Investment Advisory Service

Monday, 26 February 2018

2 Thought Leaders


In Ernest Hemingway’s novel “The Sun Also Rises”, there is a dialogue “How did you go bankrupt?”
The response is “gradually and then suddenly”.

It is so apt.
While reading about NPAs and the resolution process, I read a column written by Dr M S Sahoo- Chairperson of the “Insolvency and Bankruptcy Board of India (IBBI)” where he quoted Hemingway.
I was immediately drawn towards Dr Sahoo’s writings and found them here. You can find them under the resources tab.

Dr Sahoo delivered Dr R H Patil Memorial Lecture where he talked about important concepts of -

1.     Institutional Environment
2.     Institutional Arrangement

Using an example of stock exchange and anonymous screen-based trading system-he explains the above concepts in a lucid manner.

Another important concept he touches upon is that of Economic Liberty with an example of how 4 persons received show cause notices from the competition authority.

“Different conducts can invite the same outcome under economic laws and the same conduct may yield different outcomes in different contexts. So, it is not so much the conduct, as the context- who, why, when, what, where and how- of the conduct that matters. Rule of reason to guide economic liberty.”

This helps me to further understand the case of Intellect Design Arena which I wrote about in my last post. It is not the conduct alone but “context and conduct” meshed together which matters.

Dr Sahoo spoke very highly of Dr R H Patil – the “Father of National Stock Exchange” and how his thinking got shaped by Dr Patil.
I read up on Dr Patil and came across this beautiful interview in Moneylife magazine.

Some excerpts:

“After the Harshad Mehta scam in 1992, the government was groping in the dark about what to do…G.V. Ramakrishna was the SEBI chairman. The finance ministry had called a meeting and I only got to know what was to be discussed on reaching there. Montek (Ahluwalia, then finance secretary), Dr P.J. Nayak (then jt. secretary and now chairman, Axis Bank), Mr Ramakrishna, Mr Nadkarni (IDBI chairman) and I were present. The concept of NSE was born at that meeting. We wanted to do things differently. We discussed setting up a professional organisation with screen-based trading, a weekly settlement system, etc.”


I then said, “I want to move over to NSE.” The company had already been formed and I was a director on its board. He was shocked. He said, “People aspire for power and you are saying that you want to go to an entity which nobody is sure if it will succeed or not. Aren’t you taking too much of a risk?” I said, “Sometimes one should take the risk.” He said, “Are you sure you want to take a risk at this age?” I said, “It is only at this age that I can take the risk. Both of us -- my wife and I -- have been earning; we both lead very modest lives. We have decent savings. If we continue to live modestly, I can take that risk.” In fact, many people said that I was a fool. But my own feeling was that, once you retire from IDBI, who remembers you? So, I decided that it does not matter whether or not I succeed in setting up NSE. My grandfather used to say, if you make a whistle out of a carrot, it is good if it plays; and if does not, you can always eat it.”

“As someone who creates new markets, where do you invest your money?

In RBI bonds and in mutual funds - there too I invest in FMPs - so no risks. You need a different mindset to take risks. I prefer to devote my limited energies to do things that are more productive, especially from a social point of view. I have tried to create a world to protect others’ risks -- (laughs a lot) - that too through systems and design. Remember, systems and design only. After all, what are margins? They are walls so that the speculators don’t jump into the sea.”


Amazing clarity about building institutions, risks and priorities in life.

I am sure the readers will feel motivated- as I felt- after reading about the above thought leaders. They help us build layers of understanding and shape our own personalities.