It's about trading places
(May, 2008 - Financial Chronicle)Subroto Bagchi
Gardener & Founder, MindTree Limited
Money usually makes most people a little less human. For those people who make money out of money - Wall Street traders, brokers, investment bankers, hedge fund managers, venture capitalists, private equity players and such like - there is always the risk of developing an altered reality in which they tend to live. The world of people who make money out of money is vastly different from that of people who make a living out of providing real products and real services to real people in order to make a living. These money people sometimes look more powerful than the Gods and sometimes pitiably stupid. More often, it is the latter. An exception to this is the most celebrated money man on the Earth, Warren Buffet. Apart from the cult following for his investment insights built over the years, recently the man created history when he decided to give away his billions to the Bill and Melinda Gates Foundation because he did not think he quite knew how to run philanthropy! The man, revered the world over as the Oracle of Omaha, knows how to make money but clearly admits that it takes another very special, indeed a very different capability to spend it wisely. And for that, he gave it all away to someone else's charity instead of creating one that could have, quite legitimately, perpetuated his own name. At a fundamental level, it means that the man knows his limitations; most of us do not.
I admire him for yet another reason - the man is as real as it gets. Fortune magazine recently asked him, how potential investors can get under the hood of their investments when large financial institutions do not seem to get a handle on their portfolio and the man simply replied, "They can't". He advised that they should actually read the DNA of the people running the companies and not depend on the reams of financial statements. These, beyond a point, are just numbers. Buffet went on to say, "And the worst thing you can have is models and spreadsheets . at Solomon, they had all these models, and you know, they fell apart." He was referring to the fall of the yet another financial giant that employed some of the most qualified people one could think of. Where models and spreadsheets end, the DNA of people running their companies begins. The question is, how much attention are we all willing to pay to Warren Buffet? While many of us would agree to his concept at a broad level, when the rampage on the Street begins, we simply return to the altered reality only to moan when bubbles burst with predictable frequency.
In today's world, the one thing that has become the most difficult to come across is authenticity. We live in a world of too many look alikes; too many fakes dressed up as the real thing. The lack of authenticity is not just about the world of making money out of money. Ask any customer, what is at premium today and she would promptly tell you, it is the authenticity - authenticity of a product, a service or a relationship. Give people authenticity and it can be your single largest differentiation in most businesses.
To me, Warren Buffet stands for authenticity in a very difficult, very surrogate and sometimes, simply a make-believe world. The price people pay for the lack of authenticity in that world is sometimes personal, and sometimes collective - like the sub-prime crisis that has engulfed the entire world. Yet its roots are in someone, somewhere abandoning caution, of embracing the unreal, hoping that if there would indeed be a collapse, it would happen long after the killing has been made, I am gone and no longer am the last man standing to witness the fall. Now, that is unreal thinking. That sly mindset may work once, may even work a second time, but certainly does not make for a sustainable model. Very smart looking people who mill the Street do not understand that simple fact just as naïve investors routinely choose to ignore the DNA test Buffet is talking about - all in the hope of making a fast buck. The pattern repeats itself painfully - from the tulip to the telecom bubble, from the dotcom bust to the real estate doom. We simply refuse to learn our lesson while a Warren Buffet makes his money, gives away some and remains one of the smartest investors alive.
