Multi-Disciplinary Reading - Book Reviews

[phreakv6]

The Book of Why, Judea Pearl, 2018 - If correlation is not causation, then how does one figure out causality? This is a path-breaking (pun-intended) work on causality and one that attempts to go beyond the obvious regression and the ubiquitous bayes theorem in terms of machine-learning algorithms. This is a question that has plagued us for over a century and one that we have conveniently avoided hiding behind “correlation is not causation” (after mistaking it for one during the earlier part of the century).

The author explains the fundamental concept of “ladder of causation” that the entire book is based on. Ladder of causation has 3 levels - Association, Intervention and Counterfactuals. Association is where most AI these days is - be it self-driving cars or in general pattern-matching algorithms in visuals and voice. Most animals including us too function at this level for the most part (auto-pilot). Intervention is where we Intervene/Interact and change things in the environment to attain something and Counterfactuals is what is unique to human-beings - our ability to imagine futures and pasts that didn’t/may not transpire. The goal is for AI to reach this level so it can interact with human beings as thinking machines that would ponder “why” and answer “what if” questions.

There is 30 years of research on causality baked into this book and you get a vocabulary to speak the causal language in terms of mediator, fork and collider and what a confounding variable is and the way to represent causal diagrams and how to do back-door and front-door operations and what the do operator is and how to perform the “do calculus” and how one can go about detecting causality using just “observational” data (like randomized control trials) where intervention is not possible and so on.

The author equates these to language of geometry and guesses it will be as useful and it very well might be taught in schools a decade from now. The author does placate various students and teams that has worked with him, being an influential career academician. He has however written this book with minimal mathematics so it is approachable by a lay reader. This book has applications ranging from epidemiology, economics, AI, statistics, science, finance, philosophy and numerous others and if you have interests in such things, this book is a must read. 11/10

[phreakv6]

The Archer, Paulo Coelho, 2020 - This is one of the most gorgeously made books - by that I mean the typeset, color of paper, the binding, the vacant spaces and of course the beautiful illustrations. Cannot say the same about the smell and content though.

The content is designed as an allegory. Archery is used as the medium to delivery profundity. It could have been anything - be it driving a car or putting on your shoes but archery has the sense of preciseness, mythology and history in several cultures and hence I presume the choice. The aphorisms though are tepid.

the bottomline in plain English is - arena, target, practice, repetition, focus and being one with the goal, method and target leads to skill but the real skill is in developing an instinct and then being able to give it up. When you put it that way, you can’t sell books. If you are looking for something profound and beautiful in bite-sized pieces, I would suggest Tagore’s Stray Birds which I have loved for a long time despite several re-reads. 6/10

[phreakv6]

Fermat’s Last Theorem, Simon Singh, 1997 - I loved this book for the exact same reasons I hated ‘the man who solved the market’. This is what a well-written biography reads like as it straddles the balance between problem and person very well. It speaks equally about Fermat’s last theorem as it does about Andrew Wiles the person and of every other person that came before him on whose efforts Wiles built his solution and it does these without boring or alienating the reader.

Wiles’ own words on solving Fermat’s Last Theorem

“You enter the first room of the mansion and it’s completely dark. You stumble around bumping into the furniture but gradually you learn where each piece of furniture is. Finally, after six months or so, you find the light switch, you turn it on, and suddenly it’s all illuminated. You can see exactly where you were. Then you move into the next room and spend another six months in the dark. So each of these breakthroughs, while sometimes they’re momentary, sometimes over a period of a day or two, they are the culmination of, and couldn’t exist without, the many months of stumbling around in the dark that precede them.”

This is the mathematical equivalent of a 300+ year pirate treasure hunt with its many quests, clues, storms, empty treasure chests and deserted islands. Taniyama-Shimura conjecture and their work on elliptic curves and modular forms, Ribet’s work and Galois representations form the base on which Wiles draws his proof over years. The basis and tragedies behind these is explained in bittersweet detail that makes the final utility and Wiles’ proof comes across as a victory for everyone who laid the stones bit by bit. This is hollywood material and I am surprised its not been adapted into a movie yet. 9/10

[deevee]

Hi

BBC did make a documentary on it. And it was one of the most successful ones at that point of time. It was based on this book. Even the producers were surprised at the success of the documentary.

Hollywood did attempt to make one movie I think. But it was quite poor. I do not recall well.

Rgds

[sujayaca]

Gene Machine: The Race to Decipher the Secrets of the Ribosome

Gene Machine also has a similar theme. It’s an extremely well-written book and covers the professional journey of the author in unraveling the chemical processes within the ribosomes and the significant contributions made by other scientists and associates leading to the Nobel prize in Chemistry.

[karunbirsingh]

Bad Blood by John Carryou

[phreakv6]

Between Parent and Child, Dr. Haim G. Ginott, 1965 - “Simple, but not easy” applies to a lot of fields. In these fields, the common thread is that the barrier of entry is low, but to do really well requires skill and most of us don’t even realize what skills are required and if or not we possess those. This book attempts to outline some skills that are required for effective parenting and it does do a great job of it. For a book written over 50 years back, the relevance is commendable. Its written with several examples of conversations between parent and child and those help drive the point well.

Several things were alien to me - treating a child as you would a guest, for eg. But the more you read about it, the more sense it makes. What most of us lack in parenting is not intelligence but knowledge/skill and there’s a lot of difference between the two.

Some of the parts I liked in the book (paraphrased)

• Behind many childhood questions is the desire for reassurance

• From a mirror we want an image, not a sermon (parents are mirrors through which a child sees themselves)

• Judgmental and evaluative praise should be avoided because it is unhelpful. It invites dependency, invokes defensiveness

• Children should be free from the pressure of evaluative praise, so that others do not become their source of approval

• Children praised for being smart, can be less likely to take on challenging tasks since they do not want to risk their high standing

• If they find me so great, they cannot be that smart (Praise may undermine the source of it)

• Children do not like to be evaluated

• In criticism, the parent attacks the child’s personality attributes and their character. In guidance, we state the problem and a possible solution. We say nothing to the child about himself or herself

• When things go wrong, respond rather than react and have a sense of proportion in distinguishing events that are merely annoying to ones that are catastrophic (broken egg vs broken leg). Children learn to react from the parents

• Children who are regularly criticized learn to condemn themselves and others. They learn to doubt their own worth and to belittle the value of others

• Anger should be expressed in a way that brings some relief to the parent, some insight to the child and no harmful side-effects to either of them

• Threats invite misbehavior. A warning serves as a challenge to the child’s autonomy

• If-then approach should be avoided. (If you do this, you will get that etc.) It may occasionally spur compliance but doesn’t inspire continual efforts

• When parents “promise” something to emphasize what they say then it implies to the child that their un-promised normal word isn’t trustworthy

• When a child lies, our reaction shouldn’t be hysterical and moralistic, but factual and realistic

• It is important to not ask questions for which we know the answers (If the idea is to corner the child towards accepting something unpleasant)

• Pointing a child to say “thank you” in front of others is impolite (to the child)

• Parents should not be rude in the process of enforcing child politeness

• Transmitting values vs demanding compliance - Values cannot be taught directly, they are absorbed and become part of the child, only through identification with and emulation of persons who gain their love and respect

• If children are to mature, they must be given an opportunity to solve their own problems

• Children should be allowed to make choices but the selection of choices should be done by the parent. (Instead of “what do you want for breakfast?”, it can be, “Will you have cheese or nutella sandwich?”)

• Parents should not nag children about homework. They should not supervise or check the homework, except at the request of the child

• When parents take over responsibility of the homework, children let them and parents are never again free of this bondage

• When a child promises to take care of a pet, that child is merely showing good intentions, not proof of ability

• If an appointment has to be cancelled, the child, not the parent should call the teacher

• A child should not be nagged about practicing (say a musical instrument). No child should be reminded how much the instrument cost, or how hard the father worked for the money. Such statements engender guilt and resentment. They do not create music sensitivity or interest

• A child feels more encouraged by sympathetic understanding of difficulties than by advice, praise or ready-made instant solutions

• A good parent, like a good teacher, is one who makes him or herself increasingly dispensable to the children

• Parents shouldn’t have the urge to be loved by their children every minute of the day. Sensing their parents hunger for love, children exploit it mercilessly. They become tyrants ruling over anxious servants

• If parents talk too much, they convey weakness

• When rules are made to set limits, exceptions should not be made and should be conveyed impersonally

• Spanking relieves guilt too easily. The child having paid for the misbehavior, feels free to repeat it

• Parents should not be the ones to wake up their school-age children every morning

• Children love to use “never” and “always” since they think extremes. It is important for the parents to not do the same

I may not have done justice to this great book but if this summary piques your interest and you have children, this is worth a read. 10/10

[phreakv6]

The Art of Execution, Lee Freeman-Shor, 2015 - There’s an over-emphasis on stock-picking and extreme under-emphasis on execution in our equity markets. This is a by-product of most people being traders with a short-term mindset and stringent rules or the ones with longer-term mindset are extremely diversified. The problem of allocation and add/reduce are then problems of a few. This book has a very practical approach to this problem of execution.

The author is a fund manager and tracks investments of 45 of the world’s top investors who handled his money (around $25m to $150m each) over 7 years. The author categorizes these managers into 5 categories (rabbits, hunters, assassins based on what they do with losing investments and as raiders and connoisseurs on what they do with winning investments) based on their style and takes a statistical approach to find the commonalities in execution.

Rabbits - They stuck with losing investments for too long and did nothing to rectify the position (say add more or sell). They instead dug deep like rabbits and never saw the light of day. They suffered from narrative fallacy, thought market was irrational, were in love with their investments, were anchored to initial thought-process and price even as disconfirming evidence came in, got into illiquid investments, were egoistic and so on.

Assassins - They killed the losers at between 20-33% drawdown or after a fixed interval of underperformance, typically within 6 months. They weren’t afraid to look like idiots in walking away if it felt like a struggle, sticking to the maxim that losers hang around with losers.

Hunters - Unlike assassins, hunters did not sell but bought more. They made sure no investment was bought as a single position but as multiple ones, between 4 and 10. Statistically, its the last few tranches that made the most money. They were aware of their fallibility and so did not go all in. This way they snatched victory from the jaws of defeat. Really liked this quote from Moneyball - “Most strategies fail because they all have one thing in common. They are designed with fear of public humiliation in mind”

Raiders - Raiders took profits too early, mostly around 10-20% and did nothing more productive with the proceeds. They were right most of the time but still did not make money - good success rates but poor payoff profiles. They sold because it felt good to take home profits, or were bored or frustrated with non-action or had myopic loss aversion due to fear. Raiders are often rabbits while losing making it a fatal combination.

Connoisseurs - They sold a bit and held the rest for long, not getting scared out of their positions and generally kept out noise. There are some drawbacks to this approach as well, as you could be too late as momentum fizzles out.

I had some trouble with this book because it is hard to slot it as an investing book since the timelines (2-3 years) and profits aren’t (2x or so) what books on investing would talk about. It tries hard to slot itself as a longer-term mindset book but the data it uses to back the same isn’t really long term. The ideas aren’t new either and has been repeated elsewhere in various forms. 8/10

[lingalarahul7]

The Psychology of Money.

My Notes:

ThePsychologyOfMoney.pdf (94.0 KB)

Review:

‘The Psychology of Money’ introduces some unintuitive lessons about investing and personal finance. The author uses good examples from history to help the reader grasp his ideas.

Few examples of unintuitive lessons for investors:

1. Role of risk and luck in the investment industry. How high risk taken by irresponsible investor can be ignored if the risk doesn’t really play out and similarly how low risk taken by a conservative investor gets full attention if he gets unlucky
2. Good investing is not about highest returns but about earning pretty good returns over a long period of time
3. Most important part of every plan is to plan on the plan not going according to plan. Benchmarking worst case with Great Depression / World War II is bad as there could be some new worst case in future in a completely new dimension
4. Investing is hours and hours of boredom punctuated by moments of sheer terror. Your success as an investor will be determined by how you respond to punctuated moments of terror (March 2020)
5. People end up picking wrong (rich) role models and not correct (wealthy) role models due to the hidden nature of wealth. No one knew Ronald Read until he died, a full-time janitor & part-time investor who died with net worth of $8+ million
6. Your decision may make sense on Excel but it can’t simulate your emotions, your family’s emotions and your reaction to them when things go bad
7. Any investment with a huge upside but with a very small probability to wipe you out completely is not worth it. You will tend to take such bets again if it works until you hit that small probability. Good to avoid extremes.
8. The power of story / narrative in economic booms and busts

Overall, the book will encourage you to be more conservative and simple when taking investing decisions.

One interesting thing I found is that the author pointed out the hypocrisy of (50% of) mutual fund managers who don’t invest their own money in the funds they manage. However, as per his personal asset allocation details in Chapter 20, he isn’t invested in his fund too. May be I’m wrong…

[phreakv6]

Essays in Love, Alain de Botton, 1993 - The loving wife inserted this into the reading list around our anniversary. You certainly can’t learn to love from a book, the same way you can’t learn to swim or drive from a book. But love is one of the most abused and misunderstood words in the lexicon, as it means so many things to so many people. Each and everyone of us certainly has some misguided notion on the word. This book is part fiction, part philosophy, part humour, large parts stream-of-consciousness narrative in the form of essays, interrupted by fiction in the form of recollections.

The style is sophisticated, with generous references of love from classics, from Flaubert’s Mme Bovary, Baudelaire, Proust and his characters very English, reserved, dignified and self-deprecating (that I use humour and honour despite the spell-check should show where my sensibilities are). The book is packed with insights, with a fundamental, physiological, psychological, paradoxical look on love. The chapter on “Marxism” was an absolute favorite, where the writing distinguishes the feeling accompanying that of “loving another” vs “being loved” and how conflicting and at odds they can sometimes be (‘If s/he is so wonderful, how could she love someone like me?’). If one is not convinced of ones own “lovability”, affection can feel like being bestowed an honour for a feat one has no connection with. Desire can only thrive on the impossibility of mutuality (Many a Woody Allen film on this) is the gloomy Western traditional thought. Author quotes Montaigne (like I said, abundant sophistication) - ‘In love there is a frantic desire for what flees us’.

What I loved is the ability of the author to relate diverse things like characters from literature, ideas (like Communism/Capitalism, Authoritarianism), art, philosophy (generous on Wittgenstein, Kant and Hume) and write insightful yet entertaining prose with so many ideas like ‘One can talk problems into existence’ for eg. or ‘Some people would never have fallen in love if they have never heard of love’ (that it is society, rather than authentic urges that motivate us in priding ourselves of romantic love) or that Western cultures are “individual centered” while Chinese culture is “situation centered” and so concentrates on groups or that man sees water, palm trees and shade in the desert (mirage) not because he has evidence of belief but he has a need for it. There’s just too much to love in this, maybe because I found in it a voice for a lot of my existing beliefs. It is hilarious and profound and highly recommended. 10/10

[phreakv6]

A matter of degrees, Gino Segre, 2002 - This is a theoretical physicist telling the story of temperature through 6 loosely connected vignettes. The first one aptly named 98.6 looks at why the human body functions optimally at around this temperature and what may have caused this random number to have been set as the number in our internal thermostat and what happens in temperatures way above or below this - in sahara and antarctica and what happens in a fever. Clearly telling this story requires an adequate knowledge of evolution, adventure and biology and that’s exactly what we get.

The second has a narrative of civilization based on temperature - from the stone age hunter/gatherer’s charcoal fires, to bellows of the village blacksmith that produced bronze and iron to steam engine, the bessemer furnaces that made steel to the nuclear age - the narrative would read 0, 500, 1000, 2000, 2500 to a million degrees Fahrenheit. This one delves into archaeology and anthropology and segues gently into thermodynamics and entropy. This is the sort of narrative that doesn’t restrict itself to departments and boundaries and instead flows freely as required. Because of this, it views life as anything that reduces entropy of its environment, rather than conventional biological view of Organic life.

The third deals with what I expected from the book - that of global warming and climate change. Thankfully it is more scientific than political and emotional. Earth is a complex adaptive system with its ocean currents and el nino, its ice ages and ice which has was once present all over (snowball earth theory), its various greenhouse gases and their varying contributions to warming, and earth’s interaction with visitors from the asteroid belt and life within.

Life under our oceans near the thermal vents and our various ocean explorations and discovery of methanogens and reconstructing early earth makes up the fourth vignette while the story of the sun, its birth and inevitable death and how life as we know it will transpire makes up the fifth. The author reserves the best for last with the Quantum leap, talking about Superconductivity, Duality, exclusion and uncertainty (Einstein’s duality of light, Pauli’s exclusion principle, Heisenberg and Schrodinger’s uncertainty and quantum mechanics) with a side-note of how age of scientists affects their output, and ends with an ode to Subrahmanyan Chandrashekar who as a teenager made the discovery of quantum effects on collapsing stars at a time when the field was barely born. Thoroughly enjoyable read for me on several fronts - 10/10

[arjunbadola]

Alchemy: The Surprising Power of Ideas That Don’t Make Sense, by Rory Sutherl(2019):

If you have investing in the market, we all know that being rational is very important. But this book will convince you that applying that same behaviour in aspects of life you would be using only a tiny set of tools available with you.

A quote from book: “In trying to encourage rational behavior don’t confine yourself to rational arguments”

This book is written to make you believe that irrationality is sometimes the way to go forward with.

Here is how the book starts:

Challenging COCA COLA
The book starts with an amazing example where it shows you that the opposite of a good idea is also a good idea.
Let’s say you want to make a company which will be competing against Coca Cola, what qualities would you want in your product?
The common sense would say that, a product that is cheaper, tastier and comes in bigger bottle.
But there is a company out there which did just the opposite.

1. It tastes disgusting
2. Comes in a ting can and,
3. Its expensive.
   The company is RED BULL.

Rating 9.5/10
(-0.5 as there is too much information overload.)

My Notes: https://twitter.com/badola_arjun/status/1349230080753500161

[Ansh_Gupta]

Summary Part #1

The book is a very interesting read about some of the best Indian businesses like Asian Paints, Berger Paints, Axis Bank, HDFC Bank, Astral Poly and Marico.
There are some really good insights about these businesses, some competitors and the industries to which the businesses belong.
Note that the book was published in 2016 so the data is a little old in that sense.

Summarizing some of the interesting points about Asian Paints and Berger Paints below (will do it soon for the other businesses as well):

Asian Paints

Phase 1: 1942–67

• Back in the 1940s, Choksey (founder of Asian Paints) chose the decorative retail segment instead of industrial paints. He saw that the industrial paints business was price-driven and the company with the lowest price won the business for that year. However, decorative retail was inherently different. It had the potential of building sustainable strengths around relationships with dealers/distributors and also had strong brand recall. Choksey bet his fortune on building a strong presence within this consumer-facing segment of paints.

• In the 1940s and ’50s, decorative paints was a commodity business consisting mainly of dry distemper, also called ‘chuna’ in local parlance. Distemper is the most basic form of paint and consists mainly of coloring agents, chalk and lime.

• Choksey kept noticing gaps in consumer demand. In the cities, for example, he saw the difference between basic distemper and the more expensive plastic emulsion paint (which was launched by Jenson and Nicholson under the brand name Robbialac). While dry distemper was cheap, it had a tendency to peel off walls, stick to clothes, and stink badly. On the other hand, plastic emulsion was free from these problems but was five times costlier than dry distemper, and hence unaffordable. Thus, during the 1950s, Asian Paints launched a new innovative product—the washable distemper, placed between dry distemper and plastic emulsions. This was supported by a highly successful advertising campaign which said, ‘Don’t lose your temper, use Tractor Distemper.’

Phase 2: 1967–97

• Asian Paints has nurtured the use of data analytics to forecast demand and consistently improve its supply chain efficiency—the single largest driver of competitive advantage for Asian Paints to date.

• During these thirty years, its competitors, barring Berger, were either making mistakes around capital misallocation (e.g. Garware Paints, Jenson and Nicholson) or were focusing on only the premium segment of the industry (e.g. ICI). This allowed Asian Paints to widen its gap versus peers during this phase.

Phase 3: 1997–2015

• Asian Paints hired management consultants Booz Allen Hamilton to guide them on the way forward. The key benefits of this exercise were:
  a) the best practices of all the manufacturing plants were brought together to improve operating efficiencies;
  b) working capital cycles were brought down by rationalization of both raw material and finished goods’ inventory management processes;
  c) freeing up of bandwidth of managers which allowed them to focus more on the core business rather than spend time managing inefficient manual processes; and
  d) improved organizational structure across three business units—domestic decorative, international and industrial paints.

• During our discussions with him, Anand said, ‘The demand forecasting offered by i2’s software helped us a lot. Earlier, there was manual demand forecasting with manual interpretation of data, whereas here, there was a demand planner with analysts, who were trained to look at demand patterns in a more systematic manner’. Through these initiatives, the firm saw a significant reduction in working capital cycle days and improvement in ROCEs

• In its decorative paints business in India, Asian Paints gained substantial market share, especially from peers like Akzo Nobel (ICI) and Kansai Nerolac during this phase . The firm also accelerated the expansion of its international footprint

• In 2013, Asian Paints launched a new vertical—Home Improvement Division—with the acquisition of Sleek, a modular-kitchen player in India. This was followed by the acquisition of Ess Ess, a bathroom-fitting company in India.

What Is Asian Paints’s Secret Sauce?

Section 1: Focusing on the Core Business

• “Now we are moving towards becoming a decor solutions provider to the customer (offering value-added services like colour consultancies)”

• Asian Paints identified and understood the twin drivers for growth—supply chain efficiencies and brand power— early on and have relentlessly focused on entrenching themselves further in the paints sector using these drivers.

• Asian Paints is the only paints company in the sector which has not seen a change in its controlling shareholders (promoters) over the past seventy years, all its competitors have seen: a) a change in the controlling shareholder; and b) significant presence of a foreign entity on the board of directors. Industry experts say that this consistency at the board level has helped Asian Paints maintain focus on execution of a stable, long- term strategy over these decades.

Section 2: Deepening its Competitive Moats

Asian Paints has steadily built its competitive advantages across the four criteria of John Kay’s IBAS framework —namely, innovation, brands and reputation, architecture, and strategic assets

Innovation

• Over seventy years, Asian Paints has repeatedly excelled as the first mover, thinking differently and being several steps ahead of the competition. This is evident across the firm’s understanding of customer demand, use of technology and nurturing of professional talent. Competition has usually imitated Asian Paints, and even then, has always remained a few steps behind. There are three clear areas where Asian Paints has been ahead of competition:

• First, product innovation: Asian Paints understands its customers better than its competition. This strength was possibly ingrained from its early days (the 1940s and ’50s) when the promoters of Asian Paints deeply inculcated a culture of staying close to its customers. This proximity helped the company understand what product types (for instance, the launch of washable distemper in the 1950s), color shades (deep shades rather than pastel shades), and pack sizes (smaller packs to help paint the horns of cattle and spokes of bullock carts) are in demand in various parts of the country.

• Second, supply chain management: In the 1950s and ’60s, large multinational corporations (MNCs) used to offer at least 180 days of credit period to their distribution channel (i.e. shopkeepers, dealers and distributors who supplied paints to retail customers) and allowed the channel to extend the credit period to as long as one year in some cases. This hampered entry into the market for the smaller players, given the high and rising working capital requirements for them to deal with the channel partners at a time when the cost of capital was as high as 18 per cent.

• In that era, Asian Paints started the practice of offering regular payment performance discount, for example, a shopkeeper would get a 3.5 per cent extra discount if, without fail, he made payments on time throughout the year. This discount encouraged dealers to pay before time and the success of this practice led to the launch of cash discounts, where if a dealer made the payment in cash, he would get a 5 per cent discount on his procurement price. These initiatives were a win-win—Asian Paints delivered its products to its dealers faster than its competition and the dealers were able to manage their working capital cycles better.

• Supply chain management is a critical aspect for success in the paints industry given the voluminous nature of products, low margins for dealers, seasonality of demand and the large number of stock-keeping units (SKUs). Asian Paints has a track record of remaining a leader on this front. Some initiatives it has taken to strengthen this moat include being the first company to (a) use mainframes in the early 1970s to forecast demand for better inventory management; (b) start branch billing on computers in the late 1970s; (c) import a color computer in 1979 which helped reduce tinting time from five or six days down to four hours; and (d) use GPS (Global Positioning System) for tracking movement of trucks carrying finished goods in the channel (implemented between 2010 and 2015).

• Third and finally, empowerment of professionals: Asian Paints was unique amongst Indian promoter-led firms— it allowed professionals to take control of middle and senior management roles as early as 1969.

Brand

• Asian Paints’ investments in its brands are legendary. I am reminded of a meeting, back in 2013, with a former employee of Kansai Nerolac (a competitor of Asian Paints), who told me, ‘Asian Paints is the only paint company which has strong brand recall even for its sub-brands, both in economy, like Gattu and Utsav, as well as for premium products, like Royale and Apex. All the other paint companies have been able to create brand recall for only the mother brand—like Nerolac, Dulux and Berger.’

Architecture

• There are three critical aspects to Asian Paints’s architecture: a) creating a unique working culture that nurtures talent; b) using IT to improve competitive advantages; and c) creating a truly independent board of directors to help shape evolution of the firm.

• First, rapid career progression for those who perform. After management trainees join Asian Paints, they are given significant authority and responsibility in their roles, and if they perform, they get promoted very quickly to middle management roles.

• Second, empowerment allows creativity. Once an employee gains independent responsibility to manage a depot/ branch/manufacturing plant, there is a high degree of accountability. Also, there is ample room for an employee to be creative and take independent decisions. Asian Paints has one of the best processes of internal reporting and budgeting and, therefore, performance of each individual or branch or business unit is clearly measurable.

• Asian Paints’s use of technology is well known: It invests capital to buy and use best-in-class technology to improve its supply chain efficiencies and working capital management—which are the two biggest drivers of competitive advantage in the paints industry.

• And finally, Asian Paints has a genuinely independent board.

Strategic assets

• Asian Paints’s key strategic assets are: a) wide geographical spread of its supply chain network including manufacturing plants and depots, which helps service its dealers efficiently; and b) deep-rooted relationships with paint dealers in the industry. Both of these assets have been built over the past seven decades and are near-impossible to replicate by its competition.

(a) Network of manufacturing plants and depots:

• The company’s size and efficiency is visible in the fact that it has the largest number of dealers (35,000 vs 21,000 for Berger). With only around 125 depots in its supply chain, its revenue per depot is approximately Rs 100 crore, more than twice that of the next highest, which is around Rs 40 crore per depot for Kansai Nerolac. Similarly, its revenue per factory is approximately Rs 1500 crore, twice that of the next highest (just over Rs 700 crore for Kansai Nerolac).

(b) Relationships with dealers built through non-transactional initiatives:

• ‘Distributors are the bedrock of Asian Paints’s success, and their relationship is mutual. They look after Asian Paints and Asian Paints looks after them.’

• Major source of capital is cash flow from operations and main applications of capital include 41% in net capex and 38% in dividends paid

• The expansion of its manufacturing facilities has been timely and has included backward integration to manufacture important intermediates in the paint-manufacturing process like phthalic anhydride and pentaerythritol. Its international forays, however, have seen mixed results.

• Over the past decade, Asian Paints seems to be preparing for the future by investing in:
  a) businesses related to homes, such as kitchenware and bathroom fittings, and
  b) services that could disrupt the traditional Indian model of hiring painters to paint their homes.

In 2013, Asian Paints acquired the Sleek Group which caters to the organized modern kitchen space and in FY15, Asian Paints acquired the front-end business of Ess Ess, a high-quality player in the bathroom fittings segment.

• Albeit small in size (only Rs 230 crore of total assets), these acquisitions come across as a deviation from the strategy to remain focused on paints. However, the rationale behind these acquisitions is to protect the distribution channel of mom-and-pop stores in the paints industry from disruptive evolution of the industry. This disruption could emerge as the paints industry evolves either into a service-oriented model or a DIY (do-it-yourself) model, thereby enabling large global MNCs to open large- format stores with value addition to customers, which could dilute the importance of the traditional mom-and- pop store network.

• To explain this in numbers, consider this: The cost of labor involved in painting a home has increased to approximately 65 per cent of the project cost for a household from around 10 per cent in 1980. This is because labor costs have grown at 9–10 per cent CAGR over FY06–15 versus a mere 3 per cent CAGR in paint prices. With this trend likely to continue, there is a high likelihood that fifteen to twenty years from now, labor costs will be around 90 per cent of the overall paint project cost.

• Thus, in the future, it might make more sense to buy paint from a store and paint a home yourself rather than employ painters and laborers. Indeed, this is the practice in developed economies.
  Once this happens, two consumption patterns are likely to emerge.

• First, customers will be willing to pay for labor involvement if there is a service-oriented value addition attached to it. This could include decor consultancy services either on the shop floor or at your doorstep, or faster/ cleaner/ highly organized ways of executing the paint project.

To this end, Asian Paints has tried several service-oriented models over the past decade like:

a) opening of experience stores in Mumbai, Delhi and Kolkata;

b) Color Ideas stores (just under 300 in number currently) which provide color consultancy in the mom-and-pop stores;

c) Home Solutions painting service, which currently executes 20,000– 25,000 projects each year;

d) introduction of Royale play, high-end textured paints; and

e) color consultancy services at home for a price of around Rs 2000 (1,60,000 color consultancies were provided in FY15).

• “Two years ago, I got my house painted by my self-appointed painter. After the completion of that project, I appointed Asian Paints Home Solutions for textured paint to be done on one of the walls. Although Asian Paints Home Solutions charged me a rate 15–20 per cent higher than my self-appointed painter, I enjoyed the experience where there was a team of painters led by an Asian Paints employee who was very professional in his conduct, took great care of my existing furniture, and got the work done without any delay. Next time I get my house painted, I will just appoint Asian Paints Home Solutions for an end-to-end service.”

• Second, a DIY model will emerge. Currently, households do not adopt a DIY approach because:

a) without sophisticated tools being available, DIY painting process is tiring, dirty, cumbersome, and lacks uniformity in quality; and

b) at 60–65 per cent of the project cost, labor involvement is affordable for many households.

• However, with the introduction of sophisticated tools like the ones being introduced by Berger in its Express Painting service, and with over 90 per cent of the paint project cost being labor, both these factors are likely to change in favor of the emergence of DIY model over the next couple of decades. The experience in developed countries like the US and the UK shows that several small-sized exclusive stores, like Sherwin Williams in the US which controls 3500 such exclusive retail stores, replaced the traditional mom-and- pop stores (whose share in industry or aggregate sales has dropped to 10–11 per cent or less in the US and the UK).

• New entrants into the industry establish their presence through large-format DIY stores which are on the city’s outskirts. These stores largely offer private label paint products at 5–10 per cent lower prices compared to the incumbents, and also offer value-added services to consumers. The company’s management is aware that potentially disruptive changes lie ahead. Hence, through the launch of value-added services like Asian Paints Home Solutions, color consultancies, Color Ideas stores and its entry into the home improvement solutions business, Asian Paints intends to convert its existing mom-and-pop store network into a one-stop shop for all the needs of the evolving paint customer. In our discussions, Anand highlighted, ‘In a few months, we plan to open our first home improvement solutions store in Coimbatore. It will have all of our products, as well other products, as we don’t have the entire product range right now that can be offered through such a store. In every business we have to learn. It will take us time to learn and perfect the business. That’s our strategic game plan.’ When asked about how the firm views the risk of dilution of ROCE through such a move, the management said, ‘At the moment, home improvement business is too small to have any significant impact on the overall ROCE of the firm. But if you are talking about building long-term strength with your channel partners, whatever ROCE we lose in the new business will be more than offset by an increase in ROCE of the paints business.’

Berger Paints: 250 Years in the Making

Currently, Berger is the second-largest paints company in India, after Asian Paints.

Phase 1: 1972–91

• Berger also pioneered the concept of outsourced manufacturing in the paints industry to improve operating efficiencies.

• Kurien’s strategy worked. Berger’s shift towards decorative paints and the success of brands such as Luxol Silk helped Berger rise up the ranks through the 1980s and ’90s. Berger Paints grew from the seventh-largest paints company in India in 1980 (smaller than peers like Asian Paints, Kansai Nerolac, Garware, Jenson and Nicholson, Shalimar Paints and Imperial Chemical Industries [ICI]) to become the fourth-largest paints company in the country in the early 1990s, with a strong orientation towards decorative paints.

• ‘Madhukar and Kurien brought brilliance into Berger Paints. During their era, supply chain, productivity, operational excellence, brands and the focus on the decorative market was initiated—everything they had learnt, experienced and perfected at Asian Paints was carried forth. Berger had been transitioned.’

The Dhingra/Subir Bose Era—Rising Up the Ranks to the Second Spot Phase 2: 1992–2010

• During 1995–96, Berger introduced color tinting machines at dealers’ shops.

• Color tinting machines tint multiple neutral bases each designed to cover a range of colors, i.e., dark, medium or pastel. This machine automatically tints the shade desired by the customer once the shade’s code is punched in. As a result, the number of color shades offered by the dealer at his shop increased dramatically from 125 colors to more than 5000 colors.

• Bose also ramped up Berger’s presence across rural areas by emphasizing on products such as Jadoo Cem, Jadoo Emulsion and Jadoo Synthetic.

• On the other hand, peers like Shalimar Paints, Garware, and Jenson and Nicholson were rapidly losing market share due to either capital misallocation or poor working capital management cycles.

The Abhijit Roy Era—Catching Up with the Market Leader Phase 3: 2011–15

• Change in Brand Positioning: In an effort to build aspirational connect with the end consumer, Roy has raised advertising spend over the past five years.

• By appointing superstar Katrina Kaif (in 2013) as the brand ambassador of Berger Silk, the firm’s premium luxury emulsion, Berger has improved the brand’s awareness amongst customers. Whilst this meant that advertising spends to sales ratio increased for Berger over the past five years, this was offset by a reduction in rebates given to dealers. The strategy has worked well for Berger as it has been able to gain share in the premium segment through customer pull for its premium products rather than just incentivizing dealers to push the products to customers.

• Advertising the launch of Express Painting Solutions in 2015: A faster and cleaner painting service, Express Painting Solutions enables painters to use advanced equipment to execute the paint project in almost half the usual time with increased convenience for the occupants of the house. As the proportion of labor cost within a paint project increases over time (up from around 10 per cent in 1980 to over 60 per cent currently), over the next 15–20 years, the nature of paint projects is likely to evolve into a combination of DIY and value-added labor services. Berger’s Express Painting service aims to not only give a highly value-added approach to services, but may also prove to be a key step towards the launch of DIY paint projects in India. Amongst its competitors, Asian Paints is the only other firm which has initiated similar steps like its Home Solutions and Color Consultancy services.

• Data analytics can be used to improve forecasting demand at a pan-India level; however, without proper supply chain infrastructure, even data analytics cannot achieve much. Whilst Asian Paints took the lead in installing a technologically advanced centralized supply chain management and ERP system over 1999–2002, Berger implemented a similar technological advancement in its distribution channel in 2012 in collaboration with Oracle.

• New approach in hiring, retaining and incentivizing the sales team:
  Roy has standardized the process for hiring sales personnel across the country to bring consistency in the quality of people being hired. The distribution network has also seen improvement due to these changes.

• Gross margin expansion driven by improved efficiencies around procurement and manufacturing processes: Berger has reported a 450 bps increase in gross margin over FY10–15 despite no major input cost tailwind over this period. This margin expansion has come during a period in which Asian Paints has reported no gross margin improvement.

• As summarized in the firm’s FY14 annual report: ‘This has been possible through improvement in product mix, generating higher volumes with better economies of scale through wider reach and better servicing, reduction of rebates on the back of improved brand equity, and structured and well-monitored measures for reduction in cost.
  The last one includes strong management of working capital, improvement of productivity at all plants, continuous development of alternative raw materials, new sources for raw materials, improved formulations for better quality and lower costs, and innovative procuring and application. A new vendor management system was implemented for the purpose of seamless coordination and quicker decisions.’

What is Berger Paints’s secret sauce? Section 1: Focusing on the Core Business

• The paints industry is a ruthless and complex business. Unlike other fast moving consumer goods (FMCG) industries, the paints business faces unique challenges such as limited scope for product differentiation, low involvement of end customers in deciding which paint product to choose, the voluminous nature of the paint product (in terms of price per unit volume), and the large number of SKUs, given varied paint preferences across geographies in terms of colors, type of paints and size of the SKUs.

• Hence, competitive pressures in the paints industry are high and have resulted in slim trade margins of only 3–6 per cent in the distribution channel for the paints industry as compared to 13–20 per cent for consumer staples categories (like food, beverages, etc.) and 20–30 per cent for most other discretionary consumer categories (like automobiles, durables, leisure, etc.). Higher competitive pressures also result in increased bargaining power of the channel (dealers and painters) as compared to other consumption categories, given their ability to push a particular paint product to the end- consumers.

• In such a tough business, with low margins for distributors, how does one gain leadership? What are the critical success factors to beat competition? I believe there are six of them.

First, a strong supply chain which keeps a company’s inventory costs under control and keeps the dealer happy (with high inventory turnover).

Second, a wide enough product range, and

Third, having products with special characteristics (such as Luxol Silk and Breathe Easy mentioned in the next section).

Fourth, effective marketing initiatives that help create demand amongst customers, especially for premium products. For example, Asian Paints invests heavily on experience centres like Asian Paints Signature stores and Asian Paints Color Ideas stores, which help customers experience the look and feel of products prior to purchase.

Fifth, benefits to dealers, given their important role in selling the final product. Rebates, favorable credit terms, and rewards and gifts like international holidays are some of the most commonly used benefits.

And finally, top-quality management talent.

• If Berger could implement them with such focus, why did Berger’s competitors not emulate Berger? My discussions with paint industry veterans indicate that other than Asian Paints and Berger Paints, the other firms in the paints industry lacked focus, were complacent and refused to learn from their mistakes. Examples include the following:

(a) one competitor started a policy where it would give elongated credit periods to its dealers in order to grow its distribution network. This put severe pressure on the company in the 1980s, impairing its competitive positioning; and
(b) another competitor ventured into unrelated sectors like financial services, weighbridges and hotels. These forays, along with other factors (floods in 1998–99 affecting factories and depots, poor implementation of strategy towards the launch of tinting machines) negatively impacted the company in the 1990s.

• Mistakes made by other larger paint players include: (a) frequent changes to their ownership and management teams which brought discontinuity to the focus on execution at the ground level; and (b) more focus on the industrial side of the paints business rather than its decorative side. Thus, an intense, single-minded focus on the core business is among the key reasons behind both Asian Paints and Berger Paints maintaining their competitive positions in the Indian paints industry.

Section 2: Deepening the competitive moat

Innovation

• Berger’s innovations are on three fronts—how the promoters managed the firm, how the firm introduced innovation in the form of tinting machines for dealers, and how the firm introduced innovative products.

• ‘One of the biggest contributions of the promoters is that they have always given us a lot of freedom and flexibility to operate.’

• Secondly, the introduction of tinting machines: A tinting machine is the same size as a bank’s ATM and is responsible for revolutionary changes in the lives of paints dealers and distributors.

• Thirdly, and finally, on products: Berger has focused on introducing products with special characteristics which have allowed it to create a strong brand recall for such products.

Brands and reputation

• Over the past fifty years, Berger has consistently invested in creating a strong brand recall in all categories of paints from the economy segment to the premium segment.

• Berger has aggressively raised its advertisement spend over the years (from 3 per cent of sales in FY05 to around 5 per cent in FY11). By FY15, Berger’s advertising and promotion spend stood at 6.6 per cent of sales, the highest among competitors, including Asian Paints (5.2 per cent of sales).

Architecture

• Kurien’s successors and the current promoters have supported this approach of hiring and retaining high-quality talent, and providing freedom (alongside accountability) to employees throughout the organizational hierarchy.

• ‘There is freedom to innovate and the freedom to make mistakes. We have a very open culture. Anybody from the field level to the sales manager can walk into my room without appointment and talk to me to either give me information or to ask for my views.’

• The second part of Berger’s architecture is its strong relationships with dealers.

Strategic assets

• A well-positioned manufacturing plant reduces the need to stock surplus inventory at company depots and also reduces the time to supply products to the dealers. Thus, Berger’s manufacturing facilities are its key strategic assets.

Section 3: Controlled Capital Allocation

• Berger’s ROCEs have been consistently between 16 per cent and 28 per cent over the past twenty years. This controlled capital allocation by Berger is a result of Kuldip Dhingra’s view about allocating capital only to businesses in the paints industry, without diluting the firm’s focus on the core domestic decorative business.

• Dhingra is also ready with plans for the future. He says, ‘We bought the biggest specialist exterior insulation finishing systems (EIFS) company in Poland in 2008 where we have a technology-related edge. Although we want to bring it to India at some point of time in future, the right time has not come yet. If I do it now, for a long time I will disturb Berger Paints’ balance sheet. Hence, I will wait for the right time.’

[Deven]

Not sure my post matches theme of topics. If not will delete it.

I like lecture by Linkedin executive at flame university. This is on smart note taking. I liked it very much and will try to implement it for myself and my child.

Financial Literacy 01 | How To Take Smart Notes by Mr. Jana Vembunarayanan

Hope you may like it.

[Southern_Cross]

@phreakv6

The Selfish Gene, Richard Dawkins, 1976 - If you have ever wondered about the origin of life, the reason why we are here and why we do the things we do, and other such seemingly simple but almost unanswerable questions, this book is a must read. You will have new mental models to dissect such things as individual behaviour, group behaviour, things like culture, religion, caste, violence, politics, business and so on.

Just to add further…

The Selfish Gene is an eye opener for me in many topics - Primary motives of a male vs female which are driven by one’s genes, the parent-child conflict, how selfishness drives family planning, survival based on Prisoner’s dilemma etc.
Mr. Dawkins brings up some of life’s never asked questions and also answers them in the most cohesive way explaining theory of evolution with science and logic wherever possible.

Why there is bottlenecking of life cycle for humans?
What makes the worker bees relating to the daughters of queen bee more than their own children?
What would have been the motive for cells to combine into a complex thing like us?
What is the rationale for a bird to give the alarm signaling a predator helping the flock?

Finally, the interesting quote – Money is a formal token of delayed reciprocal altruism.

The last time I felt this thrilled was while reading “The Discovery of India” where my understanding of history has improved significantly. This time, about life in general. - 10/10

[lingalarahul7]

Getting to yes.

Notes:

GettingToYes.pdf (145.6 KB)

Review:

Reread this book after long time.

The main premise of this book is to not bargain over positions, but to understand the parties’ interests, to separate the problem from the people and look at it as problem two parties are trying to solve together.

Understanding interests and separating the problem from the people will help think objectively and invent some new options as the brain thinks from a new reference point

The book also touches some nuances on dirty tricks parties could potentially use, or how people behave while negotiating with friends vs enemies, and also the emotions involved while negotiating…

[Ansh_Gupta]

Summary part #2 of The Unusual Billionaires- covering Marico, Page Industries and Astral Poly (have not summarized Axis Bank and HDFC Bank due to Financial Services being more “opaque” than other businesses like manufacturing)

Marico: From a Commodity Trader to an FMCG Giant

Phase 1: 1972–91 Establishing Parachute and Saffola as Consumer Brands

• When he (Mariwala) joined BOIL, both the brands were doing reasonably well, but remained business-to-business (B2B). Mariwala wanted to switch to a higher-margin, business-to- consumer (B2C) model. He started with small steps such as switching packaging from bulky tin cans of 15 litres to smaller packs of 100 millilitres. He followed this up with seeking professional help in four critical areas: advertising (hired Clarion Advertising agency for the Parachute advertising campaign), marketing (sought advice from renowned professor Labdhi Bhandari of IIM- A), human resources (sought advice from his friend Homi Mulla, HR head at Monsanto) and distribution (recruited Basutkar, a veteran from Hindustan Unilever). Consulting professionals would become a defining trait for Mariwala and a founding principle for Marico.

• By 1991, Marico became the market leader in edible oils commanding about 14 per cent market share. ITC came a close second with a market share of 12 per cent.

Phase 2: 1990–96 Laying the Foundation for a Sustainably Profitable Edifice

• Harsh Mariwala realized that there was no synergy between his B2C and the other BOIL businesses, which were pure B2B.

• Marico pushed dealers to achieve stretch targets and rewarded them with foreign vacations—a first in the FMCG sector at that time.

Phase 3: 1997–2006 David (Marico) vs Goliath (HUL)

• By this time, Marico’s success in Parachute had put the firm on the radar of consumer giant HUL

• HUL started with aggressive advertising and sales promotions for Nihar and Cococare. Parachute responded by increasing distribution and improving the packaging and product quality to avoid any loss of market share. In 1999, Marico also acquired Oil of Malabar and relaunched it with a lower price tag to compete with HUL. After failing to make inroads into the category despite several product relaunches, HUL finally gave up and put Nihar up for sale in 2005. As poetic justice, Marico acquired the brand for Rs 220 crore, giving it more than 80 per cent market share in the perfumed coconut oil category along with stronger geographic presence in the erstwhile weak markets of north and east India.

• Marico introduced several new brands over 2000–05. Not all the new launches were successful. However, these launches helped the company reduce its dependence on its existing portfolio of Parachute coconut oil and Saffola edible oil.

• In 2000, Marico increased its focus on IT and decided to implement the Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) suites from SAP, one of the first FMCG companies in India to implement both the packages.

Phase 4: 2007–12 Pursuing Inorganic Growth

• On the international business front, Marico had become a significant player. In Bangladesh, it had 67 per cent market share of coconut oil. To fuel its ambition of becoming an emerging market FMCG player, Marico made several acquisitions over FY07–13

Phase 5: 2013 onwards Change of Guard and Focus Back on ROCE

• In order to cross-pollinate products and know-how between Marico’s Indian and international businesses, Marico undertook a restructuring of its businesses in January 2013.

• Marico’s domestic and international businesses were merged to create one FMCG business while Kaya was demerged from the FMCG business in order to allow it to run in an entrepreneurial manner as a retail business.

What is Marico’s Secret Sauce? Section 1: Focusing on the Core Business

Since the firm’s incorporation, Marico has consistently focused on three key factors which drive a consumer staples company’s growth rates:
(i) maintaining brand leadership;
(ii) extending winning brands; and
(iii) divesting low-margin brands.

Protecting winning brands and maintaining leadership:

• HUL entered the coconut oil category to take on Marico.

• Marico retaliated by relaunching Parachute:
  (a) with a new packaging;
  (b) with a new tag line highlighting its purity (Shuddhata ki Seal—or the seal of purity);
  © by widening its distribution; and
  (d) by launching an internal sales force initiative.

• This leadership has ensured that when one visits the hair oil section in a retail store, about 80 per cent of the shelves are occupied by Marico-branded hair oil.

Divesting low-margin brands:

• Despite Sweekar’s success, it had low margins. Subsequently, Sweekar was divested in 2011 to Cargill India.

• Marico’s single-minded focus on Saffola has made it the market leader in premium edible oils (FY15 market share of 58 per cent).

Extending winning brands across categories and geographies:

• Marico has chosen its turf carefully for extending its winning brands. Given Parachute’s success, Marico has focused on hair nourishment where it believes it has the ‘right to win’—a term frequently used by Marico employees. Similarly, Marico saw Bangladesh as a right-to-win market since consumer habits in Bangladesh are similar to those in India.

• Marico is the market leader in coconut oil in Bangladesh with a whopping 80 per cent market share.

Section 2: Deepening the competitive moat

Innovation

• Marico has a strong culture of innovation which can be seen in several areas: packaging, products, HR, and finance.

Packaging innovation:

• In the 1980s, in a first in the category, Mariwala innovated with plastic containers, to replace the unwieldy, bulkier tin containers.

• Within fifteen years, 100 per cent of the market changed to plastic packaging.’ The savings generated from the low-cost plastic packaging were invested by Marico into higher advertising and publicity spends to drive market share gains.

Product innovation:

• It follows the concept of strategic funding where a portion (around 10 per cent) of the annual profits is invested in pursuing product innovation.

• Seeing the growing trend of light hair oils in the 1990s, Marico innovated and launched Hair & Care, Parachute Jasmine and Shanti Amla. Each of these brands is at least Rs 200 crore in size and has helped Marico become the market leader in value-added hair oils, ahead of other credible manufacturers such as Dabur, Emami and Bajaj Corp.

Financial innovations:

• Despite having strong brands, Marico was still perceived as a commodity company, given its vulnerability to copra—a key raw material whose prices were cyclical in nature.

Brands/Reputation

• In FY15, Parachute had sales of more than Rs 2,000 crore and controlled more than 55 per cent of the coconut oil market.

• Saffola’s FY15 sales were Rs 880 crore, with the brand controlling 58 per cent market share in the premium edible oils market and more than 65 per cent of the flavoured oats market.

Section 3: Controlled capital allocation

• FMCG companies are well known for their high ROCE due to:
  (a) Low capital intensity: Manufacturing of FMCG products isn’t capital-intensive and can be outsourced. This result in high asset turnovers—typically, one rupee of fixed asset investment results in four rupees of sales.
  (b) Low working capital requirement: Most FMCG companies have negative working capital as their creditors exceed debtors.
  © High operating profit margins: Market-leading brands command a price premium which results in higher margins.

• An FMCG company receives money from sales quickly, while it has to pay for its raw materials over a long period of time. This is called a negative working capital (or, in financial analysis terms, when creditors exceed debtors) and this means that an FMCG company’s cash balance remains high (hence the cash-generative nature of operations).

Page Industries: Jockeying from Manila to Bengaluru

Phase 1: 1959–92 Establishing Jockey’s leadership in the Philippines

Phase 2: 1993–97 Jockey re-enters India through Page

• He named the Indian company Page after the initials of his mother, Parpati Genomal.

• On the distribution front, unlike competitors like Liberty, Rupa and VIP, which had set up wholesale-driven distribution networks, Page expanded solely through individual distributors.

• The early 1990s was a good time to set up a consumer brand in India. In the first few years, post-liberalization, consumer confidence and aspirations were high. Coke launched in 1993 and slugged it out with Pepsi. New private airlines were being launched (Jet Airways in 1993) as were new private sector banks (HDFC Bank in 1994). In 1994, Sushmita Sen won the Miss Universe crown, soon followed by Aishwarya Rai wining the Miss World title—an achievement celebrated in India almost like a cricket World Cup victory. On 15 August 1995, Videsh Sanchar Nigam Limited (VSNL) launched Internet services, only a few weeks after the first mobile telephone call had been placed. Thus, change was in the air when Page launched the Jockey brand of men’s innerwear in November 1995, coincidentally a month after the release of the Bollywood blockbuster, Dilwale Dulhania Le Jayenge.

• Genomal’s vision was bold. He set Page’s mission statement: ‘To be the brand of choice for innerwear and leisurewear in our target market’.

Phase 3: 1997–2003 Gearing up for competition

Phase 4: 2004–15 Beating the competition

• The biggest testimony of the strength of the relationship between Jockey USA and Page is the fact that in 2010, Jockey extended their licensing agreement with Page for a twenty-year period, instead of the standard practice of five years. Moreover, in the new agreement, the UAE was added as a new territory of exclusive licence and, in 2011, Page made its first shipment to the UAE.

• Genomals added another brand to Page when they signed a licence and distribution agreement with swimwear brand Speedo for an exclusive right to manufacture and distribute Speedo products in India.

What is Page Industries’ secret sauce? Focusing on the core business

• Four generations of the Genomal family have run the business and have no intention of diverting their attention to anything else.

• Page’s business model generates large amounts of cash, given its FMCG-like nature of business—sales are paid for in advance, while raw material supplies are paid over a period of time. Page has established significant dominance in the mid-to-premium innerwear segment. Sustaining this dominant position has taken focused attention from the promoters given that, unlike FMCG companies, Page has a highly labour-intensive business model, and that customer loyalty is a function of product quality. Any shift in focus would have put both these factors—labour and customer loyalty—at threat. Therefore, the fact that Page’s promoters stuck to innerwear and associated categories like leisurewear, and with Jockey as the only brand, is a significant driver of their consistent performance over the past two decades.

• Page’s executive director (finance) told me, ‘The promoters historically know Jockey and Speedo in and out and understand the intricacies of the business, and that is one of the reasons why competitors have not succeeded against Page.’ Indeed, a testimony to Page’s dedication to Jockey is the fact that it handled labour relations better than its competitors did; TTK and Associated Apparels were left behind due to labour-related problems.

Deepening its competitive moats

• It has mastered manufacturing processes and used operational efficiencies and R&D to help it produce a high- quality product. It built a very strong front end, with innovative marketing, retail and distribution.

Innovation

• Page has been ahead of its competition with regard to the pace of new launches (at least one new product range every year in each of its categories), the quality of products as well as innovations in these products. The licence agreement with Jockey ensures that Page has access to Jockey’s innovations.

• Page’s management has highlighted that at any given time, at least 110 SKUs are on the shelf with the R&D team to help deliver ‘fresh and good’ products to consumers. This keeps distributor loyalty alive since not only does Page launch new products, it also removes products that don’t work. Distributor feedback is heard and acted upon.

• Page has also leveraged off the customer loyalty that it has built with its premium products. After establishing itself in men’s innerwear, it moved to the women’s innerwear category (in 2005), followed by expansion into leisurewear in 2009.

• Page has also been innovative in many aspects of labour/workforce management. For instance, more than ten years ago, Page pioneered the practice of offering free lunch to its workers. This practice subsequently became popular in the garment-manufacturing industry. This, along with several other initiatives highlighted in the sections below, has helped Page manage scalability of a labour-intensive manufacturing process without disruptions related to labour unrest over the past twenty years.

• Page has employed another unique strategy. It makes its own elastic, compared to the industry practice of outsourcing this from small cottage industries. Over the years, Page has steadily expanded these elastic manufacturing capacities

Brand

• Loss of aspirational value is a big risk for any brand. This is because the definition of aspirational consumption in every category changes over time, and hence, the brand recall of leaders needs to evolve accordingly in terms of price points, type and mode of branding initiatives, and product characteristics. How has Page beaten its peers in this regard? Part of Page’s success arises from consistently spending around 5 per cent of its revenues on advertising. More importantly, Page’s approach towards advertising and brand building has been unique compared to peers in two key aspects:

Nature of advertising/media initiatives:

• Page’s approach towards advertising has been unique on several fronts. Firstly, its advertising campaigns have consistently been high-impact affairs like Just Jockeying in FY10–14 and Jockey or Nothing launched in FY15.

• Secondly, Page has placed significant emphasis on in-store advertising to the extent that in most Multi-brand Outlets (MBOs), Jockey’s advertisements cover the bulk of in-store advertising space.

• Thirdly, in a neat play on Indians’ world view, Page has made consistent use of Caucasian models in its advertisements and thus firmly entrenched its brand recall as an international brand. This unique approach in advertising has helped Jockey emerge as the sole aspirational brand in the mid-premium innerwear segment.

• Maintaining pricing discipline across India through the year: Page refuses to offer any discounts on its products. In a country obsessed with discounts, deals and offers, this obstinacy is unique. In my discussions with Page as well as with Jockey dealers, I found that there are no end-of-season sales in any Jockey store. As a policy, retailers and MBOs do not even offer on-the-spot discounts to persistent customers

• As a result, the management believes that at least 90 per cent of annual sales from retailers to the customers are carried out at MRP consistently every year. Unsuccessful SKUs/unsold products in the firm’s inventory are sold at a flat 40 per cent discount through seconds sales twice each year.

Architecture

• The owner of a chain of six EBOs of Jockey in Bengaluru told us, ‘Quality of product and supply chain management are the two strongest aspects of Jockey compared to its peers. When you order Jockey’s product, it comes within two days. Other brands outsource manufacturing. If you have outsourced factories, there is no confirmed timeline to make product delivery at stores.’

• As I learnt later, women account for as high as 88 per cent of Page’s labour force. The primary benefit of this is reduced probability of labour unrest as compared to a male-dominated workforce.

• There are a number of welfare officers in their factories whose job is to make sure that workers are not unhappy about their working conditions. Page also provides various benefits and facilities to their workers like good- quality free food in the factory canteen, transportation for shift workers, crèche for children of workers, proper sanitation and health centres in the factories. Page has also employed qualified doctors and nurses who provide free medical aid to the workers. The company also provides medicines free of cost to their workers, a unique feature compared to many other textile manufacturing set-ups.

Strategic asset

• Genomal’s relation with Jockey International, USA, is Page’s biggest strategic asset.

• Accessing Jockey’s innovations in the US and bringing them to a steadily growing market like India is a formula that has worked since 1995 for Page, and should continue in the foreseeable future.

Capital allocation

• ‘At Page, we are very careful about our capital allocation and will not invest in projects which are not directly related to the core business. Even core projects will not be taken up unless they promise an ROCE of at least 20 per cent.’

• A high dividend payout ratio—anything above 50 per cent, as in the case of Page—indicates that the company has sufficient funds for its operations and is confident enough in paying out surplus funds to shareholders. Page’s internal accruals account for more than 75 per cent of funds generated in the past decade, with the remaining being external borrowings and IPO proceeds.

Astral Poly: To the Brink and Back

Phase 1: 1997–2003 To the Brink of Bankruptcy

• Sandeep Engineer’s fascination with CPVC began in the mid-1990s. During this period, in the construction and plumbing industry, pipes were still made of iron and copper. Engineer saw that corrosion was a major problem with galvanized pipes and India was materially behind the evolution curve in the use of plastics for pipes.

• In the United States, CPVC was the new anti-corrosion solution for plastic pipes, which was swiftly replacing metal (iron and copper) pipes in industrial applications. CPVC was also a superior product compared to PVC because of higher ductile strength, which gave it the ability to handle hot water up to 200 degrees Fahrenheit (93° Celsius) (PVC can handle hot water only up to 140 degrees Fahrenheit [60° Celsius]).

• B.F. Goodrich (now known as Lubrizol) held the patent for CPVC resin technology, and Engineer decided to tie up with them to bring CPVC to India.

• Astral began its CPVC journey by launching industrial pipes (Corzan) in 1999. In those days, GI pipes were used for fluid transportation and were prone to scale (blockage due to water impurities), pit (pinhole leaks) and corrosion. At a time when the biggest players in steel pipes were giants such as Tata Steel and Jindal Steel, and plastic pipe segment was dominated by Supreme Industries, Astral chose a product that was 20 per cent costlier than metal pipes. Engineer was aware of the scepticism and scorn.

• Despite selling the pipes at a loss, Astral’s CPVC products flopped. GI pipes were so well entrenched in India that no one wanted to switch to an expensive product.

• By the end of 2003, Astral was staring at imminent bankruptcy.

Phase 2: 2003–06 The Building Blocks

• He simply could not compete with established industrial pipes players like Tata Steel and Jindal Steel. So, on B.F. Goodrich’s recommendation, he shifted his focus to selling CPVC pipes used for plumbing. He had his job cut out for him: first, he had to convince prospective clients to shift from metal pipes to CPVC; second, he had to convince dealers and distributors to stock his products alongside those of his competitors.

• As was the case with industrial pipes, Engineer realized that the dealers refused to pay a premium for CPVC despite its benefits over conventional GI or PVC pipes. This premium was thus the main entry barrier in the retail segment. Engineer then priced CPVC pipes on a par with GI pipes. He made a loss in the process but recovered this with the sale of CPVC fittings at a premium, since customers were not aware of the price of fittings.

• Unlike other pipe manufacturers who ignored plumbers, Engineer saw that the plumber was the influencer and decision maker and hence the most important person in the value chain.

• Astral became profitable in FY03 and invested significant sums on advertisements

Phase 3: 2007–15 Building Scale and Pan-India Brand Recall

• However, this last phase was not without mistakes. The first mistake was an ill-thought-of overseas foray. Astral ventured into Kenya in FY08, initially through exports and then by setting up a manufacturing capacity in the country through acquiring a 26 per cent stake in a JV (with Ramco group of Kenya), Astral Technologies Limited. Whilst capital employment in this expansion was insignificant (less than 1 per cent of its capital employed) and no active management was required from Astral, global expansion is a less-than-ideal step by a small-scale company as it reduces management bandwidth. The second mistake was not hedging its currency exposure on its CPVC resin imports from the United States, leaving the company vulnerable to a sharp depreciation in the Indian rupee, compared to the US dollar.

What is Astral’s secret sauce? Relentless Focus on Seemingly Simple Things

• Deepening the competitive moats

Innovation

• Instead of copying foreign technologies, Engineer forged technical partnerships with global majors to launch innovative products in India.

• Astral has consistently launched new products through partnerships with global majors

• Astral’s innovation in processes continues with increased adoption of automation; recently, it installed robotic truck-filling machines to reduce loading time by more than half (from two hours to thirty minutes), thereby reducing the probability of work disruption.

• Astral was also the first company in India to train plumbers, and that too on a scale which was unheard of— 10,000 plumbers during 2005–08.

• Astral was also the first Indian company to start barcoding on pipes to prevent counterfeits. The company also innovated in its branding.

Brands and reputation

Architecture

• During training sessions, Engineer would tell plumbers not to see themselves as plumbers, but as doctors who treat the big problem of leaking pipes in homes.

• From the promoter to the watchman, all employees at Astral wear the company’s uniform of a light-blue shirt with the Astral logo on the shirt pocket.

Strategic assets

• Astral’s manufacturing facilities, well-entrenched network of distributors, and reputation with plumbers provide a strong entry barrier against any new player who wants to sell CPVC pipes.

• Astral’s second strategic asset is its relations with global majors. Lubrizol, a company owned by Warren Buffett, is the pioneer of the CPVC compound globally. Astral is one of the two manufacturers (Ashirvad being the second) in India with access to CPVC technology from Lubrizol. The company’s tie-up with Lubrizol enables it to produce best-in-class CPVC pipes and also launch new products ahead of competition.

Capital allocation

• With the CPVC business still going strong, Engineer’s entry into adhesives holds promise since it will leverage on his distributor network and client relations. Astral is now a popular brand with real-estate developers and plumbers alike.

CHAPTER 9 Greatness Is Not Everyone’s Cup of Tea

My case studies and discussions with observers of the Indian business landscape over the past five years have led me to conclude that three factors are central to building a truly great company.

Firstly, the management team has to have an obsessive focus on the core franchise instead of being distracted by short-term gambles outside the core segment.

Secondly, the company has to relentlessly deepen its competitive moats over the course of time (I’m talking about decades here).

And thirdly, the people calling the shots at the company have to be sensible about capital allocation, i.e. refrain from large bets (especially those outside core franchise) and return excess cash to shareholders if the cash cannot be deployed to good effect by the company.

In the FMCG trade, it is routine for salespeople to aggressively push the company’s products into the dealers’ inventory. Marico does not do this. Instead, it has moved to an auto-replenishment, demand-driven model wherein the company sends fresh supplies to the dealer once the dealer’s inventory has been depleted. This helps in matching demand with supply. One could argue that dumping more products with dealers and retailers would mean greater visibility resulting in sales. Indeed, this could be a potential benefit, but if demand for any product is low, retailers remove products from their shelf and carry them as inventory and as inventory rises, a manufacturer’s sales will fall because the dealer/retailer already has sufficient inventory. By using an auto- replenishment model, Marico matches demand and supply more accurately.

As Bandyopadhyay says in his book: ‘In many segments, HDFC Bank learns patiently from the experiences of others before it steps into a new business, whereas ICICI Bank loves playing the pioneer. ICICI Bank is volatile; HDFC shares are range-bound. The same applies to earnings. ICICI Bank is often unpredictable, both surprisingly and shockingly. HDFC Bank is monotonously predictable on most financial parameters.’

“Why will we be better at doing that than other people?” will have a clear and affirmative answer, and it is typically those firms that can give that answer and act on it that are successful.’

Failure to create and sustain moats using technology will result in loss of market share to industry leaders and, eventually, severe losses in the core business. As an example of this crippling loss, I reproduce a quote from Captain Gopinath, founder of Air Deccan, which was eventually sold to Kingfisher Airlines in spite of being the pioneering low-cost carrier (LCC) in India. In his book, Simply Fly (2012), Gopinath laments: ‘Given a little more time, Deccan could have weathered the storm and overcome the cash crunch but time was running out. I might have pulled it off had my IT system not collapsed. We had to bear in mind the welfare of four thousand employees; the public insurance funds and retail investors we had to answer to.’

CHAPTER 10 A Checklist for Long-term Investors

Car ownership in India is at around sixteen per thousand compared to Brazil which is at around 120 per thousand. In contrast, mobile telephones, for example, have reached near-full penetration in India.

Personal care products such as soaps, hairoils are amongst sectors with high penetration . . .

ACs, cigarettes and cars on the other hand have low penetration

The two-wheeler penetration in India is somewhere close to 9 per cent.
Developed countries have a much lower two-wheeler penetration level as compared to developing countries. In developed markets such as the USA, Japan and Germany, two-wheeler penetration levels are lower at 3–9 per cent. On the other hand, in developing countries, the two-wheeler penetration levels are higher, particularly in China and the East Asian countries like Indonesia (26 per cent), Vietnam (32 per cent) and Thailand (29 per cent). Plotting this on a chart shows that as a Third World country gets richer, two-wheeler penetration steadily increases. That, in turn, suggests that India’s two-wheeler penetration should continue to rise for some time to come.

APPENDIX 1 John Kay’s IBAS Framework

‘No formula in finance tells you that the moat is twenty-eight feet wide and sixteen feet deep. That’s what drives the academics crazy. They can compute standard deviations and betas, but they can’t understand moats. Maybe I’m being too hard on the academics.’ —Warren Buffett

In his 1993 book, Foundations of Corporate Success, Kay states that ‘sustainable competitive advantage is what helps a firm ensure that the value that it adds cannot be competed away by its rivals’. He goes on to state that sustainable competitive advantages can come from two sources: distinctive capabilities or strategic assets.

Whilst strategic assets can be in the form of intellectual property (patents and proprietary know-how), legal rights (licences and concessions) or a natural monopoly, the distinctive capabilities are more intangible in nature. Distinctive capabilities, says Kay, are those 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 additions than its competitors.

Perhaps the most striking demonstration of architecture (Architecture is a system of relationships within the firm, or between the firm and its suppliers and customers, or both) in India is the unlisted non-profit agricultural cooperative, the Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), better known to millions of Indians as Amul.

This farmers’ cooperative generated revenues of Rs 20,700 crore (around US$3.1 billion) in FY15, thus making it significantly larger than its main private sector competitor, Nestle (CY15 revenues of Rs 8175 crore or around US$1.2 billion). Furthermore, GCMMF’s revenues have grown over the past five years by 16 per cent as opposed to Nestle’s 5 per cent over the same period.

GCMMF’s daily milk procurement of thirteen million litres from over 16,000 village milk cooperative societies (which include 3.2 million milk producer members) has become legendary. The way GCMMF aggregates the milk produced by over three million families into the village cooperative dairy, further aggregates that into the district cooperative and then feeds the milk federation has been studied by numerous management experts.

The following appear to be the dominant factors at the core of this cooperative’s success:
(a) its fifty-year-old brand with its distinctive imagery of the little girl in the red polka-dotted dress;
(b) the idea of a fair deal for the small farmer and the linked idea of the disintermediation of the unfair middleman; and
© the spirit of Indian nationalism in an industry dominated by globe-girdling for-profit corporates.

[Deven]

Just read Buy Bulls, Bears and Other Beasts: A Story of the Indian Stock Market by Santosh Nair.

Thanks @phreakv6 and @shreys. Their post in same thread has more details.

The books seems much underrated. As per my opinion its must (must) read for any serious investor.

More details are there in phreakv6 analysis.

The book provides comprehensive journey of 25 years of Indian stock market. It’s more relevant in today’s time. I got some of answers like FII flow, high ipo craze, Limitation of analyst and how high profile investors gone wrong etc. It illustrate sensational events, wrong doing and its effects on stock market etc. .

Highly recommend for all.

[Adhiraj]

Mans Search for Meaning - Viktor Frankl

Victor Frankl was an unlucky individual present at the wrong place at the wrong time. Yet, if he was not unlucky, this brilliant book would have never existed.
Almost everyone knows the atrocities faced by the Jews during the Second World War but as an outsider, can one ever understand or empathize with the experience of an inmate who lived there for a long time? I guess not and neither would we want to. Viktor Frankl, the author of this book was subject to high levels of inhumane treatment in a couple of concentration camps including Auschwitz for absolutely no fault of his. He was robbed of his freedom. He was starved, degraded, humiliated, tortured, and made to work in extreme conditions for long hours without proper clothes and inadequate food which was enough to only barely keep you alive, only barely. Neither was he aware whether his loved ones were alive or gassed to death.

The book can be divided into two parts. The first is his short autobiographical memoir about his experiences in the concentration camp. The second part involves an insight into his unique approach ‘Logotherapy’. The book is his account of his attempt to find meaning in his life through his suffering.

Concentration camps

The author narrates his journey from being a doctor to being just a number in the concentration camp in the initial part of the book. Starting from the terror upon seeing the signboard of ‘Auschwitz’ on the train route and the collective’ delusion of reprieve’ among the prisoners wishing they would be reprieved at the last minute, he narrates the journey where he lived on bare minimum food while sleeping and working under extremely cold and tough conditions where a little show of weakness and fragility would have made him qualify as ‘unfit’ whereupon he would have been gassed to death quickly. He escapes death a couple of times just out of sheer luck. He does everything to bolster his odds of surviving including making friends with a ‘Capo’, working as a Doctor for treating patients, and trying to escape a couple of times unsuccessfully. He also tries to have a sense of humor and regularly imagines his loved ones with him to keep his mental sanity. Suffering became a part of his life in an environment where the majority of the inmates had accepted that it was their fate to suffer. It was probably the better approach to take mentally to survive there.
Despite the lack of morality and justice about the treatment they were getting, the author states that many inmates including himself maintained their moral compass and empathy. He further states that man has control over his behavior and is not a product of his environment and biology and thinking otherwise can be quite destructive. He further argues that true strength of character is seen in these tough situations and they were the rare opportunities to develop. He also talks about various other psychotherapy stuff such as ‘Paradoxical Intention’, ‘Existential Vacuum’ and an interesting story of fate called ‘Death in Tehran’.

Meaning and Logotherapy

The chances of surviving those concentration camps were in low single digits (1 in 28 exactly). Most of the inmates did not expect to survive the horror-show that endured upon them. So, rarely would anyone try to commit suicide by running into the electric barbed fence as most were aware of their slim chances of survival. Seeing the hopelessness of the situation at one end and extreme suffering at the other, it is pretty easy to lose any enthusiasm or hope for life. Yet the author writes that the major difference between those who survived and those who did not was having a sense of meaning. Suffering becomes so much more bearable if it has some meaning.

‘He who has a why to live can bear almost any how’ – Fredrick Nietzsche

This quote appears quite a few times in this book.

Having a meaning to his suffering was what helped Viktor Frankl survive. As he noted, inmates who lost out on having any meaning did not survive. For they did not have a ‘why’, they did not survive ‘any how’.
It is absolutely destructive to have the nihilist approach of believing meaninglessness of life to be true and thinking it is brave to embrace meaninglessness of life head-on whereas believing that having a purpose or meaning in life is an escapist psychological trick. On the contrary, ‘meaning’ is what makes life worth living even if it is invented and temporary. It is what makes humans resilient to suffering, it is what helps us achieve our maximum potential and it is what makes us survive and accomplish things that were seemingly improbable.
Having a ‘meaning’ is really much more effective to live a good life and more importantly survive tough times.

Final Word
This is a brilliantly written book that doesn’t take much of your time. The autobiographical part of the book is haunting at times but gives a glimpse of the life in the dreaded camps and the different approaches used to survive the camps, both physically and mentally.
It makes the case for the importance of having meaning in our lives (aka ‘Logotherapy’) while also arguing that suffering, even though not desirable and necessary can be a great source of learning and meaning in our lives.
9/10

[Adhiraj]

The Little Book of Valuation - Aswath Damodaran

I read this book at a really interesting time. In a market that has supposedly forgotten the word ‘valuations’, I think this book is a good read as a reminder for investors like me in a market where it seems that the majority of the crowd has come to a consensus that ‘valuations don’t matter. So, here is a refreshing little book on the art of valuation. Aswath Damodaran has written this book with utmost simplicity such that it’s extremely easy to understand.
Valuations can be a tricky area for investors. Rarely do investors come to a consensus regarding the valuation of a stock. And that is what makes the market. Different perspectives and expectations often fuel different narratives regarding a business or a stock. So, Valuations are often estimations that often change with time as the future is many times uncertain and unpredictable.
Valuations are also extremely prone to incentives and biases. One thing I have learned about valuations over the years is that investors can easily manufacture any well-sounding explanation to justify whether low or extremely high valuations.

My two most important insights from this book are:

1. The most important factors in the valuation of a firm are its ability to generate cash flows in the future and the uncertainty regarding those cash flows. Firms with the ability to generate higher cash flows in the future will be valued more highly, as is the nature of the market to value growth companies at higher multiples.
   The firms can be intrinsically or relatively.
   The most common method to assess the intrinsic value of an asset is Discounted Cash flow (DCF) analysis where the sum of all cash flows in the lifetime of the company are estimated and summed up and discounted back to the present day.
   Relative valuations are influenced by the way similar assets are priced.
   So, this book briefly explains how the cost of capital, growth rates, and cash flows can be estimated to calculate the intrinsic value of a firm. And all these calculations are subject to various assumptions. So, they are great tools to use but one should also be aware of their shortcomings and limitations.

2. The second takeaway from the book is that one should not use the same hammer to value different types of companies.
   This is a very common error most investors make. This book analyses companies in different sectors and different stages of their lifecycle. It’s probably not wise to value a loss-making company that is yet to exploit its market potential the same way one would analyze a multi-billion-dollar giant. There is no one size that fits all. So, growth companies should be subject to different valuation metrics than mature and stable firms. As Charlie Munger states, ‘there should be different checklists for different type of companies.
   Similarly, it’s also not wise to compare the valuations of companies in different industries with similar valuation metrics. For example, A financial services company is exposed to more risk than an IT/Internet company. Banks can blow upon an entire century of profits in a quarter due to bad lending practices. Such extreme losses are rarely possible in most other types of businesses. All Businesses are exposed to their own unique industry-specific risk, thus they should be valued accordingly. And this is what makes investing extremely exciting as every investment opportunity can be viewed from multiple perspectives.

This book wonderfully gives a brief overview and some good perspectives over different ways to view a cyclical, growth, mature, declining, loss-making, leveraged, and commodity firms. I could have written a lot more, but the book has done a good job of explaining most concepts.
As it can be made out from the title, this is a little book that doesn’t take much of your time. It is a great crash course for someone who wants to understand the art of valuations and factors that influence valuations. But everything written should probably be not taken too literally as investing and the business world is far more uncertain than most people imagine and the points stated are just nice perspectives to have at your disposal.

8/10