black money is in bullion / jewelry and real estate.

I will not go into details here - but as an illustration, India holds over 18,000 tonnes of above ground gold (represents roughly over 11% of the known gold reserves worldwide). This is nearly 2/3rd of India's current GDP.

Further - it beats reason why a 2 BR house in Bangalore should be almost equal to price of a house in most tier 1 cities of the USA whereas income levels are much lower. The worldwide historical indicator of home prices is an interesting ratio called: "home price to income".

The price-to-income ratio looks at the total cost/price of a home relative to median annual incomes. Historically, the typical, median home in the US cost 2.6 times as much as the median annual income (so if the median income in an area was $100,000, the median price of a home would typically be about $260,000: $100,000 * 2.6).

In comparison, if it takes 20 - 30 years of annual income to buy a home in any tier 1 city of India, what it clearly means is that the real estate companies have priced themselves out of the market or alternatively there is so much black money in the market that home prices have been highly inflated (artificially that is).

This brings me to the point to ponder - "what next". Gold / real-estate seems to be the next logical step. Now - lets see if the same patriotic fervor remains when the price of the home you own goes down by 1/3rd or 1/4th or even more. Can it happen? Looking at figures worldwide, home prices in India are somewhat 3x or 4x more than what they should be.

Can Modi do anything to touch this - without losing support of people - irrespective of the color of money they hold - black or white? If there is no next step - why make this move at all in isolation?

"Its the trust", stupid!

When you hold cash - you trust that the value of the money you hold is really what is written on it. "I promise to pay the bearer of this note Rs 500" would mean just that. Not more, not less. In the current situation there is an *conditions apply. The rural poor who lack infrastructure to setup accounts / have to walk miles to the nearest ATM are being thought a lesson fast forward in digitization. 

It is difficult to estimate the second and third order effects of something as complex as this. Indian's are by lot - highly resilient and adaptable. We do believe in the maxim - "this too shall pass".

But, it does bring to the fore- certain questions on creating over simplified solutions to bigger economic problems a country faces. It begs the question - what next?

And until its clear what the strategy is, I am not convinced if this is the right first step in executing the strategy. The lack of transparency and poor execution is not giving me a lot of hope.

Ciao till next time...Harsha

Sunday, December 04, 2016

The do-nothing strategy

"All of humanity's problems stem from man's inability to sit quietly in a room alone" - said the French Philosopher Pascal in his unfinished memoir Pensees (Thoughts). 

I think if we have to para-phrase this to the modern day - we are so used to action for action's sake - we forget that sometimes - all you need to do is give something the time it needs to do what it can. Action is not equal to progress.

The reason I am writing an article on something so mundane a topic is because I think we all need some positive reinforcement from time-time that maybe doing nothing is as good or even a superior strategy than doing something. Through the thanksgiving vacations - I have been analysing my stock loss making patterns / unable to maximise profits (in other terms selling out too soon or inability to sit tight when you already hold a stock with very good economic characteristics) in my holdings - and the quote from Pascal came to mind.

In today's world - we value a little too much of "Type-A" personalities. The reason is - we can quantify what they have achieved if and when they achieve something. Losses are harder to quantify - i.e., what I have lost due to my actions.

Sometimes, we feel that if you keep running around in circles - you are creating something of economic value. Example - generating reports on why something is where-it-is or looking too much into history and forecasting what something needs to be or looking into set of random data and creating patterns where none exist and creating complex models around them, etc etc are running around tree patterns. It is important for individuals to constantly ask a few simple questions:

1) Do I need to do something here or can I sit quietly and let something run on auto-pilot.
2) What are the second and third order effects of changing something in the system.
3) Why should I do X now (replace X with "reply to that email", "visit that customer who's only interest is price reduction", "increase / decrease price where you have X% MS% in hope of gaining", "introduce a more cost effective product and charge lower", "run that model for forecasting something 5 years out", etc, etc).
4) Am I adding value when I do X or substracting value or not generating any tangible value.

One of the things we need to do is what the 19th century mathematecian Carl Jacobi suggested:
Invert, always invert (“man muss immer umkehren”)

Jacobi believed that the solution for many difficult problems could be found if the problems were expressed in the inverse – by working backward. For example if you want to prove that all swans are white - you would do no good finding a million white swans, all you need to do is go searching for one black swan and you would have found your answer.

Coming back to my examples on stock markets - the conventional thinking says - high risk = high return (go big or go home). However, to get to someone like Buffett’s playing field, it takes lots of trial and error to go from “How much can I make?” to “How do I not lose money?” Same destination. Different road taken.

Coming to a business example - instead of looking at capital allocation decisions in the usual form of - "how much money will I make by creating this new product?"; it makes more sense to also ask the question - "will I lose something if I don't make this new product?". Again its important to ask - how can I go down from where I stand and do those things which will strengthen my position instead of always looking at systems as stable status-quo environments with infinite growth possibilities.

Anyway - Running around trees at speed of light will only make you f**k yourself in the backside. Its important to realize that sometimes doing nothing is better than doing something.

Ciao till next time...Harsha

Friday, November 18, 2016

Managing Expectations: Tata Sons vs Cyrus Mistry

The ongoing feud between Tata Sons and Cyrus Mistry (following the removal of Cyrus as the Chairman of the board) is interesting. If you and I think its important to "manage expectations" - both with bosses and teammates / reportees - this episode proves its even more important. Cyrus's abrupt removal from Tata Sons board (which manages group companies valued at >$100B) is as much an issue of "managing expectations" as anything else.

First things first:

The first Tata company was incorporated in 1868 and over the next 150 years it has grown to be a conglomerate - 29 listed companies, over 70 unlisted companies. The group companies are controlled mainly by the chief holding company "Tata Sons". Tata Sons is mainly controlled by the various Tata Trusts (which are in turn very interesting to explore - as to how they came into being; I'm not going to be writing about that here) with 66% stake. The largest Non-Tata stakeholder is Shapoorji Pallonji Mistry (Cyrus Mistry's father) and his group company. Now - its no secret that the Tata Trusts are the true puppet masters of Tata Sons and any illusion of "independent board" is delusional. The 100-odd group companies are mainly controlled by Tata Sons along with a series of cross holdings by different Tata companies. So he-who-reigns over Tata Sons - inturn reigns over the Tata empire.

Its interesting to note that all the men who became chairmen of the board of Tata Sons came from the "Tata family" and there were only 5 men at the helm before Cyrus Mistry (over teh past 150 years which is remarkable). Cyrus is actually "no outsider" - being the crown prince of the Shapoorji Pallonji group and also related to the Tata family through marriage.

How can Cyrus screw it up? Did he screw it up?

Now, having set the stage, being as-close to the family as possible - one would have expected the crown prince of Tata empire - Cyrus Mistry to be able to manage the group companies for the next 30 - 40 years or so (he was in his early 40's taking up the mantle)... It beats the "sense of natural justice" to see the guy go barely after 4 years at the helm.

How did he screw it up? The question is - why did he screw it up. Especially of interest is the question which comes to mind - what was his charter when he was put at helm; and did he "understand", "internalize" and "execute" to the charter.

Let's break this down a little.

Did the Tata group perform badly during his helm of roughly 4 years -

This is an interesting question. When you look at the group with 100-odd companies, as is the case - 80/20 rule kicks in. 80% of the revenues come from 3 group companies - Tata Consultancy Services (TCS), Tata Motors (thanks to Jaguar-Land Rover acquisition which gave them an entry into China) and Tata Steel. Tata Motors is the unlikely revenue flag barer for the group (thanks again to Jaguar Land Rover) bringing in 40% of revenues of the group.

Over 80% of the profits come in from just one company - TCS.

So, looking at TCS - in the past 3 years (2013 to 2016), revenues as well as profits have gone up by 72% and 75% respectively. Not bad you would say - but wait a minute, what's Cyrus got anything to do with the growth here? It was built by a guy called S Ramadorai (now - how many of us have heard about this guy..).

Tata Motors has in the similar time-period grown 46% in revenues and a slower 11% in profit. Tata Steel has been the Achilles-heel of the group going deeper into the red after the phenomenally disastrous Corus acquisition (made during Ratan Tata's tenure).

Anyway - for the sake of argument, you could say that he's not done badly. Mainly driven by TCS. But - the rein was too small to make any difference, so essentially "he could have been a good commander". His helm was too short to judge.

Debt challenges -

This is one area that has bogged down the group ever since the last financial crisis in 2008. The group had ~$20B debt when Mistry took over and it has steadily climbed to over $30B. Tata Steel (thanks to Corus) has accounted for >70% of the debt growth. Tata Power and Tata Teleservices account for the 10% of the debt growth each.

However (again thanks to phenomenal growth of TCS), the overall group debt came down from Debt/Equity of 0.86 to 0.73 in 3 years time.

What did Mistry do to piss-off Ratan Tata (the apparent flag bearer of family baton and the Chairman of the Tata Trusts) -

Inability to manage expectations

One clear rule which most of us do not understand is nicely articulated by this German proverb -

"Who's bread I eat; his song I sing"

Going back to the legacy that the Tata's have built - they are known to be "empire builders" - family that does not drop the ball when the going gets tough. I am not sure if Cyrus really understood this or internalized this rule. That's the family's fabric - and its been so for last 150 years - its no easy matter to change the "culture" of the group - no matter how toxic that can become sometimes.

Ratan Tata in his helm from early 1990's until 2012 - grew the group revenues by 50 times (mainly through acquisitions). Most acquisitions (I am not saying all - as Jaguar Land Rover is an exception) have been poorly executed. Especially as Buffett says - the only way you can win at an auction is by not going there.

Every major purchase of the Tata's have been through bidding or auction like pricing (essentially where there is little relation to value and price). Corus, Tetley, Telecom buys, etc.. Sometimes when you do buy many companies - you end up buying a good one - like Jaguar Land Rover.

Almost all the investments made by Ratan Tata - Airlines, Telecom, Nano have been disasters. The return on invested capital at the major group firms have been consistently below the cost of capital. Irrational exuberance has been rampant at the group for many decades now. I think Ratan Tata became a victim of "anchoring bias" in many cases. Ex - pegging Nano sale price at Rs 1 Lakh ($1,500) since he committed that initially (commitment and consistency bias).

So, when Cyrus comes in and says - that he's going to shut down Corus (the steel plants in Europe losing $1M/day) or Telecom businesses or power companies or discontinue Nano - whatever becomes of the Tata legacy?

This is a direct attack on Tata nerve. And when someone hits where it hurts - especially in such a short time (3 years) - it hurts bad. When it hurts - and when you have the power to hurt back - you hurt back. It's cause and effect.

This I think was the reason for his exit. It is scary that human psychology can cause us to react the way we do - even if its a $100B + enterprise. I think therein lies a lesson for us.

Alternate histories - how could Cyrus have saved the day?

I think it's important to understand how to implement changes which you want to bring in. This is something which is not taught at business schools / as it seems even on the boards of companies worth many billions of dollars.

Go-slow - especially when you know you have 30 - 40 years ahead of you; its better to go slow and not rub too many egos on the wrong side.

I think if he had taken 10 years to do the things he tried doing in 3 - things might have been different. A bad business will always magnify its "badness or worthlessness" and a good business will continue to flourish.. you always have the opportunity to prune things down.

Get executive buy-in - especially in this case from Ratan Tata; as the chairman of the Tata Trusts he was the man driving things from behind the scenes. You see - If Cyrus shuts something - he questions the legacy of his predecessor. But, if he through gentle posturing lets Ratan suggest (through Tata Trusts) that he shut shop / rescind certain bad business moves - that will be a different matter. You see - after-all, Ratan Tata is not getting any younger - I'm sure he would have mellowed down a lot and would have been happy to give him some advise!

Don't cut pay-offs- especially not to the owners! I think Cyrus cutting back on dividends of group companies hurt Tata Trusts the most. It hurt them where it should not have hurt. The anger one feels when cash flow perishes can have disastrous consequences. What he could have done is not increased dividends for the next 10 years! Which in itself is a roll-back mechanism of sorts with inflation eroding value.

Be careful who you hurt! - There is a story that Abraham Lincoln narrates when he was fighting to end slavery -

"If I saw a venomous snake crawling in the road, any man would say I may seize the nearest stick and kill it. But if I found that snake in bed with my children that would be another question. I might hurt the children more than the snake, and it might bite them."

One has to tread very carefully when dealing with family entanglements.

Anyway - it's an interesting learning on how to manage expectations. I hope we can benefit from this. I hope Cyrus can benefit from this too.

Ciao till next time...Harsha

Saturday, August 20, 2016

Urgent vs. Important [I just got an email – “it’s important, reply ASAP”]

I just got an email - Its important reply ASAP. I am wondering if it’s really important for me or to the sender.

Not a topic I like to write. But, it’s something that’s been on my mind lately. It’s funny I’m putting off the trip to the gym, missing my son’s first day to school, that dinner I had planned for a long time, the festival which needed me to be there; but again it understates just how much we've been manipulated by those that would make their important into our urgent…

The problem, of course, is that the list of “do it now” never ends, it merely changes its volume as it gets longer or bigger…

Its morning 6.30 am. My son refuses to take bath to go to school – that urgent. Going to school is important. An angry customer with delivery problems is urgent. Building systems which will prevent delivery problems is important.

That meeting you attended at 8.00am a few weeks back was urgent (you’ve even forgotten about that meeting). Your son’s first day to school was important. You’ll remember that for years.. maybe more than a few years with the right kind of spouse – that’s a different story there!

Sometimes it’s like watching TV. I used to watch a lot of business channels a few years back. Buy stock on tips, watch what the TV anchor says is the next big trend, the next big stock. Bought them only to see that I had just bought something a few percentage points below the absolute lifetime high (I remember RNRL –10 years back which I bought at 190 or so.. at the absolute highest… and thank GOD I had so less money to lose..). Last year - I made three stock transactions (sold one, bought two; out of which I added onto something I already held for past 4 or 5 years). This year I’m down to one transaction. I’ve never had better results in stock market. Just sit tight and watch your stocks. Don’t shift, just make the right buys and sit tight. Let compounding work. Give it time to work.

In fact any sort of breaking news or flash stories are rarely important. Important means long term, structural, secular trend - oh.. that’s something everybody knows’ type of stuff. Something that’s a slightly positive today that can be a long term secular theme..

Yep.. let’s face it. The aim of present day news channels is not to improve your and my knowledge or to give you the tools to have a better life. It’s to make money. The reason rags-to-riches, emotional soaps, or some scandal – political or otherwise attract attention is because its entertaining. Its fun. Its emotionally engaging and attracting your mind to something that’s not challenging. Activity which has no consequences, but fun, engaging and addictive to whatsoever degree. Your mind wants to do it.

The topic started with an email and it just went onto other things. But – this article is just to show you what’s important. What’s not? And maybe act smartly.

The news we listen-to eats us. What your boss tells you, what your employees tells you, what’s on TV, what’s around you, what your investors tell you, what your customers complain about, blah blah blah – everything consumes you.

Your choice (and mine too) is to decide whether you want to engage in living through other people’s important news instead of actually focusing on what’s important for you!

Ciao till next time...Harsha

Thursday, May 26, 2016

My first scuba dive experience: lessons re-learnt

I am a non-swimmer. I have an active fear of water. The first time I tried to learn swimming was in my fourth grade. The swimming class was slightly comical when looking back. The first day of class - they dropped the kids at the deep end of the pool in some sort of a comical ritual. This turned out well for some, but for the other pour souls (like yours truly) - it lead to a life-long fear of water.

I think in our lives we have so much expectations. Over-achievement is a bane. Not a boon. "Why?" is a rarely asked question. "Want" is what we are always after.

Anyway.. now let me come to what I was telling. How and why did a non-swimmer like me want to do it. Dive in an ocean. Come to think of it - in the "pacific ocean" next to a small set of islands we call Hawaii. Its deep deep ocean. I don't know why - but strange facts come to mind when you lest expect to recall. Somewhere in my geography classes - I had read about the Mariana trench - supposed to be the deepest point in the pacific (or is it the deepest anywhere in the world - anyway.. shit.. who the hell cares how deep it is).... what if the oxygen runs out is a strange feeling. There was this strange ad which used to play on Indian TV during my childhood days - "Dar ke aage jeet hai" (There is victory in front of fear). I got visions of this Ad when I least expected... hell shit. Anyways... our minds wander.

Charlie Munger had said something which came to mind - "The secret to happiness is to lower your expectations. ...that is what you compare your experience with. If your expectations and standards are very high and only allow yourself to be happy when things are exquisite, you'll never be happy and grateful. There will always be some flaw. But compare your experience with lower expectations, especially something not as good, and you'll find much in your experience of the world to love, cherish and enjoy, every single moment."

Well.. that may be true, but so what. There was still the dive to make. And shit - I had lied on the form. I had ticked that "I know swimming" when there were those forms to sign (I would not have been diving if I had ticked no). I had rationalized who the hell cares if I knew swimming or not under water. I have equal chances of success under water than above it. Heck - that seemed all OK until we were on the boat. You see having flexible moral fiber is not something I'm comfortable with. Anyway. Now to the dive.

We had to get into our suits, put the fins on and jump into the ocean. Note the operative word - "jump" into the ocean without the oxygen cylinder hanging on. Its kind of crazy that you get special creative ability during such times.. heck I thought I was not creative. My feet started to cramp. I just dived overboard. We had to swim a few feet to wear that suit which carried the oxygen mask. I am still trying to think how I did it. Lets maybe blame that on "social proof" tendency. The theory goes that once you see others do it - you think or want to do the same stuff.. more on my thoughts on that topic in a separate blog post. Anyways.. this is what happens when you read too much of Munger. You atleast know human psychology and have words for shit you dislike or don't know.

After this initial experience of trauma - suddenly I got really calm. The calmness of the ocean took over me once I got that oxygen tube in and started breathing and turned around to look into the water. Yes "breathing". That's just it. Now I decided f**k the shit of all that comes to mind. I'm going to do one thing and only one thing right. Breathe. I just looked at getting my breathing right. All the external focus stopped and I started only focusing internally. What I had to do to survive. Now gentlemen - if there is one thing I can tell you from today - just concentrate on breathing if something like this happens. All that it takes for us to stay alive is breathe. Once you got hang of this one thing - it's all easy going from there.

The first jump that we did was in quite a dirty part of ocean. The only fun things I saw were a few fishes and some tubes lying on the ocean floor. The water was not all that pristine as I thought it was (now - we should not believe in ads). But - heck - I did a second dive. And it was magical. Getting underwater felt somewhat like flying. The sense of space. Sense of strange creatures - fishes, turtles, strange corals everywhere is amazing. Hundreds of fishes of all colors flying around you is magical. Finding Nemo seemed like a true movie. I just felt at ease with water. With myself. I made peace with my world during the dive. Breathe. The rest will be taken care of.

Ciao till next time...Harsha

Friday, April 29, 2016

The car ride with TJ: Be someone or do something

I always thought it would be interesting to pen this one. TJ Rodgers (TJ) has stepped down as CEO of Cypress Semiconductor. Lot of people would have good, bad or an in-different opinion on this. Watching him operate in boardroom environment has been a very interesting experience of late. The New Product Ship Review (NPSR) meetings, Ops reviews, EoDB meetings, etc are always interesting meetings. You like him or hate him - one thing you would never do is ignore him.

A few days back - with some turn of events, I got invited (thanks to a key customer who came to our Corporate HQ) to wine-tasting and an evening at his shop / winery. The close to 2-hour car drive was the icing on the cake. As fate would have it, got paired to drive in his car with a colleague from Europe. It was fascinating to watch him talk about wine-making, real-estate, beer varieties, his favorite movies, how he drives on the car-pool lane and his motto in life in the brief car ride.

Watching from close quarters reinforces the lurking suspicion you've always had - that you are in the midst of someone special. Genius (though the meaning gets diluted as it gets attributes to many people) is a term you could truly attribute to him. Someone who is equally fluent in technology as he is in business or finance or wine making or movie critiquing or real estate or stock speculating.

I wouldn't disclose the exact conversations as that would not be fair on my blog. But through the day - one statement of his struck in my mind. A man always has two things to choose in life - "be someone" or "do something".

I think I have learnt quite a bit about management - both business management (how to operate a tight ship in a tough environment, have the right processes in place) and people management (especially what not to do) from watching him. Only time would say if his stepping down would have an impact or not.

You see,... in the business world, the rearview mirror is always clearer than the windshield.

Thank you TJ.

Ciao till next time...Harsha

Tuesday, April 05, 2016

Selling myself the best hour of the day...

“I said I would sell the best hour of the day to myself in order to improve myself.  Only then would I sell the rest of my time to my clients… To make a man of yourself intellectually, you need to work at it.  I don’t think even Johnny von Neumann did it naturally… if you’re a person of good cognition, you can learn a lot more if you put your mind to it.  I don’t think there’s any substitute for just sitting and thinking.”
— Charlie Munger

Ciao till next time...Harsha

Thursday, March 17, 2016

Ataraxia - The Perfect State of Tranquility

I changed my blog name from "Circulus Vitiosus" (Positive Energy out of control) to "Ataraxia" (Perfect State of Tranquility).

I was recently reading about contrarian investing.

Being a true contrarian takes supreme courage and implacable calm. Buffett talks constantly about the “emotional framework” Graham provides; Charlie often says that most investors, no matter how smart, won’t succeed because they have “the wrong temperament.”

That sums up beautifully. As the Greek philosopher Epicurus stated - it is.. but the aim of human life to reach "ataraxia" - a perfect state of calm and tranquility. Attaining a state of calm amidst chaos. Becoming unshakably calm and collected. Ability to shut out noise and concentrate on task at hand. Read how you will.... "ataraxia" is what we strive to achieve.

Ciao till next time...Harsha