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http://rodinhood.com/Mr-Marwari-Have-you-met-Mr-Tata?pfstyle=wp
A few years ago, after buying a new car, the showroom lady called me up and asked me my preference of insurance companies. All the insurance offers were uniformly priced. I asked her to rattle the name of the Insurers and the minute I heard a Tata Company name, I just said buy that one. Why I made that decision, I still cannot rationally explain. Building a reputation may be tough and non productive in the beginning, but ignoring it can have serious implications on your business. White money is more nutritious that black. After my first round of VC funding, I ran into my uncle at a dinner. He had read about the financing in media and cornered me. So youre rich! Why are you looking so gloomy? he said. Huh I asked? My Companys the one that got funded, not me! No one got rich. The VCs got poorer and a long arduous road lies ahead of me to return the money to the VCs many times over. He chuckled and said What nonsense! The first rule of the funding game is to siphon out 25% of the funds and make yourself-rich. Investors can be dealt with later. Shucks hadnt I heard that story before? Many of my relatives have floated public issues that were nothing short of scams and they still boast about it! This get rich, siphon out philosophy left so many old industrial houses bankrupt. They were never capitalized to take advantage of acquisition opportunities and punished their shareholders so harshly that they could never raise capital again. Think Mafatlal, Dalmia and many more. Even today I meet embarrassed professional managers working in family firms who get paid salaries in half white and half black to avoid taxes! It takes a Tata DNA to create a TCS, Tisco, Telco + 100 other Companies with massive cash reserves on their balance sheets. This was especially tough during the Indira Gandhi emergency tax regime when the Income Tax rate was over 90%. Almost everyone gave up and resorted to siphoning off money from the Balance Sheet, but the Tata Companies hung on. When you build a cash war chest, and deals like Corus or Land Rover come your way, you have the ability to execute. On a depressing note, look at the state of Hindustan Motors and Fiat India today. Even though they dominated Indian roads for decades, they are bankrupt today. Even the mighty Bajaj could not build a Nano (the natural progression after a scooter). It took the Tata group to do it. Of course, on the flip side there are the Mittals and Ruias who have built massive empires in the past 20 years. Outsiders stay away. We are the Adams family. 12 years ago, I visited a large (100 crore+ topline) textile factory in Gurgaon (Delhi) and met the CEO, COO, CFO, CMO, and CTO. They all had Kumar printed as their last name! On inquiring, it turned out that the family tree right down to the grass roots was involved in running the show. In conversations, all they did was nod at each other for consensus. No one had the guts to tell Grand Dad Dinosaur that he was wrong. It seemed so stifling and stuck. When I asked the young 23-year-old MBA what his vision for the Company was, he said something that I felt was his fathers vision and definitely not his own! 12 years later, I did a recon the Company had shrunk to 20% of its market cap. Companies like these have no future. Their boardroom antique furniture doesnt think laterally and has no clue of new business lines. They would get a heart attack to pay Accenture Rs 1 crore to suggest a strategy to uplift them. They dont hire gold standard professionals because they cant expose their business loopholes to them. Think of it most of the old family run companies I know still make steel, cement, ingots, rods and all kinds of cloth, while the Tatas play in Software, Telecom and other value added businesses. Like the Tata retirement policy, all the granddads need to be sent home and professional CEOs hired across the board to run the Company. Else, most family concerns will cease to exist. Sometimes an Opera Singer can make the best CEO. If you go for a live music concert or a dance performance at the NCPA (National Center of Performing Arts) in Mumbai or listen to an Opera at the Jamshed Bhabha auditorium next door, you will marvel at the massive contribution the Tatas have made to the Art scene in India. Given this background, if I were an Austrian CEO who can run a steel plant as efficiently as I can play the
Oboe, I will be far more motivated to join the Tatas as the CEO of TISCO rather than become the CEO of some Industrial House in India whose CEO cannot understand if the Oboe is a wind instrument or a Shoe. Life and business is being cultivated way beyond the dusty corridors of factories and sheds. I wish that all wannabe entrepreneurs and inheritors of family businesses understand this early on!