The story behind my book "Understanding Firms"

From tomorrow my book "Understanding Firms - A Manager's Model of the Firm" is available free for kindle users (Saturday 17th to 19th) for three days. So I thought let me share the story behind this book.

In my initial days, I was ready to work on any types of projects. I worked in warehouses, factory floors, maintenance shops etc. I was ready to take risks, but my supervisors were not. I found this to be one ridiculous problem. A person who was ready to work on diverse roles, who admittedly had done great work was not allowed to work. Initially I thought may be I did not do good work and supervisors were just being polite. But I realized that was not the case. Sadly, I realized this after I left the company and some of them told be the real reasons.

Then, I have agonized over loosing people who were such spectacular talents that losing them should be criminal. Yet, the company I worked for could not find a way to monetize the talent we had. Nor could they simply block this talent from leaving by paying them their worth. Watching them go to other companies was horrible experience.

I have lost many customers who were ready to take risk with us so that we could develop new products at their expense fully aware of the risks involved. But my firm backed out from such promising opportunities. It happened so many times that I became jaded and moved to other team. 

Then, my experience with cost managers is no less spectacular. I have seen managers approve of TV commercials scheduled at the time when the target audience was away at work on their farms far away from TV. At the same time, travel budgets were hard to come by for my team. I have seen cab bills being questions while the company was splurging on parties to build team spirit. I wanted to tell the bosses, if you don't trust your employees you are not going build team spirit by mandatory partying.

I know one firm was paying $1000 to shift desk three feet apart when all you needed to do was plug the computer in the next socket. I do not see any reason why this change should be classified as "desk change" and deserve $1000 for the shift. If this is not waste then I don't know what is. In the same company I have seen managers ask their employees if they indeed ate as much as the bill they submitted when the bill was within allowance limits. I thought managers existed to reduce cost by reducing wasteful expenditures.

I have seen many companies sitting on gold-mine of products they just don't want to make. Trust me they don't want to make those products, I have tried breaking my head. I once asked a company will they take it up if I make a prototype with my own money and prove that it works. 

I have spent ages trying to rectify atrocious designs, seen compromised product specifications that don't solve customer's problem, good products priced out of customer's budget, bad products sold free, softwares that made the customer's cry (literally). Man-years spent on designing ERP systems that have no relationship with reality etc. I can go on but you get the drift. 

The problem is not that these companies do such things. The problem is that these are very very successful companies, so imagine what happens at the unsuccessful ones. The problem is also that this is very widespread. So I thought, something more than pure economics is at work here. One thing led to another and another and soon here we are. 

These negative energies were the force that pushed me to explore. I write them here because you may have seen some of them. You may have also wondered why people do things they do. You may have also thought how come your very decent friend is hated as a boss. I hope to answer some of these questions. In the book I don't directly explain the above behaviors but I explain why some companies get away with it. I explain when these behaviors become threatening. 

I hope you enjoy the book and make your firm a better place, a more successful place. And if you need to discuss any thing with me, you can email me at rahuldeodhar [at] gmail [dot] com.

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Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Free download: Subverting Capitalism and Democracy

My first book Subverting Capitalism and Democracy is available free (kindle edition) on Amazon. Click and download and tell me what do you think. (Free only till Sunday July 22)

You can also buy my next book "Understanding Firms - A Manager's model of the Firm.

Update: It is no longer free but you can email me so I can intimate you when next promotion starts.

Elinor Ostrom

Elinor Ostrom is no more and economics is poorer today. Her work on management of commons and economics in general was path-breaking. She was the only woman Nobel Laureate in Economics. RIP Ms. Ostrom we will never find someone as capable to carry forward your work.

Rahul

Want me to work with you?

I am looking for opportunities on the buy-side. Essentially, doing what I currently do but with added benefit of working with the best minds. If you are looking for someone to work with you please read below.

As an analyst employee, I tend to conform to fund manager's style. I believe a fund manager needs to get all the analysis that makes him or her comfortable about their view. In many cases it means stopping short of my comfort levels. In other cases it means working with specific formats (some fund managers I know respond to font color). 

I may, often, have divergent views than my fund manager. Whether I tell you upfront depends on two things, my relationship with you and how divergent are my views. I will tell you up front without being asked if we have a good equation or if the divergence is too large to be left unflagged. Else, I will wait till you ask for my view. 

I love to meet managements, sell-side analysts, make plant visits etc. If you let me go around a production facility I can tell you how good the management is (are they really doing things they say in MDA). In meetings I want to listen to everything the person has to say (sometimes people ramble on and I don't stop them). I don't check or fidget with my blackberry during meetings. I like to make notes on paper and I discard them later, I file things mentally.

I work with my own projections but I love to unscramble sell-side models. In my assumptions I am more conservative. In a way I deliberate a little more than people like and I doubt every model, every forecast and every assumption. However, I do not change my opinions unless the data changes. 

As an investor, I rely more on management quality than on sell-side projections. I have certain bias against few companies. Some I like to go long whenever opportunity permits (Bharti, L&T etc) and others I love as shorts (ADAG group). In some cases there is logic behind the reasoning (Bharti, L&T etc) while in others (ADAG group) it is more intuitive. 

As an investor, I am terribly risk averse, though the fact that I invest in equities implies some risk-taking. If I smell a rat, I don't want to wait for confirmation about what is wrong with the company. I am happy to close the position. Also, I like positions where there is an easy exit - so I do not invest in small and mid-caps.

I must highlight that I do not understand pharma and insurance. I believe these sectors are more about law-suits and legal skills than about science and finance. But, as I said, I do not understand these sectors.

I love to learn and understand new things. I can listen to new ideas without fatigue for days. These could be in any field from science to religion to cooking - I have varied interests. I follow reasonably advanced mathematics well, so if someone wants to explain calculus, I am game.

I like to go into depth, so I want to know how are oil rigs constructed, how are they anchored, how oil is drilled, why gas is vented off at the rigs, etc in detail. Often I know more about these things than many oil analysts. For metals, the other chemical reactions that can yield the metal and why the current method is preferred over others.

Very many years ago, a fund manager friend highlighted the importance of knowing global history in understanding any industry. What he referred to was the chronology itself. So, oil analyst must know where we struck oil first, how the production centers moved to other countries, how parallel development of technology was critical to such developments. Since then, I read up on general history more than job requires.

People say I am easy to get along with. I don't mind interruptions and am happy to explain things in detail. I am generally patient with people. 

But I know I am quirky person. I like a clean desk. Barring the computer and the phone, there is just a pen and paper on my desk. I hate printouts and like to read on-screen. I prefer iPad. I like to get tea delivered on my desk. I believe admin and HR departments often get tangled up in their own policies. I believe we must fight to retain the best employees.

In sum

I work best with gentle people though I have very high resistance to people who throw tantrums. The best people I know are all very well behaved. I am soft-spoken person. So if you want me to work with you please call me. You can find my CV here. You can reach me at rahuldeodhar [at] gmail [dot] com or call me at +91 -98 20 21 38 13.

How Cities Develop?

I have put together some thoughts on How Cities develop? in the form of an idea-book. Please feel free to download it here.

Introduction

Real estate development in every city is unique. Still hidden within, are certain principles that are common. To understand it, we need to understand two central concepts. First, how town evolve and second how evolution happens within a town.

I propose a seven phase model explaining how a population surrounding a business or factory transforms into a town. Through the transformation we point to some important developments in terms of people and their work.

The idea book postulates a growth model called “Affinity Factor Model” to explain how localities develop within a town. “Affinity factors” are those that drive the citizens towards them – e.g. business district and schools are key affinity factor.

The models help us understand why airports, usually built outside city limits, attract residential populations. Or, on a lighter note, we can guess where a company will locate its office!

We also derive a method to understand relative pricing between different areas. Further, we look at fundamental ideas for knowing if house prices are higher.

I also propose a structure of a township centred around a workplace based on first principles.

How Cities Develop

A Dog named Moti!

It is funny for a dog to be named "Moti". I named him exactly that as that was one name that was not taken on my vet’s database. Yet when you find yourself searching for a generally acceptable, easily pronounceable name for more than 10 dogs it is rather difficult. Yet, I named him exactly that as that was one name that was not taken on my vet’s database. Moti came as a quiet, lean, brown pup with intelligent. This shy reluctant puppy was as small as my hands. But aggressive he definitely was! He insisted on biting any hand that touched him. None of the “cho-chweet” gang members ever got close to him ever!
This pup’s day was filled with lot of interesting things. Mornings were spent waiting for breakfast. After a heavy breakfast Moti would get his chain and absolve himself of guarding duties for his day nap! Between dreams he also had lunch! Evenings were designated for fights with yours truly! On a saner day Moti insisted on a tug of war with his rug as a rope. Usually he liked to wrestle with me. At his age it was easy for me to beat him. Nights were designated for “hunting” expeditions with coconut tree branches as targets that were usually found dragged all over the yard and often shredded and bitten. All this exercise made Moti a really big and ferocious guard dog. And he took his guarding duties seriously.
The newspaperman once found himself lying on the road under his own bicycle with Moti waiting to take a bite. The only person Moti listened to in such situations was me! I could take his food from under his nose! Occasionally some storks, pigeons and rats tested his hunting skills. My neighbors’ dogs typically liked to test Moti’s patience from behind our gate. Occasionally Moti broke free and taught them rules of the jungle.
People often found themselves face to face with Moti who liked to put his head out of the gate grill. We had to install a separate bell outside of the gate for people to ring without touching the gate. Yet, the most interesting was how is hid himself waiting for people to open the gate and come in before he confronted them with bare teeth and red eyes.
Yet for his aggressiveness Moti was a gentle dog! My cat took full advantage of this nicety. This skinny (more appropriately lean) hero used to pick fights with all the fat and plump toms in the neighborhood and then run to Moti for protection. The cat even developed the confidence to go between Moti’s legs with his tail up!
I will always remember how “angry” Moti got when my sister and I had fights. I will always remember calling his name out as soon as I returned home. I will always remember how Moti used to obey a “NO” command with dish full of meat in front of him. I will always remember how his enthusiasm for games would wane away if he sensed I had a bad day! Last week, Moti died of illness and old age. I will always remember him!

P.S. = As I console myself the memories of Moti come back to me in the form of Taggy (his son) who incidentally is exhibiting the very same traits he has inherited from his father.

A new Responsibility!

One of the best ways to silence an outspoken person is to give him responsibility for public relations! This is my learning and reason of my silence for the past few months. In my new job responsibility, I am supposed to be an Industry Analyst! My views will form the views of my company for the industries I track! Hence according to business conduct guidelines I rather not state my views out in the open.

That suddenly leaves a lot less to be written as I am tracking the currently hot sector "Real Estate"! But life is life and so it will be that my comments from now on will be rather less related to housing, cities, real estate and more about other issues in life.

So starts a new chapter in life!

Happy New Year!!!

2005, by all means, was a very tough year. But nestled in the tough twigs of challanges, there were tender eggs of promises. I managed some unbelievable things in 2005:

• Lost everything in the Mumbai Floods but put it back together very soon. Rented a new place near Office cutting commuting time by solid 3 hours!!!
• Got married to my sweetheart!! Had a dream honeymoon in the hills of Sikkim!
• Won more deals than I could recollect till March! Lost more deals that I recollect but managed enough to achieve my targets till December!
• Went on a Cruise and tried to imagine myself with Captain Cook!

What an eventful year!!!! And now to top it all 2006 is here!! Here is wishing everyone a warm prosperous and cracking 2006!!!

Music to My Ears

I have always been a fan of Old Hindi Music. Except for Bryan Adams, Shania Twain, Sheryl Crow and some pop numbers my love of English songs is quite limited. Few days back, I discovered Frank Sinatra and Elvis (Can you believe I never heard them before except some remixes!)

I have found Sinatra and Elvis quite unbelievable. The songs are really good and best of all I can understand the lyrics when they sing!!! Now that reminds me, I have to go out to buy another Frank Sinatra CD! See you soon...

A long absence

Well,

I am back after juggling a job and a long distance courtship (which happily ended in marriage) I now have the "proverbial" breathing space. So many days have passed that I realise my ICE post is no longer relevant (God that industry moves fast!!) So I am chucking it and moving on to here.

currently I am tracking the blogs on IIPM after what I read about Gaurav's post. Will be back with some more ideas. So see you soon...

Rahul Deodhar