Stock Market Crash, Trump, China & Global Economy - Saurabh Mukherjea | FO326 Raj Shamani

37:46In fact, there's a ton of data to show that the best education in India is class 12. Before class 12 doesn't seem to boost either income or employment prospects. Which is an indictment of much of what constitutes graduate education in the country. Okay, that's an issue. But now, bifurcation. Part of the elite is saying, I need to signal to everybody else that I am the elite. So, depending on their income level, it could be a Royal Enfield motorcycle, it could be a Grand Vitara, it could be Thar rocks, German cars, etc. It's a big part of the luxury spending that you are referring to. That is dynamic situation.

38:33People know that I have money. I have money. I'm upwardly mobile. But the other dimension that fascinates me as an investor is many of these people are actually not that first that I have money today. They are focused on building mind-blowingly lucrative businesses. And businesses whose scale and conception amazes me. So, recently we've gone to South India to meet a client of ours in the interiors of Tamil Nadu. right so I didn't get it he was a client for many years and he was a client and he was our American product Global Compounders I had gone to explain that to him because he said he wanted to invest so you know you go with your own pre-consumption I'm going to Mumbai to a small town in Tamil Nadu so I get out of the taxi and gleaming glass building two story but white glass building so I go in there and this gentleman comes in imported jeans I noticed and crisp white shirt.

39:39So I'm very curious about people. So he explained that his dad used to operate a few local buses. So when he grew up, his brother migrated to Australia. But this guy said, I want to stay in India and build. So initially he was an import exporter of scrap metal. But he didn't have fun. somewhere in the early 90s he decided to take scrap metal and take a few dealerships. He started with motorbikes now he's the largest dealer for I think one of the big national motorbike companies in Tamil Nadu. He then realized that spare parts bhi le na hai kuk kamar toh by 2000 ho bhi le liya. Whereas Tamil Nadu got richer Korean gadi ki dealership bhi le li, 15-16 ho bhi banali.

40:27by 2010 it was sorted in life 30-40 dealership spare parts must be doing 5-6 crores a year comfortably in terms of income but bhook socho this insaanki so so around 2011 or 2012 these fellows in small town Tamil Nadu they were sitting and having a chat yaar kya business paise to hai 4-5 crores so they took a flight to Seoul because of there was a Korean companies dealer Seoul they went to a company Korean company which used to make equipment for rubbish recycling sites and they said you have technology in Korea you have this technology out-license we will put it in India and you will share your profit share so the Korean said we don't want to go to India so just imagine they rocked up in Seoul without an appointment he told me they just rocked up and said technology out license kar rahe hain they brought it to India and around 2016-2017 right the National Green Tribunal was fining a lot of municipal corporations because municipal corporations waste dump run off panie pollute soil kapanga so NGT was fining a lot of BMCs I think sentence sentence bhi karra hain joh bhi shahir ka head so municipal corporations are in wild panic what do what do do do do do do do do do do do do do do do do do question ko nika le so these guys would call up in mizzle corporations like humare paas robot hai do you want it and you can guess right ek ke baad ek contracts in ko milne laghe so so they become 100-200 kron ka turnover and ka and and he showed me videos where waste dump year one two years later pura saaf green park right to me na dekha thik hai then then he said meri saat took me to the adjacent room adjacent room mein diwar pe 40 screens each screen is one way stump in different parts of india life right now screen pe jo robot hai wo in ke office se us tamilnadu ke chote share se operate or aish tamne there's a 40 to 20 different ladies operating the robots on their on their laptop ipad right and and and i was just blown away that 40 sites across india korean robot out license to india yeah they made the they now make the robots in india uh so my valuation

43:09So I turned to him and said, So I actually thought that this company will give you money, and you will manage something to manage. And a big startup idea will put it in. And I was thinking this guy is worth probably half a billion. but his hunger is limitless and he's completely unassuming about it right if you went outside he doesn't have a flashy car he's wearing imported jeans very understated jeans but the whole persona that I am going to achieve more and more in life and I'm not doing it to impress you Saurabh or anybody else that's just the way I am wired right to keep ramping the attainment ceiling yeah and and i found that so inspirational that's india yeah this is mind-blowing this is this is the this is the crux of india if you can see this is what i like and when i travel around the world and i speak to so many people naturally curious because my career is in this plus secondly I'm just I love understanding behaviors of people now talk about a European now talk about American now talk about Indian now talk about multiple drive at this point highest Indian absolutely that ambition and drive and our country finally we are in this position where we have or to talk about money or to talk about money greediness is not even a taboo.

44:51Now it's accepted. Before someone said to earn money, people were a little greedy, and people are like, yes, it's bigger. Growth is seen as a positive side. So that is happening. Absolutely. And a lot of people ask me, where do I create a career? So I said, up to you. If you can build it in India, build it in India because this is the only country in the world where working 12-15 hours a day, sitting till 11 o 'clock, 12 o 'clock at night discussing business, business strategy is something other people will do with you. You will, especially as a young person, you will learn so much in your 20s and 30s.

45:30If I go to the US, after Friday lunchtime, you have to get a meeting after Friday. If you have a meeting that you have to get a meeting, how nice people are. They get a Friday. No, good for them. They're 10x richer than us. They're 10x richer than us. They can afford it. it. But at this stage when the country is poor, we are still amongst the 50 poorest nations in the world. And we have the best part of 500 million super poor people. And meeting these sorts of entrepreneurs, right? I find incredibly inspirational because in our life, we go to a certain extent, thuk jate hai right travel hai stress hai so when you meet these people who keep hitting hurdles but us overcome karke ek bada mount everest chadat hai hai phir aur ek mount everest claim karte hai so i think so you were asking me about the new elite so ek part hai do part hai ek hai ki jose flashy hai dikhana hai dikhana hai ki hum ne finally paise kamaal hi hai that is one part jose aap ko dikh rahe hai choti wada pockets pe the anecdotes which i was telling you and the second part is that the people use the money and the latter part I think will become the defining paradigm because now linking back to our middle class point right as people realize that this college study in a big company and a 20-year promotion story is over by default if not by design most people will have to become entrepreneurial gig economy will be your life in that gig economy in the bot training or food delivery is on but gig economy will be all our lives so we'll have to be entrepreneurial my children's generation will exist in a country where self employment will be the norm so for that generation of Indians for whom self employment will be the norm these sorts of rising entrepreneurs people who rise from ground up from humble origins will become the kind of poster boys and poster girls and they'll be the idols So what do you think India may be a guy entrepreneur you're doing and young India which we talk about later with the new things and the new things are going to be and the money has the top three opportunities where do you see and be specific

47:51So I think again using our recent book Behold the Leviathan as a mental template right so first the colossal trend which in data is the rise of women right it's meteoric 10 years ago was the first time when there were more girls in primary school than boys. Now in every level of education, including university, there are more girls studying than boys. The pass rates are much higher for girls. So this data is very easily seen. RBI says central bank data comes from urban areas that women have more money in their bank accounts than men. And some asset management houses comes from the city that women are doing more assets under management than men.

48:33right RBICB data data is that women owned businesses success rates higher I think the next bit data is best jobs are going to women so naturally if women earn more the better educated they have more money and they earn more they'll spend more and if you can identify stuff that they will buy I think you'll make a ton of money right I realized

49:02in that a middle-aged man like me is actually not very good at figuring out what women will buy. So there are smarter women in our office who do this job for us. What do you think they're buying and what have you heard or seen? So look at beauty and personal care that implosion explosion that's been seen. Falguni Nairji and Nike were at the forefront of that. But I think that's the start. Similarly, Zudio's success, Trent's success and Zudio's fast fashion with success is also to a large extent led by women. Led by women. Right? So one of the things I don't, you know, I'm fascinated by, I think social media has been more powerful in driving women up the, both in terms of the aspirations and in terms of the income.

49:46Social media, UPI, digital India, social media, the ability to build businesses, project them on social media. women seem to have made more money out of that and they're also it's given them a kind of forum to articulate their views um it's allowed them to see the world by the world in in the in their mobile phones the transformation digital digital media has uh wrought for indian women seems to provide to be a heck of a lot more positive than it has done from indian men i'm not being able to put my finger on why that is but it looks visibly right changes in confidence, spending habits, business acumen, aspiration, mehnat, a very positive change.

50:33So, this is a colossal opportunity. That's first. The second is the point on the new elites. The new elites think very differently from the traditional elites. What difference? Traditionally, it was a very understated smile, peace, culture, culture, whatever the new elites are in your face, to show and say, that naturally translates into a completely different aesthetic. So, with cars, with houses, with cars, with sofa, with bathroom fitting, it will become a new ethos and aesthetic. And companies who can latch on to that and understand that, I think will profit enormously. I mean, at its very simple level, post facto, but I think Siddhar Lali and Aisha Motors, Royal Enfield, I think figured this out 15-16 years ago that a new elite is coming to the Royal Envil that needs to show the Royal Envil that needs to show the Royal Envil it might not be the most fuel efficient but for someone who is rising in the world he wants to show that he is not he is driving a powerful manly bike with a thump rather than something so you mean aise products and aise services which will help people to upgrade and there is functionality a little bit compromised because it's a status symbol rather than functionality symbol.

51:55So, I think there's a new class and we discussed luxury spending with a heavily Indian idiom. So, it's a very originality scope. So, I think Sabya Sachi Mukherjee. Sabya Sachi. Mannevar also did it. Exactly. Mannevar in a mass scale, Sabya Sachi on a niche scale. So, it's not just in the clothes but also in different ways. right so what does it look which thing right where right so it's the other area and the third if we think about just on a geographic basis what is happening in South India right there will only be in the last 100 years I think one or maybe two or three parts of the world in the last 100 years there will be only two or three parts of the world which have grown as fast on a sustained basis as South India is doing today so South India means if you take a peninsular India and for us optimistically for Maharashtra, Karnataka, Kerala, Goa, Tamil Nadu, Telangana, Andhra.

52:56These seven states, they account for a quarter of our population. Half our GDP and two-thirds our GDP growth. So they're almost twice as rich as India. So Telangana is twice as rich as India. Telangana's economy has doubled in six years. So this is the southern India, peninsular India. का part है यह दुनिया का सबसे fastest growing region है यहां पे road connectivity अच्छी है law and order अच्छा है education levels are high digital is fully penetrated and पूरे दुनिया के factories global capability centers यहीं पे आ रहे हैं तो यहां पे भेंकर prosperity का explosion हो रहा है भेंकर and incredibly inspirational to watch very empowering and यहां पे बहुत ऐसा बनेगा south में business business down I'm sure personal life of a lot of cost of bizim life nothing where business neighborhood of business territory there usually do a lot of business within their own caste as at a very simple level to create a successful economy you need a high trust society right if I don't trust you you don't trust me then you will do it we will do it but we will sign 500 contracts and you know India will get a reference 6-7 people from the country how do you know that life will go out of that we will reduce the work and reference so north will be in that same way in my opinion say we be we have NCR but NCR is sort of NCR is a slightly different ecosystem and it's very Cosmo it's not like specific people from NCR within NCR Gurghau itself right so Gurghau is a lot of time in a way Gurghau and Bangalore there are similarities in a way so Gurghau is a very different ecosystem in South whilst in personal life and marriages I'm sure in the middle business life I see so much people are first that you caste what you are what language you are what religion people are saying business I will begin with the assumption that I can trust you and I can do business with you unless proven otherwise I am not going to call up five people and check out your antecedents but do you think India will grow at the speed which China grew I don't think China grew at the speed that it grew I think they are getting a lot of data they are getting 80-90 % so I am pretty sure they didn't grow at the rate that they grew because had they done so then they wouldn't have had the range of social and economic problems they are currently facing.

55:40But people say that in the 70s India and China were the same. And now today look at China's economy versus India's economy. So definitely they are growing. People say something. What people don't realize is the British ravaged India to a greater extent than they ravaged East Asia, Southeast Asia. and therefore the journey that India had to traverse through the 50s and 60s was a far more demanding journey. It is true that Deng Xiaoping opened up China in 78, 79 and obviously they benefited from the liberalization and all credit to the Chinese communist leadership for embracing the free market model, right?

56:20One of the most radical jumps in thought that I have seen in my life. But I think the journey that we have traversed since 91, Since 91 from the day we opened up, from then till now, if you look at the data, no country in the world has actually grown faster than us. Not even China. Not even China on a GDP per capita basis. I think per capita China is a little bit further. But 91 to now, what we have pulled off is pretty remarkable. and remember we've done this against severe odds in terms of going into that 91 period at a lower per capita income then China went into at 78. So yes, China and us in the 70s were same and then they took off but China's model has frailties that I think our model doesn't have and TN9NG's book is Tortoise versus hair.

57:28I think while some people might think we are the tortoise. Four years ago, everyone thought tortoise was totally wrong. China, China, China, China. In the last four or five years, China's economy has become a little bit of a fool. They've got, their achievements are remarkable, right? Especially on the technology front. For a country in the space of one generation to catch up with the West on technology is remarkable. But by the same token, our achievements on both the IT services front and the cultural front are everywhere. Don't underestimate the power of the fact that a lot of their identity, they have assimilated with the West.

58:06And I still don't fully understand why it happened. It was so big. It was so big. How come they gave up their apparel, their clothing, their design for Western designs? I don't fully understand. We've held on to that. and it will in due course help us if you maintain identity right identity is at the core of a lot of human human civilizations also identities at the core of your belief system right because when under duress uh in your deepest darkest hours you go back to your identity if you're if a civilization of a country if a people can hold on to their identity um i think it says a lot about the way in the way in which they can operate in the wide world right so why I don't understand I'm sure there are anthropologists who have looked into this maybe the cultural revolution the mother's father was in China there was something like identity that at the first chance they said let's westernize we haven't done that and I think that has implications for our future more importantly the financial system ki jo halat hoi hai ho ho hummari se financial system ki halat nahi hoi hai their environmental degradation is both unquantified and legendary and whilst we moan about air pollution my reading is they have polluted soil and water to extent in China that I don't think we have yet done so there are different dimensions to this kudos to the communist party in China for embracing free market we've done a reasonable job we can do much better but especially if you focus on peninsular India so what are the challenges of India where do you feel there's a big big challenge I was reading in a newsletter that we talk about manufacturing manufacturing India's biggest challenge is that manufacturing of socks is not equivalent to manufacturing of the major things in the world like screens and phones and automobile parts or like something like which is more technologically advanced.

1:00:19How we're India manufacture is a very basic thing. But we need skilled labor and that's missing. And if that's not coming then the India manufacturing which we get the benefit from China plus one that's also going to be and that's a challenge. I'm paraphrasing. So you paraphrased it actually even better than I could have. So just quickly three challenges. First, this is delimitation. So South India's prosperity that I think becomes a becomes a to some extent a double-edged sword because at some stage in the next 10 years at the moment it seems like 2026 but i'm sure there'll be some political uh kicking the can down the road so as per the constitution we need to figure out kitne seats lok sabha seats kis states ko jayenge so as uh at the moment the south has a third of the seats but they're half the GDP they pay half the taxes for the country but they only account for a quarter of the population so when he says when he will redraw who will get his seat most likely South will end up with a quarter of the seats in parliament now he will have a quarter but his economic contribution will increase so tax is going to be proportion portion per dete rehengi.

1:01:37So, so I think there's going to be a, a standoff or a face off at some stage, but the South will say, why will we pay the majority of the taxes if we account for only a quarter of the seats in parliament, right? And I don't have an answer to how to, how the leadership in Delhi will fix that issue. I think the second challenge of Unra is for, for a variety of reasons, our education system is based on a lot of rote learning, right? and AI is rendering that irrelevant and as a result we're seeing very high unemployment amongst graduates as it is graduate employment itself was challenged historically now we're super challenged so I think rethinking is required from school where we start teaching through to college because if you carry on doing rattofication then AI or robots all jobs and the third I think environmental challenges the summers are getting hotter and hotter water scarcity is getting more and more demanding food prices are naturally being pushed up by that we are a poor country $2500 per capita income and I'm not sure if there's any political response on how do we deal with the fact that water tables are falling monsoons are becoming more erratic.

1:03:05The water is getting so much, but it's getting so much. Sometimes it's getting so much. The hotter the summer, the more violent the rainfall. So, the flood goes on, then it drops down, then it doesn't come from the rain. So, the impact of climate change, I think, on India seems to be already pretty remarkable. So, the last two or three summers, globally, the last two years have been the hottest in human history. So, the second one, you said that people don't have skills and education system can't prepare us. We can't keep it. Why do we keep up-skilling platforms in India? Because technically there's a demand.

1:03:43Jobs are going more, unemployment is growing and graduation is not going to happen. So lovely points. I give you a gift. So I look at this. I look at knockery.com a very fascinating site. I have a shareholder. But knockery.com is very interesting. So I go to Google and I look at what kind of jobs are you? now vacancies are so semiconductor design there are vacancies about 20-30 ,000 vacancies and money is good if you do 5 years experience you get 1 crore rupiah so the googles of the world the googles of the world and the qualcoms of the world are hiring their engineers in India they are based on semiconductor design so money is getting a crore after a year is like an investment banker salary fund manager salary available in semiconducted design so you would think bhar bhar ke avadi ko semiconducted design ke zarf ja rhi hai but nahi shortage hai so then I thought shortage is liye ki college meh padhate nai hai but then I was told ki nahi there are you know online courses upskilling courses jahan pe 15-20 ,000 mein aap shikshah process if you study electrical engineering electronic engineering and you do a 15-20 ,000 ka course phir aapko ye semiconducted design ki job mil sakti hai So I contacted those companies, how many people are doing?

1:05:01Some say 1500, some 1000. I think it's bizarre. 20-30-30 vacancy. 1000, 1000, 2000, 2000 people are doing courses. These fellows, bright people have set up these education institutes but they don't have to learn. So then I started, I'm still trying to figure it out. My colleague Nandita is working on this. Why aren't people studying semiconductor design, doing these courses, getting these well-paid jobs, right? And we don't have the answer yet. My fear is that the education system makes you such a rattofication ka guru that your brain stops doing the logical flow throughs required for this sort of job.

1:05:38So, semiconduct design is not a ratto wala job. You can't just, you have to think through a cha, Raj ko kya kya sa semiconduct uchi ye, kya requirements on ki, kya limitations hai, us ke teht, kya se meek semiconduct design karke Raj ke liye sakta ho. You have to solve a problem within certain constraints, right? so is it the case that our education system doesn't impart those skills to even 20-30 ,000 people which is the number of vacancies in this industry or what is the underlying what is the underlying what is the underlying what is the underlying what is the underlying So we are still trying to get to the bottom of it but it is perplexing that jobs where there is so much money available there are skill deficits and Deliberity took an extreme example but there are so many examples where there are good money but in the free market because it's not a communication issue anybody can go to knockery.com and see vacancies so why are we going to vacancies?

1:06:39Why are we going to stay in the year? What is the challenge in the education system? We are trying to get to the bottom of it is there a cultural challenge in the way we train our young people that they have a logical flow that we can just learn and learn exams you feel that we have to because we have taught the rata so we have to learn that we have to learn critical thinking and do critical thinking because we are scared is that what you are trying to imply we are scared part of it is but even those who are scared they say that you don't get ready right if you don't get ready that's like the obvious next day there is no book there is no book called thinking 101 for dummies that book didn't come to market in my opinion when it comes to the book oh so you are saying that if for example I don't have a job I did engineering and then MBA that is like a classic combination after that I don't give 50 or 1 lakhs then I go to knockery.com and I see that there are many vacancies on social media on semiconductor on green energy

1:08:17I'm not going to try to do some deep thinking about And I will try to make some of the vacancies in that. Which three courses I can do to make you a better way? I'm going to say, there are more vacancies in which I am going to try to make some of the vacancies. I will try to make some of the vacancies.

1:08:38Now, this aspect, right? It will solve itself over time. As I said, as the job market itself becomes different, tighter, new behaviors will emerge. but the entrepreneurial opportunity is is in a way this discussion right کونسے entrepreneurs ہوں گے جو سہیں ہم help کریں گے بچوں کو figure out کرنے میں کہ دیکھ jobs یہاں پہ ہے یہ تین course کر لے تیرا یہ job کا قابل بن جائے گا تیر کو پیسے بڑھ دیں گے ہاں بالکل پر بہت difficult ہے وہ کیونکہ بہت سارے لوگ نا already دکھا رہے ہیں opportunities but still میں آپ سوچو اگر all your common sense is making sense but AI کا body train کرنا ہے which will come to the app.

1:09:19You can say in the app, my background, my interests, and the AI bot will be trained to figure out that Raj will give which option. And then, that's what I'm trying to say. But the bot will train us to do that, that's what I'm trying to say. Somebody who is money minded will do this. So, he will do that. You will do that. And then he will learn something, and learn something, and learn something, and learn something, and learn something. He will plug you into the ecosystem. employer and employer will be back. He will also say in his app, we need 500 people. So he will aggregate all the needs and these could be gig needs.

1:09:57Some company might need a lateration only for 30 days but the bot will aggregate that and just imagine right, whatever the bot will run, it's like Naukri. It's Naukri.com but with AI and a training element and perhaps he will give his home

1:10:17so you know one of the things which will restrict a northern Indian from going to Chennai is Tamil language but who bought language so I've invested in a startup which does ad tech primarily and I understand data about which ad is the most interesting data right when you start this skill, you learn the skills from the market. Then you click on the other one. Then you start the other one. You start the amount of money you will be able to do this course. Clear outcome shows you. So, you see more of 2x clicks. So, there is an outcome based. The whole market is very, very, very outcome based. Upskilling based, there is nothing.

1:11:07Outcome pay is the most. and I will be more fascinating. 3x clicks are coming, which I say that after this, you will get a certificate. So, money is not so much value, the amount of certificate value is, and this is what India is showing, and this almost every tech person will agree with me, that when they promise that after the course, you will get a certificate, everybody is happy. So, I mean, I'm sure as investors like you, and entrepreneurs, whoever you've invested in, where people are solving for it. My guess is India's entrepreneurial ecosystem will solve it. As I said, core challenge is socialist education system in a capitalist economy.

1:11:47So, capitalist education system in a capitalist economy I think will sit. Okay, so today's companies which are a young entrepreneur or think that I will be more of a company or I will become a new company entrepreneur. Where so big companies also think about startups and they are always reinventing themselves. There are so many capital and so many big players like let's say the reliance of the world the danis of the world which are deep pockets government are all things they are doing everything at this time what can be a entrepreneur what can be a mode where can be a mode to beat these people such a niche small industry where you can be a king so niche industry and then move in concentric circles outwards right adjacencies don't try to go and listen in the deriya which is the local desire before you see it and then become the king and then go out and you know Amazon is an example he uses before he focused on DVDs then he went to the book before he went to the book before he went to the book then he went to the book then he went to the book dvd america for kitab dvd europe fair retail ke kuch item america fair retail kuch item europe fair baki dunia right fair up to dukaan mein whole foods bhi kharii dhli right so so he's the amazon is the archetypical case study and in a way i think peter thiel ke mental models baut useful lagte hai ki waha pe jau jaha pe jada look fight nini marre kiki unko lakta choti si cheeze hai and if i go back to um zaksas desai ji right in a way he did that now he without reading Peter Thiel he realized watches in India a small industry doesn't have any interest in watches I'm going to be part of the watches and then in his mind adjacency was jewelry and hence he moved into that he got the end market wrong they chose Europe incorrectly but then finally they course corrected and hit up India and now you can see right from watches jewelry CK Venkatji is now doing sadis right so now so So, template choose look for niche uncontested industries.

1:14:07Go where there's no one. Right? Which is why the rural piece going back to the here on the 5 ,000 ,000 to the lower people are not killing. All in the middle India are killing. Right? all in the middle India are killing. Baghdad is middle in India is under the 5 ,000 ,000 to the lower halwa, samosa and gullab javan is 18%, 20 % return on capital is more than don't interesting perfect that answers almost all my questions i'll catch you again some other time and whenever your time allows three months from now six months from now whenever i'll talk specifically newsletters which i like very much and i'll pick on that thank you so much for coming

1:15:00Nice seat. Awesome seat. Awesome seat. Very nice. Thank you. So, when I entered right, I thought you had a studio and I was about to go out. Security card is not here. Very nice. I've seen a few studios courtesy of you guys, the industry. But this is up there with the nicer studios. Thank you. I remember you first time watching YouTube. You must be rockstar on YouTube.

1:15:30Thank you so much for watching this episode. You know that you have to do three things. Number one, subscribe to us because if we have any insights given you, please, subscribe can help us a lot. Number two, comment and tell us which guests are you want to make a podcast and ask them what questions so that we can you can get better and valuable insights. And number three, this episode you can share with someone, which you will get a new learn from this episode. Because one conversation is enough for someone's perspective. I'll see you next time. Until then, keep figuring out.