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

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

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

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

How I'm feeling.. unnecessary complexity

Ciao till next time...Harsha

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

Pressing the "Pause" button

I have been thinking about how to become a better - person, husband, father, colleague and a leader. I recently had a major ankle surgery that forced me to take a pause. It made my head a little clearer on what I want to do? where am I heading? and finally the most important question - am I healthy enough to run a marathon at sprint speed or will I drop dead? But where, really, is the time to try out all of these things that I suggest we do?

Lets take time to pause and take a step back... as W H Davies says -

What is this life if, full of care,
We have no time to stand and stare.
No time to stand beneath the boughs
And stare as long as sheep or cows.
No time to see, when woods we pass,
Where squirrels hide their nuts in grass.
No time to see, in broad daylight,
Streams full of stars, like skies at night.
No time to turn at Beauty's glance,
And watch her feet, how they can dance.
No time to wait till her mouth can
Enrich that smile her eyes began.
A poor life this if, full of care,
We have no time to stand and stare.

I recently watched this TED talk by Pico Iyer, on The Art of Stillness (https://www.ted.com/talks/pico_iyer_the_art_of_stillness?language=en), sometimes you just need to “sit still long enough to find out what moves you most, to recall where your truest happiness lies and to remember that sometimes making a living and making a life point in opposite directions.”

The Power of Pause (Ana Dutra):

“I don’t know a single executive who likes to be described as tactical, short-term oriented or as somebody who gets unnecessarily “in the weeds.” And yet, so many solid executives present, occasionally, all these behaviors, even when the situation doesn’t call for them.

Why do people who have the potential and ability to think strategically, empower others and prioritize issues seemingly choose to micromanage — to act in a way that’s myopically short-termed and dive into every problem thrown their way? The answer is that it’s not a conscious choice. No executive chooses to behave this way, just like no executive wakes up in the morning thinking “today I will really mess up and frustrate lots of people.”

Executives behave that way when they don’t allow themselves to pause and reflect about what really matters. Imagine a tennis player practicing with a ball machine that is adjusted three notches above the pace the player is able to handle. No matter how good the player is, if balls are spit at an unreasonable speed and range, the player will quickly feel exhausted, overwhelmed and defeated (feel familiar?). Only by pausing, adjusting the machine, and deciding which balls to go for, the player will obtain results and become an even better player. Just like our frustrated player, executives need to deliberately pause and reflect instead of continuously try to tackle each and every ball tossed at them.

Now imagine that the balls — or issues, challenges and opportunities thrown at us on a minute-by-minute basis — are either rubber balls or crystal balls. There are also other team members in the game. If we don’t catch all the rubber balls, they will either bounce or somebody else will catch them for us. If we don’t catch the crystal balls, they will break. The problem is that, the more exhausted, overwhelmed and frustrated we are, the harder it is to distinguish the rubber balls from the crystal balls.

But in the absence of the clarity to separate the balls, all balls look alike and we will tend to try to catch all of them fearing that we might be dropping a crystal ball. Only by allowing (or forcing) ourselves to pause we can ask ourselves which balls are really crystal balls and will, therefore, break if we don’t catch them.

At a higher level, as leaders, pausing and reflecting enables us to ask what our role really is, how to more effectively empower others to be the best at the roles they are supposed to play and, therefore, what we should really get involved with. Pause and reflection create space for us and for others — everybody becomes more effective and can grow.

Pause also creates high quality energy, increasing our resilience as leaders and our ability to deal with more complex issues. There are a number of ways to pause, physically, mentally and emotionally. A pause can be created by a walk around the block, 20 minutes of meditation, exercising, immersing into a hobby, or simply a high-quality coffee break. The important point is to create time and space to empty your mind and then reflect and filter issues.”

Pausing creates the necessary time to think, rethink, energize and act in the right direction..

1) I have started a everyday 10 minute thinking routine - wake up early and read or listen to music or podcasts or whatever makes you happy!

2) Do a few things everyday you really enjoy doing. Don't create a laundry list of things to do. Keep it simple and concentrate on things you want to achieve. Delegate. You are not a superman to do all that you are given

3) Schedule a "your time". Plan in advance and don not put off for a later time.

4) Stop multi-tasking. Stay with single tasking. As they say "the best way to do many things is to do one thing at a time"!

5) Cut down on unproductive activities. as the world grows smaller lots of communication happens over phone, email, video conferencing which creates a smaller slot to think before acting.

So, as W H Davies says - lets take the time to pause, think and take time to watch the nature's smile before its too late!

Ciao till next time...Harsha

When to sell a stock?

I recently re-read this simple statement over and over again. Philip Fisher has a way of communicating that makes it sound easy....

Excerpt from "Common Stocks and Uncommon Profits"

There is still one other argument investors sometimes use to separate themselves from the profits they would otherwise make. This one is the most ridiculous of all. It is that the stock they own has had a huge advance. Therefore, just because it has gone up, it has probably used up most of its potential. Consequently they should sell it and buy something that hasn’t gone up yet. Outstanding companies, the only type which I believe the investor should  buy, just don’t function this way. How they do function might be best understood by considering the following somewhat fanciful analogy.

Suppose it is the day you were graduated from college. If you did not go to college, consider it to be the day of your high school graduation; from the standpoint of our example it will make no difference whatsoever. Now suppose that on this day each of your male classmates had an urgent need of immediate cash. Each offered you the same deal. If you would give them a sum of money equivalent to ten times whatever they might earn during the first twelve months after they had gone to work, that classmate would for the balance of his life turn over to you one quarter of each year’s earnings! Finally, let us suppose that while you thought this was an excellent proposition, you only had spare cash on hand sufficient to make such a deal with three of your classmates.

At this point, your reasoning would closely resemble that of the investor using sound investment principles in selecting common stocks. You would immediately start analyzing your classmates, not from the standpoint of how pleasant they might be or even how talented they might be in other ways, but solely to determine how much money they igt make. If you were part of a large class, you would probably eliminate quite a number solely on the ground of not knowing them sufficiently well to be able to pass worthwhile judgement on just how financially proficient they actually would get to be. Here again, the analogy with intelligent common stock buying runs very close.

Eventually you would pick the three classmates you felt would have the greatest future earning power. You would make your deal with them. Ten years have passed. One of your three have done sensationally. Going to work for a large corporation, he has won promotion after promotion. Already insiders in the company are saying that the president has his eye on him and that in another ten years he will probably take the top job. He will be in line for the large compensation, stock options, and pension benefits that go with that job. 

Under these circumstances, what would even the writers of stock market reports who urge taking profits on superb stocks that ‘have gotten ahead of the market’ think of your selling out of your contract with this former class-mate, just because someone has offered you 600 per cent on your original investment? You would think that anyone would need to have his head examined if he were to advise you to sell this contract and replace it with one with another former classmate  whose annual earnings still were about the same as when he left school ten years before. The argument that your successful class-mate had had his advance while the advance of your (financially) unsuccessful classmate still lay ahead of him would probably sound rather silly. If you know your common stocks equally well, many of the arguments commonly heard for selling the good one sound equally silly.”

Ciao till next time...Harsha

Ajanta Pharma - A story of the missed bus..

It was I think year 2011 and I was looking at some potential stocks to buy. Two stocks popped up on horizon in pharma - Piramal and Ajanta Pharma.

After reading the wonderful post from Prof Bakshi (here) - I had no further analysis to do except verify the facts and I decided what a wonderful side-car investment it would be!

Piramal indeed turned out to be a good investment. From sub Rs 500 it has gone up to Rs 837 and I am sure its a money multiplier in the long term at 18 - 20%; a wonderful appetite to invest and the good sense to not dilute equity will keep Mr. Ajay Piramal a man to watch in years to come.

Now - coming back to the lesser known name - Ajanta Pharma. I had about brushed this company aside thinking that the growth was unsustainable and the motives of promoters were unknown or suspect at best (having taken over the business in early 2000's as second generation owners - I suspected Yogesh and Rajesh Agarwal were not known entities).

The difference and thumb sucking left lots of money on table. Here's how the financials for Ajanta looks currently -

Mkt Cap has grown by an astonishing 25,518 Cr in 10 years and Retained Earnings in the same period has been 707 Cr. Every 1 Rs retained has created a value of 36 Rs in 10 years! What a wonderful business.

As it looks one of the dangers for Pharma companies is not entering big markets like US or Europe and be localized generics players in India. A branded-generics player needs to have three things going in the right direction - right product strategy (areas to play which on hindsight has been successful - I will not delve on this point here though you can read more in the annual reports), right regional strategy (where to play) and the right people with vision handling the company.

With Ajanta - all three seem to be coming right. The key point going forward seems to be the second strategy which I thought was doomed for failure (restricting to India and developing world). This has been a blessing in disguise helping Ajanta pile loads of cash and grow at a tremendous pace - 23% sales growth and 45% profit growth in past 10 yrs... what a wonderful business this must be - establishing presence in developing markets before actually venturing into developed markets!

With US and maybe Europe later beckoning - is this a missed bus or still something that can be caught?

Is it overpaying for growth? Is the growth sustainable?

For an instance - considering that FCF keeps growing at rate of 35% (which is what it has grown in the past and considering that they are also gaining market share in their current markets - this may not be far fetched) over next 10 years and terminal growth 5% with discount rate of 12% - I still arrive at a value of Rs 1591.

Potential Growth –

Emerging countries hold unique potential in years to come as population growth and movement of people from rural to urban areas give unique possibilities to create long lasting businesses.

Here’s a very interesting perspective of world population growth and economic growth possibilities in Asia and Africa (the two most populous continents growing rapidly for the next 3 decades) – 

Link

“Can you see, as the years pass by, child survival is increasing? They get soap, medicine, hygiene, education, vaccination, penicillin and then family planning” – Hans Rosling.

Ajanta Pharma holds the unique position of playing in the right markets and the right segments.

Not one to over-pay I am still thinking..... 

Ciao till next time...Harsha

The pumpkin seeds..

This is a borrowed idea.. You can do two things with pumpkin seeds. Eat them, an excellent source of protein, or plant them, and watch a successful seed bring back 100 more. The farmer who plants the seeds aggressively, without regard for, "hey, be careful, I could have eaten that seed," often ends up with many more pumpkins and many more seeds. On the other hand, the person who guards all the seeds and then eats them ends up with not much.

And of course, money works the same way. Time, too.

Ciao till next time...Harsha