What were these guys thinking?

So Satyam computers decides to spend 1.3bn USD of its cash and take on 300mn USD in debt to buy Maytas Infrastructure and Maytas properties - two companies owned by its founders. The founders btw own 9% of Satyam ONLY. The resolution is passed unanimously by the board and then communicated to the stock exchanges. Shareholders go ballistic and the stock tanks by 54% - The company has to call of the deal fearing god knows how many lawsuits.

What surprises me is the names on the Satyam board

• B. Ramalinga Raju
  
  
• B. Rama Raju
  
  
• Ram Mynampati
  
  
• Dr. (Mrs.) Mangalam Srinivasan
  
  
• Dr. Krishna G. Palepu
  
  
• Vinod K. Dham
  
  
• Dr. Mendu Rammohan Rao
  
  
• T. R. Prasad
  
  
• Prof. V. S. Raju

The links point to their profiles. What were these people thinking? I am sure that they have decades of experience and know their respobsibilities. Or is sitting on a board just about making a quick buck and getting the company to pay for your stay in expensive hotels? Shameful to say the least. I wouldn't be surprised if shareholders decide to replace a significant number of board members and maybe the three executive directors too. They anyhow seem to be more interested in constructing bridges and apartments in India instead of spending their time and energy delivering software to customers in the U.S of A.

The daily routine

Saturdays and Sundays are my relaxed days. For the past month, I've been on a tough schedule that I love. It's made me feel much better. Here is what it looks like:-

5:30a.m. - Alarm goes off. Try to wake up
5:55a.m. - Watch U.S. markets closing reports on CNBC, check google finance, email on blackberry, Paytronic sales and new merchant sign up reports.
6:10a.m. - Head to the gym
6:20-7:45a.m. - Gym - primarily the treadmill (preparing for the mumbai marathon) and some light weights
8:00-8:15a.m. - Do some laps in the pool
8:40a.m. - Back home
8:40-9:20a.m. - Breakfast, Read the papers (The Mint in detail, Glance through the ToI), Get ready for work
9:30a.m. - Get to office (benefits of living next to work)
7:45p.m. - 10:30p.m. - Social time - The general routine is to have dinner at home and spend some time with Hemisha and watch some TV though we regularly also go out for dinner or a movie (the PVRs at Oberoi mall or Juhu are our usual destinations.)
10:30p.m. - Bed time (unless I have conf. calls with the U.S. when this gets extended to about 11:30p.m.)

Saturdays and Sundays I have a much more relaxed schedule. I don't go to the gym or Pool and try and leave work a bit earlier (6:30ish). Try to use this time to catch up on reading, meet up with friends and other start-up people and also for other personal stuff. I like having a routine. Have had once since the beginning when I became an entrepreneur. I like it as it brings some predictability into my otherwise very unpredictable life.

The terrorism post

So I'm late. Virtually every blogger who had something to say has said it. I'm done with dinner and thought of writing a new blog post. Asked Hemisha for her suggestions on a topic to post on and she said "Aren't you going to write anything about the terror attacks? " For those who have not heard, on 26-11-2008 Mumbai, the city I live in, was attacked. You can read more about it here.

I'm gonna try and share a few of my views. I do have some perspective as I do feel I have seen terrorism at close quarters post 9-11.

Firstly a preface:- Our government needs to realize that warfare has changed. When I was a kid my parents used to subscribe to the India Today magazine which was posted to us overseas. I remember seeing images regularly which basically had two columns - India and Pakistan with the number of Fighter Jets, Tanks, Missiles, soldiers etc. that each one had stacked up graphically against the other. Warfare used to mean out bombing, out tanking or out numbering the other side in battle. The states realized this on 9-11-2001 and we should have taken a cue but seeing that we haven't we should take one now. Fighting terror requires very different people, processes and technology. It does not matter if we have a large highly trained millitary, lots of jets or the nuclear bomb. Winning this war will mean realizing that we are fighting a very different kind of enemy and so rejigging our entire millitary and defense to think along these lines. Here are a few of my pointers:-

1. We need to change our metrics for whether we have won or lost a battle. Our battle is not won if we kill the terrorists. Our battle is won if we are able to unearth their plans and capture them, thwart their plans. This is far less glamorous and will not be as appreciated by the masses but this is what we must consider as a win and this is what we must celebrate. The objective of the other side is not to come to Mumbai and conquer our territory, declare it as a part of Pakistan. It is to cause damage to property, innocent lives and to the social environment in our country. The terrorists seem to clearly understand their objectives and goals - Can we say the same about our government and millitary?

2. We need to realize that fighting terror is an expensive defensive battle. It is akin to protecting your farm from a flying pest. While for the pest it takes hardly any resources to come in and cause havoc, protecting the farm from such pests means making investments many orders of magnitude larger. We as a democracy will need to realize that significant money will need to be dedicated to protecting our security. Our government will have to keep defense spending as it is and create an equal (if not larger) budget dedicated to 'Homeland security'. To give you a quick comparison - The States has a homeland security budget of about 60bn and a defense budget of about 550bn. India's defense budget is about 25bn USD. We will have to set aside at least 3-4bn USD on a yearly basis towards homeland security.

3. Technology is a key weapon against terror. This is because fighting terror is about two primary areas - watching out for suspicious activity (surveillance and monitoring) and deep diving once you get a clue to be able to follow the trace (sort of being able to follow a trace even though it is very faint. We need our cities to be covered in surveillance cameras, all indians to be fingerprinted and given smart card and biometric IDs, all bank transactions to be tracked, voice calls on all telecom networks to be logged for 6-9 months and then speed analyzed, trace chemicals to be detected through traces in the air etc. We will need to invest in technology and people with a technological bent of mind to be able to implement these in the department of homeland security.

4. Problems we will face will be non-trivial. India is a country which generates large volumes of data. Imagine the complexity with trying to archive all voice calls for even a year. Then imagine the problem if you are trying to analyze these calls by having humans listen to them (physically impossible as they will be listening to real time conversations in real time. This requires software that can analyze calls much faster than real time = probably 40-50 times faster!!) . I suspect we will need to invest heavily in research into these problems and to finding solutions that can then quickly be implemented by the government. Government owning research will be highly inefficient. My suggestion would be to fund labs at some of the IITs and give 40-50mn USD to 2-3 funds whose charter would be to fund companies that they think are developing relevant technologies for the government.

5. It will be difficult to do everything ourselves. We will need to buy software and tools from overseas vendors who have working solutions to similar problems being faced by their governments. To do this, we need to have a procurement process that is reasonably open and transparent. We will also have to be mature and not cry foul everytime we see a company has been awarded a multi-million dollar contract.

and Lastly,
6. We need to prepare as a nation for Emergencies. All kids need to be taught how to swim, climb down from the 3rd floor balcony, how to administer first aid, how to put out fires, how to stay calm etc. If they don't clear the basic course in 'survival skills and emergency procedures' they should not be able to get past 6th grade. All buildings need to have fire drills, evacuation procedures and emergency exits. We need to have an ambulance system that is designed for the chaos that is India and our roads. Most importantly we need to train our people that in situations of war, they need to sit indoors, remain calm and not expect to be kept posted about everything. We should be content with listening to hourly government bulletins and to not having any other reporting in moments of war.

So having said this much, I must end here. It's been interesting writing this and I might be motivated in the future to write some more!!

Honey, the economy is shrinking!!

So I'm back in India after my trip to dubai and have been continuously asked by multiple people while I was in dubai and over the last two days as me and Hemisha have been visiting people for Diwali about the state of the economy and how I think things will play out. I've tried to spend some time thinking my own thoughts about the same and figuring out how the economy will play out and how it will affect my life and business. So here are some of my thoughts about what is happening at the moment.

We are entering a time of uncertainty and fear. Smart companies and smart families will err on the side of caution. Their own earning potential and financial situation may have not deteriorated but being stingy has never hurt anyone and so they will try and curb discretionary spending and reduce unnecessary overheads.

What will happen because of this slowdown in smart families spending? It's like 10 families stuck on an island with a million dollars in cash to trade between themselves. If each of them just spends 100,000 USD across the year, the GDP is just 1,000,000 USD while if they were to spend it twice (once from the money they earn from trading with others), then the GDP is 2,000,000 and thrice then 3,000,000 USD. Basically spending money helps the economy to grow without the government having to insert more money into the system. As people reduce or defer their spending we will see the economy shrinking.

You will see corporates earning lesser money as a function of time - e.g. Fewer people will go to watch movies and fewer people will spend money on that new pair of diamond earrings. What does this mean ? Companies will be forced to shrink also i.e. they will be forced to 'right size' themselves to keep in mind the new reality. They can do this in two ways - by reducing variable costs and secondly by controlling supply and distribution i.e. by going slow on rollout of new projects that may cannibalize their existing outlets - Think Shoppers stop having only one outlet to service the whole of Bombay from 1991 - 2000.

This forced contraction of some of the largest consumer oriented businesses will mean a multiplier effect on the sentiment of people at large. Many people will be out of jobs and many companies who were dependent on a large number of 'cookie cutter' projects will see their business plans go from looking like a hockey stick to one looking like a jump from a cliff. Sad but unfortunately true.

My view is this shrinkage of spending and the economy will mean we will see very bleak times over the next 3-4 years. Reason being that people have built the foundations of empires on the premise that consumption is there (which it was 3 months ago) and very few have the money to build out the entire building. Money being like water will chase the best returns it can get and in todays environment finding the best return is a bit chaotic so most owners of capital will adopt a wait and watch or else 'take it or leave it' attitude. Smart entrepreneurs will focus on sales and growing businesses organically but that means that we will not see heady days and wild spending for 2-3 years ahead.

I would love to belv. that the economy will recover sooner but I doubt it. For it to recover, it will need the discovery of a new disruptive business model - think software exports, Call centers etc. so that capital can flood into that sector and salaries can go through the roof, confidence in the economy improves and droves of people start spending money together again. If there is such a disruption we will see the economy improve in a 3-4 year time frame else we should be prepared for this to take longer. It will improve but it will take longer because over that period of time, significant number of people who should have been buying on a yearly basis have deferred their decision until it is no longer possible and so when sentiment improves they all look at purchasing together and because of businesses having contracted investment in capacity has not been made and so individual businesses will see high revenues per unit (per McDonalds outlet) etc. thus making the case for rolling out a larger number of outlets more compelling.

I personally feel this correction is a good thing. My generation is fortunate to have seen this and thus to learn a few things:-
1. Equity is a risky investment and Debt always supersedes equity. Very few people realize this when they invest in the equity markets but businesses can have negative net worth. You can't see a negative figure on CNBC and you can't buy any stock for negative money but equity can go to negative and when that happens companies are bankrupt and debt superseding equity means the debt holders now own the company with the equity holders getting NOTHING. Hence, I think it's important for most people to use leverage carefully and to ensure that they have complete confidence that the managements of companies they are backing are putting money into projects that absolutely must be done and are borrowing money from reliable sources at fair terms.

2. Never trust others when it comes to investments. Unfortunately anyone with an MBA can create an obvious systemic incentive. Which means that all investment advisers had a vested interest in selling you products as they were getting a commission on the same. Your bank manager has a target to meet and hence was talking to you about ULIPs or trying to get you to book FDs. My view is that most investment advisory firms will go bankrupt. They have just eroded all trust among their clientele and they will never be able to recover. Funnily, most of their employees seem to have been belving their own spiel and I expect most of them will now realize that all the commissions that they made selling ULIPs are now down to 10% of their value. We've learnt that the old tactic works best - compare apples to apples and then play 2-3 providers and take the cheapest product. Never get into any situation where you are not comparing apples to apples.

3. We seem to be continuously reminded that we need to manage things that are within our control - time and our resources effectively. These are the two things that we control and relying on anything or anyone external to help us with time management or providing us additional resources is just putting our achievement of goals at risk.

So I am sick + some learnings and thoughts

So yes I'm down with an upset stomach - so bad in fact that I had to leave my Co-op's Annual General Meeting mid-way (which was a shame as I was one of the two members younger than 70. Luckily Hemisha could stick through the whole thing and have the samosas and juice!!)

Haven't been able to sleep well - woke up at 3:30a.m. and spent a LOT of time trying to look up old friends on facebook and check on updates in my friends' lives. Finally decided that I had seen all the new pages on the internet and had pretty much tracked down all my friends and it was time to do something productive.

Most of you might now that for the past 16 months I've been working on building a new company. Paytronic is an attempt to build a retail network for the acceptance of consumer payments in India. It is our aim that if you are trying to get retail customers to pay you money you will come to us and we will provide you the reach and an elegant way to do so with the least cost. It's been a learning experience (as always) and I wanted to share some of my learnings with the world at large:-

Firstly, I wanted to share things that every start-up should do to save cost:-
1. Move all your email hosting to Google. We run a company with 200 employees and an even larger number of mail boxes on it and it's brilliant. It comes with shared calendars, documents, files etc. and we have never felt the loss of Outlook. Most importantly, it never goes down, it works seamlessly with Blackberry (including the calendar) and you don't require to dedicate resources to administer the whole thing.

2. Never hire through recruiters. We have found that the best way to hire is through referrals and through job portals. Recruiters are just lousy. If your HR person is using a recruiter or wants to use one, it just means they don't want to put in the effort to do the job themselves. Of course the best hires are people who have worked with other team members in the past.

3. Encourage people to start the day early. This is especially important for people like us who are based in Mumbai. Starting the day early means that at least some people will avoid the pain of commuting two hours and coming to the office all fagged out. Trust me this takes a huge toll on their productivity.


Next I wanted to share things that we have learnt through experience:-
1. Ensure that the entire process is under your control. This is very important. There will be temptations to do that deal with a large company who will get their entire sales force to sell your product. It will be lucrative to get integrated with this large pan-indian bank so that your cash management becomes a trivial problem. Trust me, this will not work. The fact that you want to do any deal with an external party means that you feel that the problem is a difficult one for you to tackle. Wisdom has taught us that the only reason the external party agrees to do the deal is they don't realize how difficult the problem is. In the initial days, it's important for every company to have full ownership and a fool-proof plan they can implement to solve the difficult problems they come across.

2. Metrics, Real Time Systems and Automation. When you are running a large company, it's very easy to get bogged down by operational issues. During times like this it is important to drill into every employee - Are you doing the same thing everyday? If so, can it not be done by Software? Are you being continuously asked for reports ? If so, can it not be generated by software? Would you be able to do your job better if you had some data from another department? If so, can the software not get the same for you? It is absolutely critical that every member of the organization's performance, goals and achievements are monitored in real time. There is no better way to improve productivity.

3. Ensure that the company can function from cybercafes and buses. We operate in a country consumed by chaos. In the last month there have been severe rains in Bombay meaning on many days our staff has not been able to commute to the office. There have been riots in Indore, floods in Jharkhand and our Sales manager Om in Jammu has been sitting inside his house (hopefully only till Aug 15th) because of a curfew in Jammu and Kashmir - along with a ban on SMS. We operate a real time business and it's impossible for us to not have productivity from even a single team member for even a day. It has been important for us to give all team members an ability to function from the closest cybercafe or else by sending an SMS from their mobile.

and lastly,

4. Put in effort into building a culture. This is different for every company. I like to feel we have built a culture where we are aggressive as a company, we do what we say we will do and every person is accountable for his commitments. This is an ongoing process and I am thinking hard on how to build some of the softer values into the company such as compassion and respect for dissension etc. Let's see how it goes.

P.S. We've crossed over 10,000 Recharge points across the nation. Congrats to the team!!

Nice Article about Nandan Nilekani

In today's Mint Lounge. Click here to read it.

The quote I liked most -

Asked what he would like on his epitaph, Nilekani simply says: “Here lies someone who didn’t squander his serendipitous opportunities.”

Randy Pausch Loses his battle with Cancer

Randy Paush lost his battle with cancer yesterday morning. Randy is the author of the book "The last lecture" inspired by the actual last lecture he gave at CMU - For those who have not watched it - the video is embedded below.He was a brave man and has inspired me to do go out and do things.

My favorite quote from the last lecture
"It's not about how to achieve your dreams; it's about how to lead your life. if you lead your life the right way, the dreams will come to you."

-Snipped from his wikipedia bio -

Randolph Frederick Pausch^[1] (October 23, 1960 – July 25, 2008) was an American professor of computer science, human-computer interaction and design at Carnegie Mellon University (CMU) in Pittsburgh, Pennsylvania, and a best-selling author who achieved worldwide fame for his "The Last Lecture" speech on September 18, 2007 at Carnegie Mellon.

-- The full wikipedia article here

Update - Paytronic goes live!!

Hi everyone, for those who don't know, about a year ago I started work on a new project - Paytronic Network - Me and my team are trying to build India's leading branded digital network for the distribution of prepaid cards. We started the company in February 2007 and went live in April 2008 in Mumbai. We've now started rolling out "Recharge Points" across the country and today crossed the 3500 point mark nationally. What's encouraging is we're now getting 200-300 applications a DAY from retailers to become recharge points. I'm really encouraged and we're gonna do everything possible to ensure that our merchants are very happy dealing with us. If you want to visit us on the web - www.paytronicindia.com. It's been amazing with the teams at Paytronic and Myzus (of course technology is handled by Myzus) working together to ensure everything comes together smoothly. - cheers,

Went Rappelling yesterday

yesterday was a fun day. Myself and Hemisha went Rappelling at Kondona Caves - close to Karjat. It was a tiring 2 hour hike (I know.. I am not in shape!!) and then was the best part - learning how to rappel and going down a 150 foot drop to the Kondona Caves. I enjoyed it thoroughly and maybe will do some more of this if time permits in the future.

Chilled out Sunday!!

Had a chilled out Sunday yesterday. It was Hemisha's birthday and so we woke up late, enjoyed a lazy lunch at the Pan Asian and then came home and crashed while watching the Seven Samurais - Woke up watched the finals of the IPLT20 and then did some reading, a late night sandwich and then woke up today all ready to face the new week. Life's been a blur lately with lots of travel and deal making as I'm getting close to launching the company that I've been working on for the past year and so this was a much needed break.