Shekhar Kapur

I had the good fortune of meeting up with one of India’s finest film producer and director – Shekhar Kapur. Shekhar had come to my alma mater school – Kellogg School of Mgmt for an “India Day” event. While the other speakers were buoyant about India’s progress, Shekhar (while bullish) warned the audience that unless systemic issues like infrastructure, growing divide between the rich and poor, etc are not solved – sustaining progress would be tough.

During my chat with Shekhar he mentioned his latest project – Paani (which means water in Hindi). Paani (which is in the process of being made) is set in 2025 in a city polarised by water scarcity, a world divided into the haves and have-nots – those who have water and those who do not. Shekhar thinks that the next wars will be fought over water and not oil. As Global warming takes place, water will become the scarcest resource. Millions will die of thirst and countries will go to war to colonize the water resources – he indicated. People who know about the water challenges in India would understand the context.

The film is set in Mumbai. I am looking forward to the completion of this film by Shekhar. Visit Shekhar's blog on Paani to learn more about this.
http://www.shekharkapur.com/blog/archives/my_films/paani/

Floriculture firm - Karuturi Global

My brother (Sanal Kumar) recently took over as Chief Strategy Officer and General Manager at a floriculture company - Karuturi Global. Their main product line is cut roses. Their annual revenues are upwards of $100M USD and have interests in India, Kenya, Ethiopia and Holland. They acquired the Dutch owned Sher Agencies in Kenya for $43M Euro in Sep 2007.

Karuturi is a flower grower. They have plans to acquire a distribution company in Europe (to operate within the European market). Additionally, they are also looking at acquiring companies that have a production base in Latin America (Equador, Columbia) to serve the North American distributors.

Karuturi is listed in the Bombay Stock Exchange (ticker symbol KARUTNET). Over the last 2 years the stock has appreciated 5 times (400%) from Rs 100 to Rs 500 (1:1 bonus and a 1:10 split with the current price at Rs 25).

He is looking forward to raising $175 M USD for their expansion plans.

Wayne Huizenga - the absolute deal maker

I just finished the audio version of the book – “The Making of a Blockbuster: How Wayne Huizenga Built a Sports and Entertainment Empire from Trash, Grit, and Videotape”. It is the story of Wayne Huizenga – probably the only person in history to have built 3 Fortune 1000 companies from scratch – Waste Management, Blockbuster and AutoNation. He also owns the Miami Dolphins and is the past owner of the Florida Marlins baseball team and the Panthers hockey team.

The book takes us thru Wayne’s journey of building Waste Management from a one-man shop to a mega empire thru tons of acquisitions. It showcases Wayne as a master deal maker. Wayne held fast to two rules: Don't loose a deal because you're not paying attention to it and never talk about it until it is done and in writing". Wayne is the ultimate deal maker, and the book demonstrates how he reached the highest levels of business success through intense hard work, and single minded determination and drive.

It also takes the reader thru Wayne’s intense negotiations with Sumner Redstone of Viacom. His passion was the service business. Blockbuster employees nicknamed him “Toilet Man” since he always used to inspect the bathrooms as he visited stores – if the bathrooms were not clean, it meant lack of attention or care for the customer.

It is a wonderful book that showcases the grit, determination and passion of a deal maker and a true business leader. Wayne is now 70 years old.

How does the Fed pump money into the economy?

We hear on CNBC and read in financial journals that the “Fed is pumping money into the economy”. What does this mean? Does it mean the Fed works overtime and prints lot of currency? No, it does not work that way.

The Federal Reserve (Fed) has 3 methods to influence its monetary policy
i) Raise/Lower short-term interest rates
ii) Raise/Lower the amount of reserves that banks are required to hold
iii) Open Market Transactions

Short-term Interest Rates
When the economy is softening (current state), a rate cut improves things – since it makes things cheaper. On the other hand, if the economy is too strong, an interest rate cut slows down the economy.

Reserves
If the Fed asks banks to raise their reserves, it means banks need to hold on to more money which in turn reduces the money supply and thus tightens credit. When the Fed asks banks to lower their reserves, there is more money that the banks can lend.

Open Market Transactions
Open market transactions are measures by which the Fed controls the money supply by buying and selling government securities, or other financial instruments. Of the three, Open Market transactions have the most immediate effect on the economy. If the Fed wants to squeeze money from the system, it sells bonds from its account. This deducts the amount from the dealer (bank) thus draining money from the system. On the other hand, if the Fed wants to “pump money into the economy”, it will buy bonds and pay the bank that sold them. This money then flows thru the system and that is how the Fed increases money supply.

The Fed has been buying a ton of subprime mortgage bonds (since there were virtually no buyers for it) in light of the subprime crisis.

Confessions of a Wall Street Analyst

I just read the book “Confessions of a Wall Street Analyst” by Dan Reingold. Dan was the superstar telecom analyst on Wall Street in the 1990’s. He tracks the “unplanned” journey from MCI to becoming a star analyst on Wall Street. Dan takes us thru the fast-paced life of an analyst traveling across the globe and responding to investors/customers around the clock with no respite. It takes us inside the firms like – Morgan Stanley, Merrill Lynch, and Credit Suisse First Bank.

He describes the (shady) dealings of Global Crossing and WorldCom – the failed telecom companies. The book focuses on his intense rivalry and fight with arch nemesis – security analyst Jack Grubman. It outlines their competition to get on top of the list of the “Institutional Investor” – which is considered the bible for rating Wall Street analysts. Jack was eventually banned for life from the securities industry.

It is a good read – albeit you get to hear just Dan’s side of the story. Will Jack write a book outlining his side of the story? We will have to wait and see.

Cutthroat competition

I just read “The Running of the Bulls – Inside the cutthroat race from Wharton to Wall Street”. It is a fascinating book by Nicole Ridgway (now Senior Editor of SmartMoney) – that describes the life of an undergraduate at Wharton (arguably the best undergrad program in the US for finance). It outlines the intense competition, drive and hunger of the students in their 4 years at the school. The book takes us through the experiences of 6 students – as they go thru brutal interviews for the 10 week summer internship. Students work 100-120 hours seven days a week at firms like Goldman Sachs, Lazard Feres, Citigroup, McKinsey, General Mills, etc – just to keep up. The author then takes us into the interview process (case studies, quantitative technical questions, situational interviews, etc) with the jobs they land after graduation.

The author has selected the 6 students with enough diversity that their stories do not seem monotonous. One of them is Shreevar Kheruka (whose family owns Borosil group) - from my hometown, Bombay. It is an easy read that is sure to take you back to your school/college days.

The book also mentions Kellogg alum and the superstar of Lazard Feres - Gary Parr (Deputy Chairman). It outlines Gary mentoring one of the 6 students. Gary helped broker the $58 billion transaction that merged JP Morgan Chase with Bank One.

What does a Chief Strategy Officer do?

Recently, my friend Rohit Shyam joined Accelrys as their Chief Strategy Officer (CSO). This is a newer C-level title that is catching up in many companies. Traditionally, the CEO is responsible for strategy and company direction while the COO is in charge of operations. So, what does the CSO do?

From the title, one would think that the CSO is responsible for formulating strategy. That would be a very incomplete and misleading definition. In a recent issue of the Harvard Business Review, authors R. Timothy S. Breene, Paul F. Nunes, Walter E. Shill outline the CSO role in greater detail. For starters, the CSO role is not just a “(strategy) thinking” job. In fact execution is an integral part of this role. Typically, the CEO is bogged down by the ever growing complexity of the global business environment – political, regulatory, economic, shareholder and other stakeholder challenges. Add to that the pressure to deliver results at an ever increasing pace. Clearly, with all this pressure, it becomes tough for a CEO to ensure strategy refinement and execution.

That is the reason more and more CEO’s are hiring CSO’s – to help them with refinement and execution of strategy. The CSO typically reports to the CEO. The CSO is tasked with creating, communicating, executing, and sustaining a company's strategic initiatives. The CSO is not just a thinking/dreaming strategist; in fact they consider themselves as doers.

They help set and refine the strategy. Furthermore, they ensure that different departments/organizations within the company understand their role in the strategic plan and how it connects with the overall objectives. They also drive change across the company – to ensure the different arms of the organization march in tandem. Finally, the CSO validates the decisions made by the various departments to ensure alignment with company strategy. CSO’s help steer the top team away from groupthink and from focusing too much on past practices and accomplishments.

CSO’s are seasoned executives who have held P&L responsibilities and have had significant operational experience. Most importantly, a good CSO candidate should be: deeply trusted by the CEO, a master of multitasking and a jack of all trades, a star player, and a doer, not just a thinker. The CSO role is an apt successor to the CEO – since they get involved in almost all parts of the business. Having a CSO is no longer a luxury for a CEO – it is becoming mandatory to have a strong CSO in order for CEO’s to perform their job well. The COO role does not go away. They are still critical but their focus is on day-to-day tactics and operations.

I am very thankful to Rohit for clarifying the role of the CSO. I wish him only the very best in this new venture.