On the last day of my ICSE exam (10th standard finals), my Nani (Grandmother) offered me a free seat into the Marwari Business School.
I was 16 and I had the opportunity to go and sit in my Nana’s (Grandfather's) office.
I took up the offer.
These are the seven subjects I learnt:
M = Monetization Mentality
For Marwari’s, money pretty much means everything.
It’s the ‘currency’ of success – pun intended. People are sized and measured not by their waist sizes but by the width of their balance sheet. A Marwari’s religion is making money and they meditate on it.
What Monetization and its terms means is also unique for Marwari’s.
For instance, I learnt that Revenue was not what you ‘bill’ or ‘pass-thru’ or ‘recognize’. Revenue was always what you ‘net-net’ earned that came in your coffers.
Revenue is bottom line for a Marwari – not top line.
Also, the facets of revenue became very clear to me. Every capital investment (be it land, or machine or even cars and computers) had a ‘monetization expectation’ attached to it.
You could spend on things only if they made money. Hence ordering flowers for office tables in a typical Marwari office would be disallowed (despite the plea that they enhance profitability).
This ‘monetization mentality’ made me create what I believe was the most detailed costing breakup of any socks factory in the world.
I took 3 years to ‘post mortem’ the cost of everything we incurred (whether real or notional in terms of interest lost) and link it back to revenues that were being earned.
So, I could tell you that if you ran extra air-conditioning in the office building, then 'X' was the revenue that needed to be generated to make a PROFIT on that extra spend.
Also, I learnt that revenue was something to be always ‘improved’ – not just by price hikes alone. If collecting money from debtors were improved by 3 days, then there would ‘X’ reduction on bank overdrafts and hence extra income to the firm etc.
A = Accounting Archery
All successful Marwaris really know their accounting.
Trial Balances, P&L statements and Balance sheets are the juiciest novels that a Marwari reads. What they clearly understand is the concept of ‘Capital’ & how Capital gets generated at the lowest cost and how that same Capital then needs to be exploited to the fullest.
‘Creativity’ in accounting was the highlight of what I learnt.
I remember when I was 17, an uncle sent me to his Chartered Accountant (CA) to finalize and close my Uncle's books. Like a good student, I prepared the P&L and presented it to Mr. CA, along with the ‘tax’ liability. He chuckled and then called up my Uncle in my presence on a speakerphone. I expected Mr. CA to tell my Uncle what I had prepared.
Instead Mr. CA asked my Uncle ‘Babu (Sir), how much tax do you feel like paying this year’?
My Uncle grudgingly muttered a number and that was the end of the call. Then Mr. CA took my P&L and completely re-crafted the numbers (and believe me legitimately) to perfectly match the tax outgo my Uncle wanted to pay!
R = Righteous Rigor.
Each month, there would be at least a couple of instances when a very old worker (you know the ones who look like grand dads) would hang out near the factory cashier with a couple of his relatives.
At the right opportunity, the worker would gently knock on my fathers cabin door; enter nimbly; gently walk together my father and then bend down to touch his feet.
The first time this happened I was stunned. I mean it was very demeaning to see such an old man behaving in such a subservient way. My dad of course would immediately stop the old man from bending further, do a ‘Namaste’ (fold hands) and greet the man. I would almost always notice the tears in the old worker’s eyes.
I learnt later that these workers had worked for 30 -35 years in our factory and this was the ‘D’ day they had withdrawn their Provident Fund account (saved in the factory for all those years) to be used for marrying their daughters or for buying a house etc.
The amount they received was largely disproportionate to their monthly salary (lacs of rupees) and they solely relied on our Company to safeguard their moneys, banked safely for an important day.
If you have read how corrupt many companies have been with PF accounting and the fact that some of them have NOT even maintained accurate PF accounts and have squandered what was not their own money, you will realize how damaging this is . Imagine telling this 60-year-old worker on the eve of his daughter’s wedding that his fortune of 30 years will be paid ‘later’ (meaning never).
This taught me a lot. It taught me morals, ethics and righteousness and how to actually live up to others people’s TRUST that they have placed in us.
Most People are naïve and innocent and very trusting. We have to honor their faith in us.
W = Wait, Watch and Win
When I sauntered into my father’s factory on a bright Monday morning on my first day at work, I thought the world would be at my feet.
In my mind I had a desk to myself, lots of papers and files, a huge telephone on my desk with lots of blinking lights (remember the EPABAX) and a constant stream of visitors to meet and greet me.
Quite the reverse of that happened.
When I entered my dad’s cabin, he pointed me to a rather uncomfortable looking ‘corner’ chair, and asked me to SIT.
I remember his words so clearly even today. He said – ‘Alok, learn how to sit. If you can just master sitting, you will have learnt a lot’.
Grrrr…I was exasperated! I mean I was a rock star supposed to gyrate and prance all over the stage. Instead I was being locked inside the backstage changing room?
Slowly, the concept of ‘waiting and watching’ began to sink in. For almost one year I sat like a flower vase on a pedestal in my dad’s cabin just watching him function.
I was not asked for an opinion and was even barely noticed! Being completely ignored became a normal emotion for me, and I spent the hours just learning.
And how I learnt! From everything about machines to finance to production planning to inventory management.
I guess the biggest lesson I learnt was that winning comes from waiting.
In the first seven years of starting contests2win.com (my first independent business), this ‘waiting’ training bore rich fruit.
I became the expert at waiting outside client’s offices for hours just to meet them for five minutes. Never once did I even feel bad or humiliated. I became best friends with these busybody’s personal assistants and secretaries and learnt a lot about the way their business functioned.
In fact, I even found a long-term partner in Rajiv Hiranandani while waiting for hours in the Shaw Wallace office in Mumbai! Rajiv was the head of sales of Yahoo at that time and after many ‘sofa’ meetings at Shaw Wallace, he agreed to head mobile2win India – a mobile business that I was just starting up then.
All good things in life take time. One has to learn to wait, watch and then win.
A = Attitude Adjustments.
Marwaris generally have little ego issues. We are trained to do business and not to pretend to be the Queen.
In 1994, my father and I traveled to Germany to attend a textile fair. That was one of the busiest fairs in the world, and all the hotel rooms were fully booked. My father and I were sharing one room.
In the hotel lobby, while eating breakfast we met one of the largest textile Barons of Hong Kong – who was a Marwari and had emigrated there many years ago. He was hugely successful and very well known globally.
While all of us were eating together, a rather disoriented looking man in a crumpled shirt and Hawaii slippers came across and stood next to Mr. Textile Baron.
Mr. Baron smiled at him and excused himself and arranged breakfast etc for the man. Later he came back and explained that this man was the chief jobber (mechanic) in his Indian factory and had never traveled in a plane before or ever stayed in a hotel.
He did not know how to operate the bathtub shower. However he was the heart of the factory and Mr. Baron was sharing his room with him to make sure he was comfortable!
That trip I learnt a lot about attitudes, and how to adjust them to be a very successful entrepreneur.
R = Risk and Reward
About 4 years into having started the export division of my factory and having executed many successful orders, I was on top of the world. I guess I was enjoying the sweet ‘high’ of success.
Retrospectively put, I think I had become over confident.
As scheduled, I met my buyer from C&A (An erstwhile large European retail clothes store) in my factory showroom and began discussing new orders.
My buyer winked at me, retrieved a bundle of socks from his bag and laid them on the table. The yarn color and texture of the socks caught me my surprise. This was that ‘heather mixture/grey flannel’ type color (like the t-shirts that look like a blended grey).
My buyer said ‘Alok, this new yarn is a rage in the EU. I am happy to give you an order that will be 5 times larger what we have ever done with you - if you can ship your socks in this type of new yarn in various color tones’.
I asked him what this yarn was and he very casually said ‘oh, it’s a cotton mélange. All global socks manufacturers are working with the same yarn in their country; I’m sure you will find suppliers for it in India without a problem’.
I looked at him, and the socks and said ‘yeah, I’m doing it’.
What I never realized was that I had taken the biggest risk of my life. I also think that greed had blinded me. I could have agreed for a trial order rather than one that was five times the usual size.
But I also learnt that what entrepreneurs do for a living is to leap without looking.
Once I received the order sheets, I began scouting the market for mélange yarn. None of my regular suppliers made that type of yarn. A couple of the suppliers in Hyderabad (the south of India) were large producers of Mélange, but their yarn composition was synthetic not cotton.
Quickly I began to panic because I could not find a single yarn supplier of that yarn in India. What haunted me was that non-fulfillment of the socks orders meant severe penalties and a black listing to ever work with C&A.
Added to the problem was that I had accepted the orders in 5 different types of yarns.
The standard colour in Melange was grey and not ‘sky blue’ and ‘camel’.This order was looking like a train wreck for me.
After an agonizing search and hunt operation, the Hyderabad Company agreed to spin a special Cotton yarn for me in their regular 2/40’s count. (In cotton, the larger is the count, the finer is the yarn – so 40’s is good for garments and 200’s is what we wear in shirts. ‘s’ stands for single yarn). I actually wanted 20’s which is used for socks.
Now, 2/40 meant that 2 yarns of 40’s would be twisted together to make it as thick as 20’s (which is what I wanted), but the cost was double of what I was paying for 20’s yarn. So buying 2/40’s was a no go.
Finally, I convinced them to spin the yarn in 20’s (20 single count) and they sent me a few spools to test.
When I got the yarn and spun the socks, I had a heart attack.
Because the yarn was mélange and a single thread (20’s), it was ‘twisting’ and ‘turning’ like a top and making the socks look like they were ‘wrung’ to death. The 2/40’s yarn would not have that problem because a ‘S’ twist and a ‘Y’ twist were spun together giving the combined yarn a ‘neutral’ spin – but as explained earlier, I could not afford that yarn!
When I explained my agony to the mill, they asked me to ‘heat’ the yarn via a specific process to ‘kill’ the spin. I did just that and enjoyed my second heart attack – the color of all the 5 yarns dramatically changed when ‘heated’.
In the end, I got a ‘duller’ 20’s custom cotton yarn made, got that yarn heated to kill its twist make it look like the original colour ordered and even ‘washed’ all socks to kill the little spin left behind.
Because the washing was shrinking the socks, I had to redesign all socks specs in a way that after they were washed and shrunk, they came back to the original size the buyer had ordered!
I made my shipment just on time and that execution paved the way to tripling our exports in the next few years. Interestingly, most of the orders that came in those next 7 years were mélange yarn orders.
I had learnt the very difficult lesson by taking on Risk; but more importantly managing risk carefully and with perseverance to make it rewarding.
In 1999, when I walked out of my factory doors to launch contests2win.com – I had no clue about the Internet or promotions or marketing. I just thought of my European socks buyer and chuckled. Intriguingly, that day I was wearing a pair of ‘mélange’ socks!
I = Innovative Ingenuity
When I pitched to my father that there was a massive opportunity to export plain white, navy and black socks to Europe but at ridiculously cheap prices, he took up the challenge and worked back to back with his technical team to ‘refit’ Indian knitting machines bought from Punjab to make socks worthy of European feet.
In essence, he innovated and created a sock that was the same in quality as a European sock, but knit from a machine that cost 1000$ in India vs. 20,000$ in Italy.
The trick that really mattered was treating the ‘Toe’ portion innovatively.
In Italian socks, the toe was knit ‘within’ the machine and very finely, so that it did not cause discomfort to the consumer while wearing. In Indian sock machines, the toe portion came out unstitched; to be manually ‘sown’ over the open ends to close the toe. The process of sewing Indian socks caused a thick seam that always created discomfort while wearing the socks over the consumer’s toes.
My dad fixed the problem by using an external machine to sew the thread into the Indian sock almost needle on needle (like granny’s knit sweaters) using a slow manual process that yielded a finish that was better than the Italian machine. Labour was cheap in India, and the outcome was perfect!
You can imagine how profitable the business became since we were getting paid for socks priced at EU costs whilst making them with Indian machines, yarn and labour.
This experience embossed the passion to reinvent in my mind.
I have observed that there is a constant drive in all Marwari companies and entrepreneurs to ‘re-think’ business processes, concepts and change ‘this is how it is done’ to ‘this is how it can be done profitably’.
In 1998, after spending 7 years in the socks factory, I quit and started contests2win.com. The day I left the factory premises, I think I had graduated with merit from the Marwari Business School.
This post is dedicated to my Dad.
Greetings from a fellow Marwari entrepreneur.
And thanks for sharing this wisdom - which no business school teaches you.
I believe this is the juice of being an entrepteneur.
Very Thoughtful and well written Alok ... been following your column for a while and never cease to be amazed at your clear and thoughtful insights. All these 'Marwari' values are engrained in us as we grow up since this is what we see all around us, whether it is in the way our moms have managed their households or our fathers their business. And yes, no business school can substitute for a sound marwari 'gaddi' education! -- Nirmal Agarwal, Kolkata
Awesome is the word.
i always wondered whether i think like a marwari, i just got the confirmation. thanks for the benchmarks. i did not realise that contest2 win was stated up by you.regards samraj
pls give me your opinion on going long on gold, shorting dow and long oil. believe dow would hit 7000 and there a plausibility of israel attacking iran
Alok: Excellent! Thank you for sharing.
Boy! Do I see a Pulitzer winner of 2020 in the making!
So humble of you Alok to share, to speak inside out. You actually always do so and inspire many. Hats off.
Excellent full form of MARWARI. This is typical of Marwaris as I've worked for a Marwari company which completely believed in monetization mentality & also the other subjects as Alok has mentioned. Super!