Transcript of the talk given by Gaurav Dalmia to the Stanford MBA India Study Tour group on August 29th, 2025, in New Delhi.
Good morning. It’s a pleasure to talk to the visiting Stanford group again. I was told that if I did this a few times, I might get tenure! Forgive me, but I might repeat a few things that I had said to your friends who were visiting last year. The reason is: India has not changed that much in the last one year. Well, except Trump and his ambivalent attitude towards India.
“What does an IC stand for?” When your friends came last year, I had asked them a trick question. “What does an IC stand for?” And, I have to say, they didn’t do too well with the answers. The worst one I heard was “investment committee”. The expected one – still not the one I was looking for – was “integrated circuit”. The real answer, in my mind, was “Indians and Chinese”! Yes, these are the people who will incrementally shape the future of the world, and I am glad you are visiting us to understand what’s going on in our country.
Uniqueness of Silicon Valley. There’s a lot to learn from Silicon Valley. I don’t know what water you drink out there but the fearlessness and optimism I see in the Valley is simply unparalleled. It’s quite interesting that the most-used word in the northern California is “disruption”. It’s not merely “innovation”. And the hippie-culture types from the 1960s San Francisco will be disappointed that it’s not “love”. Nevertheless, I should have asked you folks to bring me some bottled water from there!
Political risk. Indeed, the world has changed. Twenty years ago, business people from New York would show up here and ask: “So, tell us about political risk in your country?” Now, I go to New York and ask them the same question. It’s the full circle of life!
Trend-watching. Change, of course, is inevitable. Perhaps it’s best described by a verse by the British economist Alexander Cairncross:
A trend is a trend is a trend,
But the question is,
Will it bend?
Will it change its course?
Because of some unforeseen force,
And come to a premature end.
To me, the most important line is: “Because of some unforeseen force…”. Do keep this in mind as you look at trends, whether it is in tech, or in economies.
Contrasting wealth creation in the US and India. Let’s quickly look at wealth creation. In the US, the top quartile wealth creators come from two buckets: You either disrupt a sector, like say Open AI or Amazon or Tesla, or you take a stable cash flow and lever it as much as possible to juice up your return on equity, like Blackstone or KKR does. These are the templates for a mature economy.
And of course, these days you can add joining politics to the list of wealth creation opportunities. I’m not sure how many of you have read the rather damaging piece on US politics in New Yorker recently. It analyses that in his first term and his second term so far, Trump has made $3.4 billion. Now, if true, that’s pretty good for 5-6 years of work!
But let me make a further comment about the excitement about AI. It’s not clear whether these AI data-centre investments will pay off, or who the winner might be. I was reading a tech sector blog a few weeks ago and it had a scary calculation. Data centre capex is expected to be $400 billion in 2025. Of this 35% will be the GPU cost. On a net basis, given the mix of assets, experts believe a 10-year depreciation curve will be reasonable. That means $40 billion in depreciation alone. These new assets are expected to generate a revenue of $25 billion. Over time, they will need an annual revenue of $160 billion with a 25% gross margin, just to cover the depreciation, forget return on equity. Will that happen? When might that happen? All this reminds me of the telecom frenzy from the late 90s and the early 2000s, when the so-called tech infrastructure companies like Global Crossing as well as the telcos spent heavily in anticipation of the internet boom. The internet boom did happen. It even surpassed many expectations. But the wealth creation happened, not for the then-obvious infra players. A darling of the times, Global Crossing, went bankrupt. Wealth creation happened for the app-creators. So beware, how the profit pool from AI might spread this time!
Coming back to India, let me offer you, in growing markets like India, this old economy-new economy dichotomy does not exist. There are a multitude of wealth creation sectors. And the age-old formula – just build a business – works. You are meeting many captains of industry in the next few days and I am sure you will hear these thoughts again and again.
Steve Jobs and Indian philosophy. If you agree, I will punctuate my comments regarding India with lessons from Indian philosophy. I know you’re all likely to be jetlagged, so I promise I’ll keep it simple! I think there are many life lessons from Indian philosophy which might help you in your career. Steve Jobs, arguably the greatest business leader in modern history, spent 7 months in India in 1974. He founded Apple two years later. By his own admission, his experiences in an Indian ashram, where he internalized some of the nuances of Indian philosophy, helped him in his business career. I hope you will feel the same after encountering ancient Indian thought.
Philosophy vs religion. You mix religion with individuality, and you get light. You mix religion with politics, and often you get fire! We need to increase the illumination and temper the fire. The philosophical core of all religions is common. It’s the periphery, shaped by geography or culture or time, that separates one religion from the other. For instance, Judaism is a religion from the Bronze Age. Hinduism is an agrarian religion. Islam started as a religion of desert tribes. Christianity was a religion of the underprivileged. You see on the surface, and you’ll see many differences. You peek inside, and the fundamentals are the same.
Lindy’s Effect. I want to address an even more fundamental point. Is religion even relevant? Here, I would like to draw on the concept of Lindy’s Effect, which has been popularized by Nassim Taleb. He looks at Lindy’s Deli in NYC, which has been running since 1921. He argues that the fact that Lindy’s Deli has been in business for such a long time, and since the mortality rate of cafes in New York is rather high, there is something uniquely appealing about Lindy’s Deli, and it is safe to predict, that it will continue to be around for a long time. In other words, the future life expectancy of many non-perishable things, like ideas, technologies, or cultural works, is proportional to their current age. By that metric, religion as an idea is hugely relevant and certainly here to stay.
Indian entrepreneurs zindabad. Let me talk about Indian entrepreneurs. They’re everywhere. If you were to drive around on the streets around India, you are likely to hit either a pothole or an entrepreneur! Operation Sindoor was a brief armed conflict between India and Pakistan from May 7th-10th.
As expected, social media was abuzz with chatter about Operation Sindoor. The events started on May 7th and just a day later, of May 8th, some smart-alec Indian entrepreneur had launched a herbal tea called Sindoor. As is often said, never waste a crisis!
Hierarchy of startups/entrepreneurs. If you look at the new economy startups in India, you will notice a hierarchy. At the most basic level are businesses involved in what we can call “concept arbitrage”. Take an idea that has worked elsewhere and replicate it in India. For instance, Flipkart, now controlled by Walmart was the “Amazon of India”. Naukri.com, India’s leading jobsite became the “Monster of India”. Ola is the “Uber of India”. And so on.
At the next level are business models which are unique to India. Because labour costs in India are low, a variant of e-commerce, called quick commerce, developed here in India, faster than it did in the developed world. Zomato and Squiggy are examples of that. I believe Zomato’s dark stores have a payback period of 3 years. That’s seems to be quite a robust business model. Not surprisingly, Zomato, now renamed at Eternal, is valued at $22 billion, a large number by Indian standards.
Move up another level, and now one is seeing a number of promising deep tech startups. In 2023, Indian patent applications amounted to 57% of all patent applications globally. These were patent applications, not patents granted. Even on the basis of patents granted, India overtook the US in 2021 to reach the #2 spot. As you can guess, the China is #1 in the patent race. Recently, a company called BonV Aero made a presentation to us. It is a drone company started in 2021, has about 50 employees, and has developed drones that can carry 50 kgs of goods in high altitude, sub-zero temperatures. Tim Draper has invested in it. India is full of such stories of deep tech startups.
God is optional. Coming back to Indian philosophy, contrary to what one might think, in Indian philosophical texts, God is optional. You should read The Argumentative Indian by the Nobel laureate Amartya Sen. My wife says I’m a living example of the thesis of the book! But seriously, Amartya Sen points out that ancient Indian religious texts have elaborate discussions on atheism (there is no God) and deism (religion is not needed to intermediate the relationship between man and God).
Definition of leadership. Hinduism has two seminal religious texts. One is the Ramayana, the other is the Mahabharata. Let me summarise these for you. Ramayana is the story of a Rama, prince who is banished to the forest by his step-mother. While in the forest, his wife is kidnapped by Ravana. There is war and good triumphs over evil. The second one, Mahabharata, is a story of two sets of cousins, Pandavas and Kauravas, fighting for the legitimate right to a kingdom. Pandavas, the underdogs, win.
I’ve read many definitions of leadership, but perhaps the best one is in the opening paras of the Ramayana. It goes like this: “Someone with heroic qualities, well versed in the duties of life, grateful, truthful, firm in his vows, an actor of many parts, benevolent, learned, eloquent, patient, slow to anger, truly great, free of envy, yet can cause terror when excited to wrath”. It fits spot on with renowned psychologist Howard Gardner’s extensive study of leadership and Theory of Multiple Intelligences.
Odds that five global CEO’s will come from one high school. Let me ask you a question. What’s the fastest growing language in the US? You may not realise it, but its Telugu. This is the language of the southern states of Andhra Pradesh and Telangana. So, all of you who want to be a part of the tech ecosystem, please forget Java Script, or even Python, which may be the most common programming language for AI, and learn Telugu. Let me give you another reason why. Here’s a second question: what are the odds that a single high school will produce five current global CEO’s? You can run the probabilities; it’s very very low. But it’s happened. And the answer is: Hyderabad International School in Hyderabad in southern India. Satya Nadella (CEO of Microsoft), Shantanu Narayan (CEO of Adobe), Ajay Banga (formerly CEO of Mastercard and now President of the World Bank), Prem Watsa (Chairman of Fairfax in Canada) and Shailesh Tejurkar (CEO of P&G), all of them come from this single high school. In Hyderabad, they speak Telugu, so think about it!
Focus that does not clutter the mind. In the Mahabharata, the other Indian text I was referring to, there is a subsection called The Gita, which many people also regard as a standalone text. The setting of The Gita is this: the warring cousins and their armies are lined up for war. As the war is about to start, Arjuna, the ace fighter for the Pandavas, has an existential dilemma. He wonders to his charioteer, Krishna, a reincarnation of God, who is also his mentor, whether fighting and killing his cousins is justified for material gain. Krishna must have thought to himself: “What, you’re thinking of this now, as the war is about to start? You could not have thought of this six weeks ago?”. Krishna goes on to explain to Arjuna the principle of dutiful action. He says Arjuna should fulfil his karma, or his duty, without overly worrying about the consequences, both positive and negative. If his duties are justified, the results of his actions, whatever they might be, will be just. In layman’s language, he says that one needs to focus on one’s duty, and an external focus simply clutters the mind. You could have heard similar lines from Michael Jordan, one of the greatest basketball players of all time: “I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” This is the power of a focussed, uncluttered mind.
Indian macro. Warren Buffett talks about the American tailwind. He says he considers himself lucky that he was born in the US, was born male, and got a good education. Many Indians will tell you the same about India today. In the long term, India’s prospects are determined by geography and demographics. Both are positive. In the short term, India’s growth is determined by oil prices and monsoons. These days you can add Trump to this short term growth equation as well.
I look at a simple mathematical formula to make a macro bet about India. Econ 101 will tell you that growth rate is investment rate divided by the incremental capital output ratio. The ICOR is determined by the mix of the economy and is fairly stable. The investment rate is determined by savings rate, which in turn is determined by the dependency ratio. This changes over time. So, for instance, India’s dependency ratio in the 1960’s was high, so savings rate and therefore the investment rate was low. Therefore, our growth was slow, what came to be known as the “Hindu rate of growth”. As our dependency ratio declined, our savings rates increased and so did our investment rate. And our growth rate went up as well. Roughly speaking, our investment rate in slightly less than 30% and our ICOR is slightly higher than 4 and inching upwards, so our economic fighting weight is about 7% GDP growth. This is going to be our long term average. If GDP growth is 5.5%, I am not overly worried because I know it’ll revert to the mean, and if its higher at say 8%, I am not overly-excited because I know it’s likely to be short lived, irrespective of the political narrative one might hear. This mindset is what we use to underwrite our investments. A natural question might be: how did China grow at 10% of more for long periods of time. The answer is simple: their investment rate was higher than 40% for a decade or more. The flip side of this is: they created overcapacity in industry after industry, roads to nowhere and ghost towns. As you can see, in economics, as in life, there’s no free lunch!
One of the best measures of the dynamism of an economy is the long term return on equity of the business sector. The US ranks on top here with about a 16% ROE. India, at about 13.5% is lower than the US but higher than all its peers. Brazil is at 12%, Indonesia at 7-8%, China at about 6.5%.
The translation of GDP growth into earnings and wealth creation. There’s one more way to look at this. Let me use India as an example. Let’s say our GDP growth is 6-6.5%. This is real GDP growth, which means, if we add inflation to it, nominal GDP growth will be say 10%. This is the growth we experience on the ground. Now, this means, on average, revenue growth for the business sector should be around 10% as well. Now, businesses may have some operating leverage, which means that a 10% revenue growth may translate into 13-15% profit growth. Now, this is pretty much what Indian companies are experiencing, on aggregate, over a period of time. And guess what? The multi-decadal stock market index returns hug this number, and is about 14% as well. In other words, at 6% GDP growth, you can double your wealth every 5 years or so, without doing too much heavy lifting. That’s a good place to be.
Understanding compounding. In a high inflation economy, combined by the fact that we have had bad infrastructure, real estate has been a good wealth creator. So, someone in India might tell you that his grandfather bought a house in suburban Delhi in the mid 80s and its up 200-times or 400-times. Now that’s pretty cool! But think about the alternatives. The same money invested in say the stock market index, the Sensex, would have returned more than 800-times. Common folk had not internalised this. As this awareness is growing, there is an increasing allocation of middle-class India from real assets to financial assets, and this will have a have a profound effect over time.
The Unicorn vs the Octopus. The term unicorn was first used in 2013 by venture capitalist Aileen Lee in an article in Tech Crunch magazine to describe startups with a valuation in excess of $1 billion. Now, we have more than 1500 of them. Let me offer you another term, coined by fund manager Saurabh Mukherjee in 2022. It’s the octopus. This describes a small businessman, typically in a tier-2 town, with a limited or regional business franchise. He does not have the skills to go national or grow beyond a point. So instead of following the mantra of core competence, they become opportunistic and create new regional businesses. The more successful ones look like regional conglomerates, or octopuses, with multiple small, local, tentacles, each doing well, though none of them may be venture-capital worthy or IPO-worthy.
This is both a constraint and an often-overlooked opportunity in Indian business. These businesses can be pretty large. For instance, in 2022, there was a cover story in India Today magazine, which is India’s equivalent of Time magazine. It featured 178 small town business people, all of whom had a net worth of over Rs 10 billion, which is roughly $115-120 million. Their collective net worth, believe it or not, was a staggering $86 billion. I had to read that number more than once in the article to fully grasp it! Yes, that is the kind of wealth being generated deep inside India.
As a result, if you look beyond the largest 7 or 8 cities in India, and if you compare to 20 years ago, fewer businesspeople from these tier-2 towns are looking to migrate to a Delhi or a Mumbai or a Bangalore. They are perfectly happy building their businesses in their smaller towns. Twenty years ago, India had maybe 5 or 10 business hubs that were aspirational. Today maybe there are 20-plus such magnets. And that is the direction of the India story, whether you look from the lens of bootstrapped tech startups or multi-millionaires.
So, where’s the money? There is a study, which looks at income tax data and divides companies on the basis of profits, from the top decile to the lowest decile. They found that, on average, the fastest growing cohort amongst these are the businesses in the 2nd decile. There are two opposing forces at play here. One, the 2nd decile firms tend to be more entrepreneurial than the 1st decile companies. Two, on the flip side, there is a shift from the disorganised to the organised, the smaller companies are not able to keep pace, and one can see consolidation in industry-after-industry. The way the cookie is crumbling is that the 2nd decile companies seem to have the best of both worlds: entrepreneurship and consolidation. We have seen that anecdotally in our private equity investments as well.
The operating leverage of the Indian consumer. If I had to give you the most important reason why I am bullish about India, I would say, it’s the operating leverage of the Indian consumer. Think of a middle-class Indian making 100 units of income. Of this, say 80 units goes away in day to day needs such as rent or mortgage, food, clothing etc, leaving 20 units of money as disposable income. Now, let’s assume he gets a 9 or 10% raise, which is pretty much what average annual salary increments are. So, his nominal income goes up by 9% but his real income goes up by say 5%. This 5 units of additional income translates to a 25% increase in disposable income, from the earlier 20 to a new 25. We have millions of Indians crossing the threshold where they are seeing 20-30% increase in disposable income. Which is why, in India, and even in other developing markets, what are mature industries in the western world, such as automotive or insurance, are growth businesses here. If one looks back a decade or more, and not just the past few years, during which consumer demand has been a bit muted, one can see the tremendous growth in consumer businesses.
India’s aspirations are running high. Here, successive generations are looking forward to a standard of living much higher than their parents. This is not true in the West, where standard of living has stagnated, and for many, it has even declined. I have a person here, who greeted you outside, who’s son got into medical school some years ago and has just started his medical practice. His starting income will be more than his father’s current income. Many Indians are seeing this kind of uplift. By contrast, the income stagnation in the West is leading to the rise of right wing governments, whether it is the US, Netherlands, Finland or Germany.
Yet, I think, a top-down view of the Indian prosperity is often wrong. India’s income distribution curve has a steep fall. For instance, if one were to ask how many homes have an income of say $10,000, which, if we apply the purchasing power parity index, would have a purchasing power of around $35,000, we would find that less than 5% of the homes, or only about 60mm people have that kind of purchasing power. A top-down view might tell you India has a middle class of 400mm people and one might infer that the addressable market for most product categories is somewhere around that number of 300-400mm people. But the business reality is that for most product categories, the addressable market is in the range of 50-100mm people. Most private equity investors and multinationals systematically overestimate this number and are hence disappointed. But even with an addressable market of say 100mm people for a given business, there is plenty of headroom for growth. You won’t be disappointed if you’re not seduced by the India story.
Meditation and intuition. Oprah Winfrey, Ray Dalio, Google, all are advocates of the Indian practice of meditation. There’s evidence that meditation helps improve intuition and develop a beginner’s mind. It cuts away the noise from within. Let me give you an example. Let’s say you are in a crowded airport and someone calls out your name. Amidst the ambient noise, there’s a greater chance you will hear your own name rather than some random name.
The reason is, you’re conditioned to hear your name. In the same way, meditation helps you declutter your mind and cut away the ambient noise so you get an unfiltered view of the world, you pick up subtle signals, and that is what intuition really is. Try some meditation, you’ll enjoy it.
So, what are India’s fault lines? I would offer three challenges.
Population density and zero sum games. India is amongst the most densely populated countries in the world. India has 483 people per sq km. Indonesia has 158, China 151, US 38, Vietnam 320, Brazil 25. Therefore, many things become zeros-sum games in India, whether it is rural vs urban, or industry vs society. This tends to hold back economic development.
The challenges of uneven growth rates. There is an increasing gap in the growth rates of western and southern India as compared to northern and eastern India. The West and South are growing 10-12% faster. When you compound this delta in growth rates over decades, you get a huge difference. I joke with friends here in New Delhi that we are the poor cousins, the rich ones are in Bangalore or Mumbai somewhere. At the policy level, how does a legislator from Bihar, one of India’s poorest states, even connect with a legislator from Tamil Nadu, one of India’s richest states, to debate the direction of our country. Compound this with linguistic differences between the regions, and higher population growth and hence voting power in the poorer states, and we might have the makings of a perfect storm!
India’s state capacity is lower than we think. India is often criticized for a big, bungling bureaucracy. But the fact is we have a small, over-worked bureaucracy. This is true by global standards. Our state capacity is low. I would encourage you to read the paper on Indian state capacity by my friend Devesh Kapur, from some years ago. The implications of this are, for example, India performs best in the backdrop of a crisis, when all resources are marshalled. If you hear an extraordinary positive story from India, it will possibly be of individual heroism in the face of institutional decay, whether it’s a great sportsperson, a great police officer, or a great academic. The Indian Space Research Organisation is world class. I cannot think of many other government bodies which can claim the same. And Indian regulators typically play catch up to market realities. That’s not the best recipe for economic dynamism.
The Ramayana and common-sense advice. In the Ramayana, the villain Ravana, a 10-headed king, kidnaps Rama’s wife Sita. His 10 heads symbolise his intelligence and knowledge. But his temptations overpower his intellect. So, Stanford geniuses, be careful!
The war against Ravana is led by Rama along with an army of monkeys. This newly-created army of underdogs wins against the mighty army of Ravana because they have a mission. We also hear this in the world of scrappy startups all the time: intent comes first, resources follow.
The leader of the monkeys and Rama’s right-hand man is Hanuman, who Rama has met in the forest during his exile. During one of their early encounters, Rama asks Hanuman: “Who are you?”. Hanuman’s reply is prophetic. He says: “When I do not know who I am, I serve you. When I do know who I am, you and I are one.” The message for all of us is simple: the right combination of humility and confidence is unbeatable!
Let me come to the scene towards the end of the story. Rama’s army is victorious and Ravana lies dying on the battlefield. Rama tells his younger brother Laxmana that since Ravana is one of the most learned men in the world, he should go take Ravana’s blessings. Initially, Laxmana is baffled. The lesson Rama was giving is that everyone we meet, even those we call our enemies, have some good qualities we can learn from. There’s more to this scene. Laxmana goes to Ravana, who is lying on the battlefield. and bows near his head and requests for his blessings. Ravana ignores him. Laxmana looks up at Rama, who admonishes him. He asks Laxmana to not be drunk with his victory and treat Ravana with the respect he deserves. He asks Laxmana to sit by Ravana’s feet. The lesson: have empathy and give respect, no matter what! As Laxmana bows at Ravana’s feet, the dying king offers sage advice. He says he was defeated because he was no longer invested in the dreams and aspirations of those he was seeking to command and had lost their respect. The dustbin of history is full of great leaders who stumbled and fell because they lost touch. We all have to consciously make sure this does not happen to us.
Globalisation and slobalisation. As the world economy slows, and the long terms trends of trade, capital flows and movement of people takes a u-turn, hopefully temporarily, India will slow down alongside. Depending on who you ask, global growth numbers are between 2.5%-3%. Next year is not expected to be any better. There’s empirical evidence that India grows about 300 basis points faster then global growth. So, we’re facing short term headwinds as well. However, India’s balance sheets at all levels – government, banks, companies – is very healthy and as a country we should be able to weather the storm.
The story of a mother and son. Chand Sehgal and his mother started a company, aptly called Motherson, I believe after his father passed away prematurely. Today it is the largest auto components company in India, with 425-odd plants in 44 countries. It is also perhaps India’s most successful home-grown manufacturing multinational. It has revenues of $13 billion and Chand Sehgal’s net worth is $5.5 billion. His business is headquartered in Delhi but he now lives in Europe. Whenever he visits Delhi, his first stop is a temple of Krishna – remember him from the Mahabharata – in Vrindavan, which is an hour’s drive from Delhi. He considers God his mentor and business partner. Talking to me once, using private equity terminology, he referred to God as his “general partner”. Forget Steve Schwarzman from Blackstone or Mike Moritz from Sequoia, I want to be in a place where God is my general partner!
The difficulty of being good. In the Mahabharata, the royal teacher Dronacharya was teaching the young Pandava princes to always tell the truth. He asks whether they have understood the lesson. Yudhishthira, the oldest brother says he hasn’t leant it. An exasperated Dronacharya asks what is so difficult about understanding that truth should be told. Yudhishthira says that he’s understood the principle, but he’s not really understood it because he’s never had the temptation to lie and therefore test himself. We should all bear this in mind.
I want to give you a real life example. I was an MBA student at Columbia Business School in the late 80s. Remember Michael Milken from Drexel Lambert? They created the high yield bond market and as market makers they were hauled up for large scale manipulation. Milken was sentenced and as a part of his sentencing, he was asked to talk at universities about his misdemeanors. He came to Columbia to talk. After the talk, during the Q&A session, a person remarked that what he had done was disgusting. Milken replied, and pardon my obscene language, in the form of a question: “A dog licks his penis. A man doesn’t. Why? Because he can’t.” The point he was making was that he did not start out trying to be a crook. But the temptations were such, he succumbed. And he appealed to the Columbia crowd that we should not feel morally superior until we’ve tested ourselves in the face of temptation. That point stayed with me, and not just because of his flowery language. Being good is not always automatic; often times it requires a conscious effort.
Unilever and India. India has tailwinds, and the trick therefore is to not worry about the macro, keep your head down and implement well. There will be ups and downs but they won’t be disastrous. Let me give you an example of Unilever in India. It’s so successful in India that it’s local subsidiary was the largest market cap company in India for many years during the 90s and its Indian talent pool has gone into senior management positions in various companies around the world. Unilever’s Indian subsidiary revenues are 12% of its parent company sales, its India profits are 19% of total profits, but its India market cap is 52% of its total market cap. That’s the intersection of the India story and A+ implementation.
Some counter-intuitive export facts. India has traditionally been a laggard in exports of manufactured goods. However, we’re improving faster than most people think. As noted economist Ajay Shah has shown, during the 2007-2009 period, China’s goods exports to the US were 15-times that of India’s goods exports to the US. Now that number is 5-times. This gives me great confidence regarding the possibilities for a manufacturing renaissance in India.
God, money, and the practical Indian. Indians are very practical. The biggest festivals for Hindus is Diwali, which falls in end October-early November every year and is the equivalent of the Hindu new year. This is also the day King Rama came home after his banishment and his successful defeat of Ravana. During Diwali, people pray to goddess Lakshmi, regarded in Hindu mythology as the goddess of wealth. One of the lines goes like this: “In whichever home you reside, all good qualities come”. On the surface, this sounds very un-religious, but if one goes deeper, one will find that in Hinduism, the goddess Lakshmi follows her sister, the goddess Saraswati, the goddess of knowledge and wisdom. So, if you want Lakshmi to visit, invite Saraswati. If you want wealth, go for knowledge. In this regard, your Stanford MBA should hold you in good stead.
Marilyn Monroe’s famous words. I’m sorry if I’ve gone on for longer than you had expected. Let me make two closing points. I was talking about India to a friend Sumit Jalan, who is an investment banker by profession and an angel investor by heart. Like him, I’m macro-agnostic and micro-bullish. If there is one takeaway from our discussions, it is this one line. I think you will hear a similar sentiment in your various meetings in India.
And my adventures in India constantly remind me of Marilyn Monroe’s lines: "I'm selfish, impatient and a little insecure. I make mistakes, I am out of control and at times hard to handle. But if you can't handle me at my worst, then you sure as hell don't deserve me at my best". It’s true for Marilyn Monroe, its also true for India!
Gaurav Dalmia is Chairman of Dalmia Group Holdings.
Add Now!
Good morning. It’s a pleasure to talk to the visiting Stanford group again. I was told that if I did this a few times, I might get tenure! Forgive me, but I might repeat a few things that I had said to your friends who were visiting last year. The reason is: India has not changed that much in the last one year. Well, except Trump and his ambivalent attitude towards India.
“What does an IC stand for?” When your friends came last year, I had asked them a trick question. “What does an IC stand for?” And, I have to say, they didn’t do too well with the answers. The worst one I heard was “investment committee”. The expected one – still not the one I was looking for – was “integrated circuit”. The real answer, in my mind, was “Indians and Chinese”! Yes, these are the people who will incrementally shape the future of the world, and I am glad you are visiting us to understand what’s going on in our country.
Uniqueness of Silicon Valley. There’s a lot to learn from Silicon Valley. I don’t know what water you drink out there but the fearlessness and optimism I see in the Valley is simply unparalleled. It’s quite interesting that the most-used word in the northern California is “disruption”. It’s not merely “innovation”. And the hippie-culture types from the 1960s San Francisco will be disappointed that it’s not “love”. Nevertheless, I should have asked you folks to bring me some bottled water from there!
Political risk. Indeed, the world has changed. Twenty years ago, business people from New York would show up here and ask: “So, tell us about political risk in your country?” Now, I go to New York and ask them the same question. It’s the full circle of life!
Trend-watching. Change, of course, is inevitable. Perhaps it’s best described by a verse by the British economist Alexander Cairncross:
A trend is a trend is a trend,
But the question is,
Will it bend?
Will it change its course?
Because of some unforeseen force,
And come to a premature end.
To me, the most important line is: “Because of some unforeseen force…”. Do keep this in mind as you look at trends, whether it is in tech, or in economies.
Contrasting wealth creation in the US and India. Let’s quickly look at wealth creation. In the US, the top quartile wealth creators come from two buckets: You either disrupt a sector, like say Open AI or Amazon or Tesla, or you take a stable cash flow and lever it as much as possible to juice up your return on equity, like Blackstone or KKR does. These are the templates for a mature economy.
And of course, these days you can add joining politics to the list of wealth creation opportunities. I’m not sure how many of you have read the rather damaging piece on US politics in New Yorker recently. It analyses that in his first term and his second term so far, Trump has made $3.4 billion. Now, if true, that’s pretty good for 5-6 years of work!
But let me make a further comment about the excitement about AI. It’s not clear whether these AI data-centre investments will pay off, or who the winner might be. I was reading a tech sector blog a few weeks ago and it had a scary calculation. Data centre capex is expected to be $400 billion in 2025. Of this 35% will be the GPU cost. On a net basis, given the mix of assets, experts believe a 10-year depreciation curve will be reasonable. That means $40 billion in depreciation alone. These new assets are expected to generate a revenue of $25 billion. Over time, they will need an annual revenue of $160 billion with a 25% gross margin, just to cover the depreciation, forget return on equity. Will that happen? When might that happen? All this reminds me of the telecom frenzy from the late 90s and the early 2000s, when the so-called tech infrastructure companies like Global Crossing as well as the telcos spent heavily in anticipation of the internet boom. The internet boom did happen. It even surpassed many expectations. But the wealth creation happened, not for the then-obvious infra players. A darling of the times, Global Crossing, went bankrupt. Wealth creation happened for the app-creators. So beware, how the profit pool from AI might spread this time!
Coming back to India, let me offer you, in growing markets like India, this old economy-new economy dichotomy does not exist. There are a multitude of wealth creation sectors. And the age-old formula – just build a business – works. You are meeting many captains of industry in the next few days and I am sure you will hear these thoughts again and again.
Steve Jobs and Indian philosophy. If you agree, I will punctuate my comments regarding India with lessons from Indian philosophy. I know you’re all likely to be jetlagged, so I promise I’ll keep it simple! I think there are many life lessons from Indian philosophy which might help you in your career. Steve Jobs, arguably the greatest business leader in modern history, spent 7 months in India in 1974. He founded Apple two years later. By his own admission, his experiences in an Indian ashram, where he internalized some of the nuances of Indian philosophy, helped him in his business career. I hope you will feel the same after encountering ancient Indian thought.
Philosophy vs religion. You mix religion with individuality, and you get light. You mix religion with politics, and often you get fire! We need to increase the illumination and temper the fire. The philosophical core of all religions is common. It’s the periphery, shaped by geography or culture or time, that separates one religion from the other. For instance, Judaism is a religion from the Bronze Age. Hinduism is an agrarian religion. Islam started as a religion of desert tribes. Christianity was a religion of the underprivileged. You see on the surface, and you’ll see many differences. You peek inside, and the fundamentals are the same.
Lindy’s Effect. I want to address an even more fundamental point. Is religion even relevant? Here, I would like to draw on the concept of Lindy’s Effect, which has been popularized by Nassim Taleb. He looks at Lindy’s Deli in NYC, which has been running since 1921. He argues that the fact that Lindy’s Deli has been in business for such a long time, and since the mortality rate of cafes in New York is rather high, there is something uniquely appealing about Lindy’s Deli, and it is safe to predict, that it will continue to be around for a long time. In other words, the future life expectancy of many non-perishable things, like ideas, technologies, or cultural works, is proportional to their current age. By that metric, religion as an idea is hugely relevant and certainly here to stay.
Indian entrepreneurs zindabad. Let me talk about Indian entrepreneurs. They’re everywhere. If you were to drive around on the streets around India, you are likely to hit either a pothole or an entrepreneur! Operation Sindoor was a brief armed conflict between India and Pakistan from May 7th-10th.
As expected, social media was abuzz with chatter about Operation Sindoor. The events started on May 7th and just a day later, of May 8th, some smart-alec Indian entrepreneur had launched a herbal tea called Sindoor. As is often said, never waste a crisis!
Hierarchy of startups/entrepreneurs. If you look at the new economy startups in India, you will notice a hierarchy. At the most basic level are businesses involved in what we can call “concept arbitrage”. Take an idea that has worked elsewhere and replicate it in India. For instance, Flipkart, now controlled by Walmart was the “Amazon of India”. Naukri.com, India’s leading jobsite became the “Monster of India”. Ola is the “Uber of India”. And so on.
At the next level are business models which are unique to India. Because labour costs in India are low, a variant of e-commerce, called quick commerce, developed here in India, faster than it did in the developed world. Zomato and Squiggy are examples of that. I believe Zomato’s dark stores have a payback period of 3 years. That’s seems to be quite a robust business model. Not surprisingly, Zomato, now renamed at Eternal, is valued at $22 billion, a large number by Indian standards.
Move up another level, and now one is seeing a number of promising deep tech startups. In 2023, Indian patent applications amounted to 57% of all patent applications globally. These were patent applications, not patents granted. Even on the basis of patents granted, India overtook the US in 2021 to reach the #2 spot. As you can guess, the China is #1 in the patent race. Recently, a company called BonV Aero made a presentation to us. It is a drone company started in 2021, has about 50 employees, and has developed drones that can carry 50 kgs of goods in high altitude, sub-zero temperatures. Tim Draper has invested in it. India is full of such stories of deep tech startups.
God is optional. Coming back to Indian philosophy, contrary to what one might think, in Indian philosophical texts, God is optional. You should read The Argumentative Indian by the Nobel laureate Amartya Sen. My wife says I’m a living example of the thesis of the book! But seriously, Amartya Sen points out that ancient Indian religious texts have elaborate discussions on atheism (there is no God) and deism (religion is not needed to intermediate the relationship between man and God).
Definition of leadership. Hinduism has two seminal religious texts. One is the Ramayana, the other is the Mahabharata. Let me summarise these for you. Ramayana is the story of a Rama, prince who is banished to the forest by his step-mother. While in the forest, his wife is kidnapped by Ravana. There is war and good triumphs over evil. The second one, Mahabharata, is a story of two sets of cousins, Pandavas and Kauravas, fighting for the legitimate right to a kingdom. Pandavas, the underdogs, win.
I’ve read many definitions of leadership, but perhaps the best one is in the opening paras of the Ramayana. It goes like this: “Someone with heroic qualities, well versed in the duties of life, grateful, truthful, firm in his vows, an actor of many parts, benevolent, learned, eloquent, patient, slow to anger, truly great, free of envy, yet can cause terror when excited to wrath”. It fits spot on with renowned psychologist Howard Gardner’s extensive study of leadership and Theory of Multiple Intelligences.
Odds that five global CEO’s will come from one high school. Let me ask you a question. What’s the fastest growing language in the US? You may not realise it, but its Telugu. This is the language of the southern states of Andhra Pradesh and Telangana. So, all of you who want to be a part of the tech ecosystem, please forget Java Script, or even Python, which may be the most common programming language for AI, and learn Telugu. Let me give you another reason why. Here’s a second question: what are the odds that a single high school will produce five current global CEO’s? You can run the probabilities; it’s very very low. But it’s happened. And the answer is: Hyderabad International School in Hyderabad in southern India. Satya Nadella (CEO of Microsoft), Shantanu Narayan (CEO of Adobe), Ajay Banga (formerly CEO of Mastercard and now President of the World Bank), Prem Watsa (Chairman of Fairfax in Canada) and Shailesh Tejurkar (CEO of P&G), all of them come from this single high school. In Hyderabad, they speak Telugu, so think about it!
Focus that does not clutter the mind. In the Mahabharata, the other Indian text I was referring to, there is a subsection called The Gita, which many people also regard as a standalone text. The setting of The Gita is this: the warring cousins and their armies are lined up for war. As the war is about to start, Arjuna, the ace fighter for the Pandavas, has an existential dilemma. He wonders to his charioteer, Krishna, a reincarnation of God, who is also his mentor, whether fighting and killing his cousins is justified for material gain. Krishna must have thought to himself: “What, you’re thinking of this now, as the war is about to start? You could not have thought of this six weeks ago?”. Krishna goes on to explain to Arjuna the principle of dutiful action. He says Arjuna should fulfil his karma, or his duty, without overly worrying about the consequences, both positive and negative. If his duties are justified, the results of his actions, whatever they might be, will be just. In layman’s language, he says that one needs to focus on one’s duty, and an external focus simply clutters the mind. You could have heard similar lines from Michael Jordan, one of the greatest basketball players of all time: “I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.” This is the power of a focussed, uncluttered mind.
Indian macro. Warren Buffett talks about the American tailwind. He says he considers himself lucky that he was born in the US, was born male, and got a good education. Many Indians will tell you the same about India today. In the long term, India’s prospects are determined by geography and demographics. Both are positive. In the short term, India’s growth is determined by oil prices and monsoons. These days you can add Trump to this short term growth equation as well.
I look at a simple mathematical formula to make a macro bet about India. Econ 101 will tell you that growth rate is investment rate divided by the incremental capital output ratio. The ICOR is determined by the mix of the economy and is fairly stable. The investment rate is determined by savings rate, which in turn is determined by the dependency ratio. This changes over time. So, for instance, India’s dependency ratio in the 1960’s was high, so savings rate and therefore the investment rate was low. Therefore, our growth was slow, what came to be known as the “Hindu rate of growth”. As our dependency ratio declined, our savings rates increased and so did our investment rate. And our growth rate went up as well. Roughly speaking, our investment rate in slightly less than 30% and our ICOR is slightly higher than 4 and inching upwards, so our economic fighting weight is about 7% GDP growth. This is going to be our long term average. If GDP growth is 5.5%, I am not overly worried because I know it’ll revert to the mean, and if its higher at say 8%, I am not overly-excited because I know it’s likely to be short lived, irrespective of the political narrative one might hear. This mindset is what we use to underwrite our investments. A natural question might be: how did China grow at 10% of more for long periods of time. The answer is simple: their investment rate was higher than 40% for a decade or more. The flip side of this is: they created overcapacity in industry after industry, roads to nowhere and ghost towns. As you can see, in economics, as in life, there’s no free lunch!
One of the best measures of the dynamism of an economy is the long term return on equity of the business sector. The US ranks on top here with about a 16% ROE. India, at about 13.5% is lower than the US but higher than all its peers. Brazil is at 12%, Indonesia at 7-8%, China at about 6.5%.
The translation of GDP growth into earnings and wealth creation. There’s one more way to look at this. Let me use India as an example. Let’s say our GDP growth is 6-6.5%. This is real GDP growth, which means, if we add inflation to it, nominal GDP growth will be say 10%. This is the growth we experience on the ground. Now, this means, on average, revenue growth for the business sector should be around 10% as well. Now, businesses may have some operating leverage, which means that a 10% revenue growth may translate into 13-15% profit growth. Now, this is pretty much what Indian companies are experiencing, on aggregate, over a period of time. And guess what? The multi-decadal stock market index returns hug this number, and is about 14% as well. In other words, at 6% GDP growth, you can double your wealth every 5 years or so, without doing too much heavy lifting. That’s a good place to be.
Understanding compounding. In a high inflation economy, combined by the fact that we have had bad infrastructure, real estate has been a good wealth creator. So, someone in India might tell you that his grandfather bought a house in suburban Delhi in the mid 80s and its up 200-times or 400-times. Now that’s pretty cool! But think about the alternatives. The same money invested in say the stock market index, the Sensex, would have returned more than 800-times. Common folk had not internalised this. As this awareness is growing, there is an increasing allocation of middle-class India from real assets to financial assets, and this will have a have a profound effect over time.
The Unicorn vs the Octopus. The term unicorn was first used in 2013 by venture capitalist Aileen Lee in an article in Tech Crunch magazine to describe startups with a valuation in excess of $1 billion. Now, we have more than 1500 of them. Let me offer you another term, coined by fund manager Saurabh Mukherjee in 2022. It’s the octopus. This describes a small businessman, typically in a tier-2 town, with a limited or regional business franchise. He does not have the skills to go national or grow beyond a point. So instead of following the mantra of core competence, they become opportunistic and create new regional businesses. The more successful ones look like regional conglomerates, or octopuses, with multiple small, local, tentacles, each doing well, though none of them may be venture-capital worthy or IPO-worthy.
This is both a constraint and an often-overlooked opportunity in Indian business. These businesses can be pretty large. For instance, in 2022, there was a cover story in India Today magazine, which is India’s equivalent of Time magazine. It featured 178 small town business people, all of whom had a net worth of over Rs 10 billion, which is roughly $115-120 million. Their collective net worth, believe it or not, was a staggering $86 billion. I had to read that number more than once in the article to fully grasp it! Yes, that is the kind of wealth being generated deep inside India.
As a result, if you look beyond the largest 7 or 8 cities in India, and if you compare to 20 years ago, fewer businesspeople from these tier-2 towns are looking to migrate to a Delhi or a Mumbai or a Bangalore. They are perfectly happy building their businesses in their smaller towns. Twenty years ago, India had maybe 5 or 10 business hubs that were aspirational. Today maybe there are 20-plus such magnets. And that is the direction of the India story, whether you look from the lens of bootstrapped tech startups or multi-millionaires.
So, where’s the money? There is a study, which looks at income tax data and divides companies on the basis of profits, from the top decile to the lowest decile. They found that, on average, the fastest growing cohort amongst these are the businesses in the 2nd decile. There are two opposing forces at play here. One, the 2nd decile firms tend to be more entrepreneurial than the 1st decile companies. Two, on the flip side, there is a shift from the disorganised to the organised, the smaller companies are not able to keep pace, and one can see consolidation in industry-after-industry. The way the cookie is crumbling is that the 2nd decile companies seem to have the best of both worlds: entrepreneurship and consolidation. We have seen that anecdotally in our private equity investments as well.
The operating leverage of the Indian consumer. If I had to give you the most important reason why I am bullish about India, I would say, it’s the operating leverage of the Indian consumer. Think of a middle-class Indian making 100 units of income. Of this, say 80 units goes away in day to day needs such as rent or mortgage, food, clothing etc, leaving 20 units of money as disposable income. Now, let’s assume he gets a 9 or 10% raise, which is pretty much what average annual salary increments are. So, his nominal income goes up by 9% but his real income goes up by say 5%. This 5 units of additional income translates to a 25% increase in disposable income, from the earlier 20 to a new 25. We have millions of Indians crossing the threshold where they are seeing 20-30% increase in disposable income. Which is why, in India, and even in other developing markets, what are mature industries in the western world, such as automotive or insurance, are growth businesses here. If one looks back a decade or more, and not just the past few years, during which consumer demand has been a bit muted, one can see the tremendous growth in consumer businesses.
India’s aspirations are running high. Here, successive generations are looking forward to a standard of living much higher than their parents. This is not true in the West, where standard of living has stagnated, and for many, it has even declined. I have a person here, who greeted you outside, who’s son got into medical school some years ago and has just started his medical practice. His starting income will be more than his father’s current income. Many Indians are seeing this kind of uplift. By contrast, the income stagnation in the West is leading to the rise of right wing governments, whether it is the US, Netherlands, Finland or Germany.
Yet, I think, a top-down view of the Indian prosperity is often wrong. India’s income distribution curve has a steep fall. For instance, if one were to ask how many homes have an income of say $10,000, which, if we apply the purchasing power parity index, would have a purchasing power of around $35,000, we would find that less than 5% of the homes, or only about 60mm people have that kind of purchasing power. A top-down view might tell you India has a middle class of 400mm people and one might infer that the addressable market for most product categories is somewhere around that number of 300-400mm people. But the business reality is that for most product categories, the addressable market is in the range of 50-100mm people. Most private equity investors and multinationals systematically overestimate this number and are hence disappointed. But even with an addressable market of say 100mm people for a given business, there is plenty of headroom for growth. You won’t be disappointed if you’re not seduced by the India story.
Meditation and intuition. Oprah Winfrey, Ray Dalio, Google, all are advocates of the Indian practice of meditation. There’s evidence that meditation helps improve intuition and develop a beginner’s mind. It cuts away the noise from within. Let me give you an example. Let’s say you are in a crowded airport and someone calls out your name. Amidst the ambient noise, there’s a greater chance you will hear your own name rather than some random name.
The reason is, you’re conditioned to hear your name. In the same way, meditation helps you declutter your mind and cut away the ambient noise so you get an unfiltered view of the world, you pick up subtle signals, and that is what intuition really is. Try some meditation, you’ll enjoy it.
So, what are India’s fault lines? I would offer three challenges.
Population density and zero sum games. India is amongst the most densely populated countries in the world. India has 483 people per sq km. Indonesia has 158, China 151, US 38, Vietnam 320, Brazil 25. Therefore, many things become zeros-sum games in India, whether it is rural vs urban, or industry vs society. This tends to hold back economic development.
The challenges of uneven growth rates. There is an increasing gap in the growth rates of western and southern India as compared to northern and eastern India. The West and South are growing 10-12% faster. When you compound this delta in growth rates over decades, you get a huge difference. I joke with friends here in New Delhi that we are the poor cousins, the rich ones are in Bangalore or Mumbai somewhere. At the policy level, how does a legislator from Bihar, one of India’s poorest states, even connect with a legislator from Tamil Nadu, one of India’s richest states, to debate the direction of our country. Compound this with linguistic differences between the regions, and higher population growth and hence voting power in the poorer states, and we might have the makings of a perfect storm!
India’s state capacity is lower than we think. India is often criticized for a big, bungling bureaucracy. But the fact is we have a small, over-worked bureaucracy. This is true by global standards. Our state capacity is low. I would encourage you to read the paper on Indian state capacity by my friend Devesh Kapur, from some years ago. The implications of this are, for example, India performs best in the backdrop of a crisis, when all resources are marshalled. If you hear an extraordinary positive story from India, it will possibly be of individual heroism in the face of institutional decay, whether it’s a great sportsperson, a great police officer, or a great academic. The Indian Space Research Organisation is world class. I cannot think of many other government bodies which can claim the same. And Indian regulators typically play catch up to market realities. That’s not the best recipe for economic dynamism.
The Ramayana and common-sense advice. In the Ramayana, the villain Ravana, a 10-headed king, kidnaps Rama’s wife Sita. His 10 heads symbolise his intelligence and knowledge. But his temptations overpower his intellect. So, Stanford geniuses, be careful!
The war against Ravana is led by Rama along with an army of monkeys. This newly-created army of underdogs wins against the mighty army of Ravana because they have a mission. We also hear this in the world of scrappy startups all the time: intent comes first, resources follow.
The leader of the monkeys and Rama’s right-hand man is Hanuman, who Rama has met in the forest during his exile. During one of their early encounters, Rama asks Hanuman: “Who are you?”. Hanuman’s reply is prophetic. He says: “When I do not know who I am, I serve you. When I do know who I am, you and I are one.” The message for all of us is simple: the right combination of humility and confidence is unbeatable!
Let me come to the scene towards the end of the story. Rama’s army is victorious and Ravana lies dying on the battlefield. Rama tells his younger brother Laxmana that since Ravana is one of the most learned men in the world, he should go take Ravana’s blessings. Initially, Laxmana is baffled. The lesson Rama was giving is that everyone we meet, even those we call our enemies, have some good qualities we can learn from. There’s more to this scene. Laxmana goes to Ravana, who is lying on the battlefield. and bows near his head and requests for his blessings. Ravana ignores him. Laxmana looks up at Rama, who admonishes him. He asks Laxmana to not be drunk with his victory and treat Ravana with the respect he deserves. He asks Laxmana to sit by Ravana’s feet. The lesson: have empathy and give respect, no matter what! As Laxmana bows at Ravana’s feet, the dying king offers sage advice. He says he was defeated because he was no longer invested in the dreams and aspirations of those he was seeking to command and had lost their respect. The dustbin of history is full of great leaders who stumbled and fell because they lost touch. We all have to consciously make sure this does not happen to us.
Globalisation and slobalisation. As the world economy slows, and the long terms trends of trade, capital flows and movement of people takes a u-turn, hopefully temporarily, India will slow down alongside. Depending on who you ask, global growth numbers are between 2.5%-3%. Next year is not expected to be any better. There’s empirical evidence that India grows about 300 basis points faster then global growth. So, we’re facing short term headwinds as well. However, India’s balance sheets at all levels – government, banks, companies – is very healthy and as a country we should be able to weather the storm.
The story of a mother and son. Chand Sehgal and his mother started a company, aptly called Motherson, I believe after his father passed away prematurely. Today it is the largest auto components company in India, with 425-odd plants in 44 countries. It is also perhaps India’s most successful home-grown manufacturing multinational. It has revenues of $13 billion and Chand Sehgal’s net worth is $5.5 billion. His business is headquartered in Delhi but he now lives in Europe. Whenever he visits Delhi, his first stop is a temple of Krishna – remember him from the Mahabharata – in Vrindavan, which is an hour’s drive from Delhi. He considers God his mentor and business partner. Talking to me once, using private equity terminology, he referred to God as his “general partner”. Forget Steve Schwarzman from Blackstone or Mike Moritz from Sequoia, I want to be in a place where God is my general partner!
The difficulty of being good. In the Mahabharata, the royal teacher Dronacharya was teaching the young Pandava princes to always tell the truth. He asks whether they have understood the lesson. Yudhishthira, the oldest brother says he hasn’t leant it. An exasperated Dronacharya asks what is so difficult about understanding that truth should be told. Yudhishthira says that he’s understood the principle, but he’s not really understood it because he’s never had the temptation to lie and therefore test himself. We should all bear this in mind.
I want to give you a real life example. I was an MBA student at Columbia Business School in the late 80s. Remember Michael Milken from Drexel Lambert? They created the high yield bond market and as market makers they were hauled up for large scale manipulation. Milken was sentenced and as a part of his sentencing, he was asked to talk at universities about his misdemeanors. He came to Columbia to talk. After the talk, during the Q&A session, a person remarked that what he had done was disgusting. Milken replied, and pardon my obscene language, in the form of a question: “A dog licks his penis. A man doesn’t. Why? Because he can’t.” The point he was making was that he did not start out trying to be a crook. But the temptations were such, he succumbed. And he appealed to the Columbia crowd that we should not feel morally superior until we’ve tested ourselves in the face of temptation. That point stayed with me, and not just because of his flowery language. Being good is not always automatic; often times it requires a conscious effort.
Unilever and India. India has tailwinds, and the trick therefore is to not worry about the macro, keep your head down and implement well. There will be ups and downs but they won’t be disastrous. Let me give you an example of Unilever in India. It’s so successful in India that it’s local subsidiary was the largest market cap company in India for many years during the 90s and its Indian talent pool has gone into senior management positions in various companies around the world. Unilever’s Indian subsidiary revenues are 12% of its parent company sales, its India profits are 19% of total profits, but its India market cap is 52% of its total market cap. That’s the intersection of the India story and A+ implementation.
Some counter-intuitive export facts. India has traditionally been a laggard in exports of manufactured goods. However, we’re improving faster than most people think. As noted economist Ajay Shah has shown, during the 2007-2009 period, China’s goods exports to the US were 15-times that of India’s goods exports to the US. Now that number is 5-times. This gives me great confidence regarding the possibilities for a manufacturing renaissance in India.
God, money, and the practical Indian. Indians are very practical. The biggest festivals for Hindus is Diwali, which falls in end October-early November every year and is the equivalent of the Hindu new year. This is also the day King Rama came home after his banishment and his successful defeat of Ravana. During Diwali, people pray to goddess Lakshmi, regarded in Hindu mythology as the goddess of wealth. One of the lines goes like this: “In whichever home you reside, all good qualities come”. On the surface, this sounds very un-religious, but if one goes deeper, one will find that in Hinduism, the goddess Lakshmi follows her sister, the goddess Saraswati, the goddess of knowledge and wisdom. So, if you want Lakshmi to visit, invite Saraswati. If you want wealth, go for knowledge. In this regard, your Stanford MBA should hold you in good stead.
Marilyn Monroe’s famous words. I’m sorry if I’ve gone on for longer than you had expected. Let me make two closing points. I was talking about India to a friend Sumit Jalan, who is an investment banker by profession and an angel investor by heart. Like him, I’m macro-agnostic and micro-bullish. If there is one takeaway from our discussions, it is this one line. I think you will hear a similar sentiment in your various meetings in India.
And my adventures in India constantly remind me of Marilyn Monroe’s lines: "I'm selfish, impatient and a little insecure. I make mistakes, I am out of control and at times hard to handle. But if you can't handle me at my worst, then you sure as hell don't deserve me at my best". It’s true for Marilyn Monroe, its also true for India!
Gaurav Dalmia is Chairman of Dalmia Group Holdings.
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
