I grew up in a relatively prosperous suburb of New Delhi but it had no bookshops. This being 1980s India with all its frustrations, I remember that the local market had three videocassette libraries but no libraries for readers. In fact, most of my friends' families had more cars than books. Since, by the age of ten I was a hardcore bookworm with no bookshops near my house, I had to hatch a plan.
I invited the boys in the colony down to the road to a fortnightly cricket match with the boys in my neighbourhood. We agreed that the losing team would pay ₹200 to the winning team. Then I trained the boys in my neighbourhood with unrelenting intensity completely unfettered by issues like work-life balance. Catching drills, net practice, sprints, early morning runs...whatever I had seen in Hollywood sports movies, I did to the boys in the neighbourhood. Result: we thrashed the boys down the road in pretty much every match. I would then take the ₹200, distribute ₹150 to the rest of the team and keep ₹50 for myself.
With a fortnightly outlay of ₹50, I would hit the pavement bookstalls of Connaught Place and Karol Bagh every other week. Shops like Bahrisons in Khan Market were visited to browse the latest books from the West which were, of course, way beyond my means.
By the time my reading had progressed from Hardy Boys to Frederick Forsyth and, finally, into the wonderful worlds woven by Gabriel Garcia Marquez and VS Naipaul, my parents decided to migrate to England and my wonder years in Delhi came to an end.
I read as a child to explore worlds that I had never seen and to understand experiences that I had never had. I now read as an adult to understand perspectives that I had never appreciated and to introspect on issues which I had taken as dogma. Reading remains central to my attempt to understand the world better and to push myself to see the world from angles that others can't see. So listed below are the three books which have helped me the most in this regard.
"India: A Million Mutinies Now" by VS Naipaul
Published in 1989, this remains-by a country mile-the best book written on India and it is as relevant today as it was in 25 years ago. The Nobel Laureate shows incredible clarity of thought in cutting through India's chaos to focus on the central fact that defines India today, namely, the desire of the Indian people to do whatever it takes to move ahead in life. In the author's own words: "The book was dedicated to a further idea: that India was, in the simplest way, on the move, that all over the vast country men and women had moved out of the cramped ways and expectations of their parents and grandparents and were expecting more."
"Foundations of Corporate Success" by John Kay
The first few years of my professional life were spent as a management consultant. To my disappointment, this turned out to be a dreary profession full of Powerpoint presentations and people with MBAs. Most frustratingly, neither the MBAs nor the books that they read gave me a framework to compare the inherent quality of one business with another. Then I found Foundations of Corporate Success.
Since all firms use a collection of inputs to generate a certain output, the difference between inputs and output can be called "value addition". Obviously, the more additional value a firm generates, the more successful it will be. So, why do we find, within the same industry, some firms doing better on this score than others? The answer lies in "competitive advantage"- competitive advantage is what helps a certain firm add more value than its rivals. Why is it that certain firms seem to have more competitive advantage than others? In his 1993 book, Foundations of Corporate Success, John Kay, the British economist and Financial Times columnist, has written more comprehensibly and clearly about this than any other business guru.
John says that "sustainable competitive advantage" is what helps a firm ensure that the value that it adds cannot be competed away by its rivals. It can come from two sources: distinctive capabilities or strategic assets. Whilst strategic assets can be in the form of intellectual property (patents, proprietary knowhow), or legal rights (licenses, concessions) or in the form a natural monopoly, distinctive capabilities are more intangible in nature.
Distinctive capabilities, says Kay, are the relationships that a firm has with its customers, suppliers or employees which cannot be replicated by other competing firms and which allow the firm to generate more value added than its competitors.
He further divides distinctive capabilities into three broad categories: Brands and reputation, Architecture and Innovation. To see how these concepts can be applied profitably and with ease in the Indian stockmarket, you will have to read my forthcoming book.
"The Pyramid Principle" by Barbara Minto
Pressure makes us or breaks us. How we respond to it, especially in professional life, defines the course of our lives. The problem for me was that at least in the early part of my career, I would often fumble to find answers to business issues in high pressure client meetings. Then one of my managers gave me a copy of The Pyramid Principle by the former McKinsey consultant, Barbara Minto. (I admit that a few management consultants have "added value" to the planet.)
Minto simplifies the presentation of complex ideas through what she calls the situation-complication-question-answer. I have given below an illustration of how it usually works in the context of stockbroking:
- Situation: the stock has risen by XX% over the past year.....(OR SOME SUCH REITERATION OF A WELL KNOW AND WELL ACCEPTED FACT)
- Complication: However, over the past month XXX, YYY has happened....(THIS IS THE KEY REASON FOR YOUR MEETING THE CLIENT)
- Question: are we buyers or sellers?
- Answer: we are "sellers" because of the following three reasons...
It ain't rocket science but it is wonderfully useful in my daily meetings with institutional investors and on most days, I am a Minto-machine spinning out this framework dozens of times a day to clients, colleagues and friends.
Saurabh Mukherjea is CEO of Institutional Equities at Ambit Capital. The views expressed here are personal.
This column appeared in the September 2014 issue of Wealth Insight.
This story first appeared in October 2014.