NR Narayana Murthy: India's IT innovator

23:59Come on, man. Yeah, I know. You know, go with the flow. But anyway, they slowly established themselves throughout the 80s. even though it was slow going? So they entered into a joint venture with Kurt Salman Associates, which was at the time a leading global management consultancy firm from Atlanta in the US. And this was in 1987. And it was the first big Indo-American joint venture. And it kind of showed that, you know, this policy of operating in an honest, trustworthy way was a good one, that it was paying off. It vindicated that approach because I think what it meant was, the company could say here was a reliable partner.

24:36Here's someone we can sort of, you know, do business with because we understand the way they're doing business. And we, you know, it passes the smell test of how they go about what they're doing. And I'm assuming at the time going into business with an Indian company, given the kind of political backdrop and, you know, the corruption, as you said, it was kind of a big deal for an American company. Yeah, but in fact, it was the American company which actually collapsed. And the collapse of the American part of this joint venture almost pushed Infosys to the verge of collapse. So one of the founder partners of Infosys quit, but Murthy managed to convince the others to stay.

25:09And within a year, they regrouped, and there was another offer on the table to buy out the company for basically the equivalent of$1 million. OK, so they've been offered$1 million to sell the company to someone else. At that point, Murthy's share of the company is worth roughly$166 ,000, one-sixth of a million, basically. So still a long way off being a billionaire. and every other founder is ready to kind of sell up. This is the point at which I would have cashed out, by the way. But again, Murti says, no, let's stay. So they've been offered a buyout. They turn it down. In 1991, India's finance minister then launched a programme of reforms, which is a big economic liberalisation.

25:51And Murti himself says this was a pivotal moment in both unlocking investment in India and the growth of Infosys itself. Yeah, he said if there's one shining example of the good that came out of the 91 economic reforms, it's Infosys. And they saw an immediate impact from this. In the years following those reforms, Infosys' revenues were doubling or tripling every year. And tech developments happening at the same time in the 90s allowed Infosys to become a world leader in outsourcing. Yeah. So you've got highly technical, highly educated people in India who are prepared to do work for a fraction of what people in Western companies are getting paid.

26:30So it becomes a no brainer in a way to say, I'm going to sort of do this over there. And the outsourcing revolution gets into full swing. And it's also because of the Internet, right, that enables them to be connected to an office in India hours and hours away from the main headquarters in the US. Yeah, although the internet was not then in 1991, is not quite the internet that we know today. But you could say, work on this project and you could get the final code back to the US company, having had it worked on over in India. And Indian workers were actually up to 30 times cheaper than those in the West.

27:08Yeah, this is in a way, globalization in action. You can see why it makes sense for companies, they get the same work done at a fraction of the price. but of course it's not without its drawbacks and the whole outsourcing thing becomes quite controversial both economically and for consumers who are either put through to call centres in other countries and politically and economically it becomes a bit of a football. Yeah, because politicians aren't happy about domestic jobs being moved overseas. They see it as competition with the people who vote for them. And Infosys actually gets criticised by American politicians later on in the story for doing exactly that.

27:46They try and make amends for that and will establish US offices, as we'll see as we go through the story. But it lists on the Indian Stock Exchange in 1993, and it was among the first companies in India to introduce employee stock options, which is something we've discussed before, which is giving your employees the right to buy shares in the company at a time in the future, at a certain price with the idea that if the company goes up in value, the right to buy at this lower price will become incredibly value and you can make big money. It's an incentive for everyone in the company to make the company as valuable as possible.

28:23Right. And in fact, that stock option plan came up when we were discussing Bill Gates and how Microsoft and the employees at Microsoft were incentivised to make that the colossus that it is today. And weirdly, Murti is sometimes called the Bill Gates of India. But the IPO wasn't popular initially, right? I mean, it actually looked like it was being undersubscribed. It didn't find any takers at the initial offer price of 110 rupees a share. So the lead managers at Infosys had to pick the shares up at a discount. But fortunately, the management at Infosys convinced some big names to back them at this lower price.

28:59Including Morgan Stanley, the big American investment bank, which ended up buying 13 % of the entire company. And that turned out to be a great move because the shares, when they finally listed, they went from 95 rupees each to 160 on the first day of trading. So, Merti and those others and Morgan Stanley all made a lot of money on day one. Right. And Infosys was growing. So, it grew to 700 employees. It was making revenue of$18 million monthly, mostly from the software exports. Infosys' customers for its programming at the time included General Electric from the US, Reebok, which is based in the UK.

29:39And Merti said that today we're competing on quality and productivity and not just on cost. So they're not getting rich and successful just because they're outsourcing. It's about what they're able to offer to people. They're not just cheap, they're technically proficient. And in 1995, he set out an ambition to be a$100 million company by March 31st, 2000. He said he wanted to have 1 ,000 rupee millionaires among our staff here. That's 1 ,000 millionaires in rupee terms. And then he said in US terms, we probably have around$50 millionaires here today. That's 50 millionaires in dollar terms. And Murti, given he was the head of the company, was definitely one of them.

30:16So in 1995, we can confidently say Narayana Murti is a millionaire.

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32:51so how does he get from a million to a billion to get on our list well on 11th of march 1999 infosys makes an even bigger move it becomes the very first indian company ever to list on nasdaq i used to know what nasdaq stood for national association of security dealers and something um but anyway it's the go-to place to list your shares if you're a technology company. All big names that we know today, Facebook, Amazon, Google, that's where they started. NASDAQ became the home exchange if you're a technology company. So it's a big deal if you get on there. And he actually paraphrased Neil Armstrong, saying it was a small step for NASDAQ, a giant leap for emphasis in Indian software.

33:34And what it does do, once you're listed on somewhere like NASDAQ, you are expected to behave and to present your financial results in a fairly disciplined way. Murthy said the listing brought submission to the discipline of an international financial framework. And not only that, but if you ever see the NASDAQ exchange, it's got all these little four-letter abbreviations for them. And being on NASDAQ gives you visibility in corporate America. And it's a great bit of advertising. It's a bit of a stamp of legitimacy as well, right? Because you have to be legit to be listed on NASDAQ. And in fact, you know, NASDAQ were chuffed to have them as well because they wanted to have international companies.

34:16And they said that Infosys is the epitome of what we want a NASDAQ listed company to be. And Infosys kind of becomes this gold standard for technology outsourcing because Merti's insistence on doing business by the book, you know, not paying bribes, like not operating in those legal grey areas, is paying off for them. Yeah, because basically people say, I hear that outsourcing some of our technology to India would be a good move. I've got no idea where to start. Where's a brand I can recognise and have some trust in? So they become the trusted partner for both American and European companies. So Infosys had revenues of$121 million the year before they listed on Nasdaq.

34:58But in the first six months of trading, Infosys shares had quadrupled in value. They brought their market capitalisation, that's the value of the whole company, to$6.7 billion. So he was certainly a multimillionaire in 2000 and was being described as a near billionaire in the press. And 270 of his employees are now US dollar millionaires. And those are employees who are presumably mainly based in India. And, you know, Murti's stated goal of being a compassionate capitalist who brings prosperity to India seemed to be kind of paying off. Yeah. Growth continues pretty much unabated. And in 2002, Narayana Murti hands over the chief executive role to Nandan Nillikani, who was one of the original founders, and Murti becomes chairman.

35:44But still, Infosys is continuing to do well. Profits are rising. In 2004, Infosys posted$1 billion in total annual revenues, a one-third increase in revenues over the previous year. So they are growing fast. And also this happens to be a big year personally for the Murtis because this is the same year that his daughter Akshata meets a certain Rishi Sunak who is studying for an MBA at Stanford University in the States. Akshata was also studying the same course as Rishi Sunak. Stanford University, it's a factory for producing technology whizzies. And those US business schools have become a magnet for children of rich and successful people.

36:29In the old days, everyone would go to like Oxford or Cambridge. Now the actual top of the tree is sending them to American business schools. Well, I wonder if Rishi Suno at the first Stanford business school prime minister we've had in the UK. I think he is. Yes. Suffice it to say, it's listed in the NASDAQ. It's a trusted partner to loads of American and European companies. The company is a global player now. But this success also brings a lot more scrutiny onto the company, right? Because at the same time, there's this huge political debate erupting in the States over the job losses caused by offshoring the outsourcing of work overseas.

37:07And this spells serious trouble for Infosys. Yeah, because it's getting two thirds of all its revenue from American corporations outsourcing some or all of their operations over to India. And Murti kind of tries to alleviate these political concerns, saying that these concerns are normal, but, you know, outsourcing is here to stay. It's part of the new global economy. But he makes concessions, right? He has to kind of show politicians in the US that he's willing to invest in the country. Yeah, and he wants to show that the US can get something out of it as well. So he establishes a consulting unit in the US that employs 500 workers.

37:42So he's alive to the political sensitivities. But in 2006, he stands down as chairman after reaching the company's official retirement age of 60. Yeah. I mean, there's a lot of billionaires in our list who refuse to retire. Yeah, Rupert Murdoch was in his 90s when he stepped down. And one also imagines he's still doing a bit of backseat driving. So is Murty to a certain extent. So between 2006 to 2011, he served as non-executive chairman, chief mentor, which is an interesting position. But his official departure came during the Silver Jubilee year for Infosys. Yeah. And which is amazing to go from$1 ,250 or$250, whatever the number we, so to basically a multi-billion dollar company in just 25 years is quite an achievement.

38:29And it was an event marked with a massive big party on their spectacular new campus outside Mysore, which is about three hours from its headquarters in Bangalore. I highly encourage you to Google what this campus looks like because I looked it up and it is spectacular. I mean, it is crazy. It looks like the White House on steroids is how I would describe it. It's like, imagine how big the White House is and just kind of stretch it out for about several more miles. So it's every bit the kind of shining temple of technology of a confident India, which is a major part of the global technology ecosystem.

39:07And in this televised extravaganza, Infosys becomes the first company outside America to open the trading day on the Nasdaq stock exchange by ringing the bell. Remotely. They do it remotely, though. I mean, that in a way is kind of sending a real message, which is that's almost like globalization, outsourcing, remote working in a nutshell. Yeah, very symbolic. You can imagine the marketing team was having quite happy when they came up with that. Delighted. And the company founders, they all wore their blue emphasis T-shirts. They had the images were projected on the NASDAQ building right in the heart of New York's Times Square.

39:41A massive moment. And when he left his role of chairman, the company had 70 ,000 employees, three billion a year in revenue, had offices around the globe, you know, everywhere from Atlanta to Beijing to London to Sydney to Tokyo to Zurich. It's an empire. Stockholm, Stuttgart, you name it. And Mertie's retirement came in the same year that Forbes pronounced him a billionaire, estimating his wealth to be 1.2 billion. So in 2006, he is a billionaire.

40:18What happens once he hits that billion and goes beyond it? So in 2009, he sets up Catamaran Ventures, which is a venture capitalist firm. And his daughter, Akshata. She runs the UK arm of the company, but the firm is funding startups in India at that time. And Murti is personally involved in it. He says he's in touch with many of the entrepreneurs. They send them his business plans. They do angel funding, early stage funding, mezzanine and late stage investment in every single sector of the economy. And although he hasn't quite done with Infosys, although he stood down completely in 2011, he makes a bit of a surprise return in 2013 as executive chairman and director.

40:58As Infosys is going through a bit of a rocky patch, they bring in the old guard. And he also receives criticism for breaking one of the company's core principles, which is no nepotism, as he takes his son Rohan on as vice president. That's interesting, isn't it? Because he made a big deal about that in his early years. But to be fair, he only stayed in the company as long as he was there. When he stood down after the year, when he came in to do a bit of troubleshooting, Rohan left as well. But he still stayed on as chairman emeritus, as an honorary title. And he's remained vocal about the company.

41:31I'm sure actually internally there's probably some very frustrated emails flying around about Murti's involvement. In 2015 there was a scandal on an acquisition and usually high severance payment packages were being given out and Murti actually wrote to the board telling them that they had to make these investigations into whistleblower complaints public so that everyone could see them. And yet again in 2017, Merti was in the news again for raising concerns over alleged corporate governance lapses at Infosys, which the company denied. He clearly feels that without his watchful eye, some unsavoury practices are beginning to emerge in the company.

42:08Or in other words, he can't let go. Yes, it might be. And his fortune doubles in 2021 because Catamaran Ventures sells a stake in a venture with Amazon India. So his wealth, according to the Forbes Rich List, goes from£2.8 billion in 2020 to£4.35 billion in 2021. So a huge jump in wealth there. So at the end of our story right now, he's worth around$4.35 billion. But now we come to the point where we judge him. Where does Murti score on our good, bad billionaire metric?

42:58and there's a bit where we judge everyone based on categories like wealth rags to riches and we score them on a score of one to ten so we start out with just wealth and it's not just how much it's sort of how you wear it how you spend it how you flaunt it whether you flaunt it so So four and a half billion dollars. He's not near the top of the tree, a very respectable fortune nonetheless, but he certainly doesn't flaunt it. No, he doesn't. And actually in a Guardian piece, which profiled Murti after Rishi Sunak came to power, it says that he lives in the same Bengaluru flat with his wife, Suda, that he did decades ago.

43:34He drives a small car, he clears the dishes, he cleans his own toilet, which is pretty rare given he's a billionaire. No hot couture, no lavish holidays, no private jets, no swanky homes, no luxury brands. Everything about them is low-key. It's interesting, isn't it? Because his son-in-law comes into quite a lot of criticism about the way he spends his money. But anyway, no high life for him. So how would you score him? Wealth, middle of the pack, five. Yeah, I would say maybe even a four. I can't think of many of our billionaires who still live in apartments. Yeah, you're right, actually. Given we go up to sort of 200 billion plus, four and a half is not near the top of the tree.

44:12So I think you're right. I'm going to agree with you. Give him a four. So it's a four out of ten for him on wealth. But what about rags to riches? The journey from being born under British colonial rule in India to becoming father-in-law of the British prime minister 75 years after partition. I mean, that's a great story. That's great. That's the biopic. Yes, that really is. It's not quite rags. You know, he was well educated. It's not like Oprah Winfrey, who literally did wear rags, but he's come an awfully long way. It's the prime minister's father-in-law bit when you start under British colonial rule.

44:49That's the story arc rather than the actual money arc. One thing that also needs to be mentioned is that he belongs to the Brahmin caste, which is the highest caste in India, usually the caste that accrues the most amount of wealth, opportunities, etc. But it's officially banned, right? But it's officially banned in India. But some would say, well, many people would say, still continues to affect regular Indians' life chances and opportunities today. But nevertheless, he started a company... At 35. At 30, just before... Which is relatively late in the game. Late in the game. But grew it from being, you know, almost impossible to have investment and a relationship with US and European countries to being an established part of the technology ecosystem.

45:33So I'm going to give him... If Oprah Winfrey's a 10, this guy's a 7 then. Yeah, I would give him a 7, given that the bar is established quite high because of Oprah. The Oprah bar is very high. Do have a listen to that one. It's well worth it. And now for Villainy. Is he a kind of textbook cartoon villain? I think quite the opposite, isn't he? Yeah. I mean, he stood out in a country whose business world was renowned, rightly or wrongly, for being nepotistic, corrupt, bribery everywhere. He set out to do things slightly differently, honour with profit, play it by the book, make it India's most respected company.

46:14They had a value system about how it went about their business and that made them a trusted partner, a reliable partner for US and European companies. And I can't see any personal scandal where he's embezzled any money or sort of done over his business partners. in fact he made them all rich so um i'm going to give him a one for villainy yeah you know what sticks out to me speaking of nepotism is the fact that you know he set his store out quite early on you know no corruption nothing like nepotism etc even when he went back on that and he brought his son in he took him just as quickly with him when he left yeah and when you look at some of the other billionaires we've spoken about you know we've made these big dramas out of successions and you know issues like who are you going to hand the firm over to you know we talked about this if bernard arnaud auditioning his own children to take over lvmh and you know someone like murty comes along and so he points out actually nepotism is kind of bad right we shouldn't be giving our companies to our own kids or even letting our kids have anything to do with them you know he's a really principled guy i think that's from what you know from from the publicly available information this guy is not a villain no and actually i think some employees have actually seen murty fixing small electrical problems in the office canteen.

47:29That's great. So he's clearly a humble guy. Wouldn't it be great to be one of those great scenes when someone comes in for their first day at Infosys and sees some guy there fixing someone's computer or whatever and thinks they're the kind of IT troubleshooter? Excuse me, getting out of the way. It's actually the guy who founded the company. Having said all that about nepotism at Infosys, he also did get Akshata highly involved with catamaran. And also she's got about£700 million worth of Infosys stock, which is why the Merti Sunaks are the richest family ever to live in 10 Downing Street. But that's like, it's less than 1 % of the company.

48:06So I don't know. Look, this guy's not a villain, is he? So let's give him, I'm going to give him a one for villainy. Yeah, I'm going to give him a one too. I'm not going to give him a zero just in case anything comes to light after this podcast is aired. We're hedging our bets. Hedging our bets, I'll give him a one. One out of 10 for villainy, now for philanthropy. So Murti is actually on record as saying that the real power of money is giving it away. He's done a fair amount. In 1996, he helped found something called the Infosys Foundation that supports projects in healthcare, education, rural development, etc.

48:38And he, in addition, requested employees to contribute one day's salary on a voluntary basis. And they did something similar after 9-11. In fact, I think they were the first Indian company and one of the few in the world outside the US to contribute to the Fireman's Fund for the fireman who died at 9-11. And the foundation has donated clothing, medicine, food to victims of the Indonesian tsunami. But he's no Chuck Feeney, is he? The other thing that kind of irritates me a bit sometimes is that he gave$5.2 million to Harvard University and the Harvard University Press to establish this publication series It's called the Murti Classical Library of India.

49:20And I know, obviously, he's raising the profile of India at a great academic establishment like Harvard. But when people give money to Harvard, I go, these guys have got plenty of money, you know? They're swimming in it. The Harvard Endowment Fund is something like 15 billion. I have to check the numbers. But it's many, many, many billions. So I always have a problem when they leave money to Stanford or Harvard. He'd be much better off leaving money to universities in India. Yeah, I think that's probably right. And for all I know, he does. I mean, the stuff we know about his philanthropy is probably not exhaustive.

49:51He also has a foundation which supports the Infosys Prize, and this is an annual award for scientists, researchers, or engineers, and it's one of the highest monetary awards in India to recognise research. You get a gold medallion, a certificate, and prize money of US$100 ,000. US dollars. So on philanthropy, I suppose he would want us to consider his approach to compassionate capitalism as part of, as a form of philanthropy, right? In that you create jobs and you create wealth and opportunities as a way of kind of distributing money in a way that philanthropy can't. Yeah, right. Raising all boats, everyone's better off as a result.

50:32I mean, you know, questionable whether they should be in that bucket. But I think that he would want it to be in that bucket. I don't know. I'm going to give him a four. Yeah, I mean, I'd give him a three. Okay, three for you, four for me. Power. Well, this is interesting, right? Because I think that even though if you're a British listener, you might be listening to this and only knowing him really through the Rishi Sudak connection. In India, he's a huge deal. Yeah, when he talks, people listen. He certainly can pick up the phone to politicians when he wants to. We know he could certainly pick up the phone and call one politician in the UK.

51:05That's for sure. That's true. He's got a hotline to number 10 Downing Street. Power, I don't know. He's no Rupert Murdoch in terms of influence. So I give him three for power. Right. Within India, I would say he's probably what, like a seven? But outside of India, probably four. That's true. That's a good distinction to make. So what's the difference between that? Five and a half. You said seven and four. Seven and four. You're getting him five and a half. Yeah. Okay, that's our first half point. Because I wanted to do the fancy maths. Okay, well done. Okay, so I'm going to give him a three. You're going to give him a five and a half.

51:42And then legacy. And this one I think he does score highly on because he's often described as the father of India's IT boom. Right, India's Bill Gates. India's Bill Gates. And there's no doubt that he pioneered the idea of outsourcing using a highly articulate, educated, hardworking Indian workforce and mobilising them for the benefit of US and European countries. Now, obviously, there's a mismatch in terms of pay there, which they exploited. And you could say that's exploitative in a way. But it did help create India and Bangalore, Bangalore, to be one of the recognised outposts of world technology.

52:24Is it fair to say that so many of the things that we now take for granted, you know, that, you know, sometimes you call a bank or you call a company, the call centre will be based in India. those kind of quirks about modern life, they wouldn't have existed without Infosys. No, he certainly would have been in the vanguard of doing that. I think you're right that, you know, obviously it helps companies be profitable. Some people get quite irritated by it. It's worth saying that outsourcing is not popular. It wasn't popular in the US and Donald Trump had problems with it. But it has revolutionised India as a country, I would say.

52:56You could say he's riding the wave of globalisation. But in many ways he's driving it as well. So he could take some personal responsibility for it. So for good or ill, that kind of globalisation of human capital and outsourcing those kind of things became a feature of the global economy. and it's part of the story of India, which is now more open and more outward looking and is already a huge economic superpower, is now the most populous country in the world and could well have a bigger economy than the US in 20 or 30 years. And I think what scores him quite highly for legacy for me is the fact that for a while he was just an outlier, right?

53:39He wasn't doing things the way that people normally did business in India. He refused to work in those legal grey areas. He didn't want to be part of a kind of business system that was rightly or wrongly renowned for corruption and bribes. So he was kind of forging his own path for a while. He wasn't just riding the wave. Yeah. So I think on legacy, he scores pretty highly. I think he's something who's left his mark on India for sure and actually on the global economy. So I'm going to give him an eight. I think for what he's done for India alone and what he continues to do actually probably as a symbol of aspiration to show that you can compete on a world stage, you know, even at the relatively advanced age of 35 onwards, I'd give him a nine.

54:23OK, fair enough. OK, eight from me, nine from you. So our final judgment is N.R. Narayana Murthy good, bad or just another billionaire? Oh, I'm torn between. Well, actually, you know what? I'm going to say good because for someone who still lives in the same apartment with his wife, refuses to take the private jet, washes his own dishes and yet has left such a huge mark on his own country and has really helped to generate so many jobs and been a kind of symbol of aspiration. I mean, he has to be good, right? Yeah, he has generated a lot of jobs. He might have also costed a lot of jobs in the companies which outsourced them to India.

55:02But I agree 100 % with your analysis. I think you were pretty comprehensive there. So I think that good news, and we won't get any hostile calls from 10 Downing Street press office. I think that the father-in-law of the Prime Minister at the time of this recording is a good billionaire. So who do we have next week? The Oracle of Omaha, the greatest investor of all time. You probably know him. He's called Warren Buffett and he has not budged an inch from where he grew up in Omaha, Nebraska. Still lives in the same house he bought in 1958, despite being worth$120 billion. Thanks for listening to Good Bad Billionaire.

55:48This podcast is produced by Hannah Hufford and Mark Ward. James Cook is our editor and it's a BBC audio production.

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