What would RTH do?

That is the question.

If I were in a highschool yearbook, they would vote me most likely to die of a lynch mob. That does not prevent me from opening my mouth and serving a warm hearty cup of STFU to people who deserve it. My dark scathing humor will leave no matter of existence untouched. My innocence will touch your soul.

Welcome to a warped world turned inside out and upside down. All sorts of discretion advised.

Saturday, July 14, 2012

Murders & Executions

Or Mergers & Acquisitions as the rest of you insane folks know them as. Patrick Bateman, the American psycho was right about it, there is little difference between the two. Whatever you choose to call them, I'm writing this to let you know that the whole process is stacked up against desis. Actually, I consider the process beneath us desis but people may mistakenly assume that the process is against us.

Case in point, our Managerial accounting finals was a Murders & Executions problem in two parts. The first part being the seller's perspective and the second part being a buyers perspective. The sellers part went very well. When it comes to selling we are adept at it. Exuberant optimism runs through our veins. We live in the belief that our cricket team will win every match, that our favorite actor will produce one hits after another and that you hit the jackpot every time you play. That is why we have no qualms having people sign away their fortunes to buy crap, because we sincerely, hopefully believe that all crap is worth a fortune. So when it came to offering up a firm as the goat to its execution, I got the price right.

Turn the table around though and we lose it. When it came to buying the firm, our professor calculated 600m and its ballpark to be the right answer. As for me, I calculated 200m and still was left with the restless feeling that I'm bidding too high. Murders & Executions don't make sense to us. Why anyone would go to great lengths to acquire a company is beyond us. Synergy, economies of scale and scope, diversification, revenue growth, all sound great on paper but don't seem to have any practical bearing. Any true blooded desi would balk at the idea of paying millions of dollars to buy anything. Even if it were El Dorado the city of gold at a bargain price we would balk and hesitate. This is the realm where our optimism turns to cynicism.

It appears that a lot of western executives are driven by hubris and competitive killer instinct. They like to win and win big. If they see something they like, they want it and will go at any lengths to get it. Two firms chasing the same start up can generate a bidding war that results in paying twice or thrice what something is worth. Even though most murders and executions fail miserably, they still walk around flailing their executioners Axe in a blood lusting frenzy felling everything in their path. A perfect murder or a meticulous execution stokes their ego.

We desis come from a whole different perspective in life. Barring a few of us who are immensely lucky, most of us come from very humble beginnings. That is why we tend to be a very miserly lot holding onto our hard earned possessions like Gollum. Our precioussssss! Back home in India our fine China and cutlery was for display purposes only. In fact it would not even be displayed. It would be safely packed and stored for some important occasion like when the Queen herself might drop by for a cup of tea with a hint of lemon. Even if we were visited by the President of the United States, we would probably just whip out our tall  glasses and small plates into which we pour the hot tea for slurping. I miss slurping tea and drinking water from the very practical, durable, ever lasting, unbreakable and ugly as fuck stainless steel glasses. There is just an extra dash of flavor that illogical neurotic frugality can add.

When it comes to frugality, my grandfather was an inspiration. He was a mister fix-it man. He never through away shoes and sandals if they broke. He had his own stash of glue, shoe nails, leather needles and twine to fix shoes. As a child I remember learning to glue and nail back soles that were coming off, fixing tearing seams and stuff like that. Even if things were broke, he never threw them away. He would always pull it apart and try and figure out how to fix it. It was quite a sight on weekends to watch him sit at his desk with something torn apart trying to fix it. My grandfather was quite something. He didn't trust anything to third parties. To save money he bought books on all sorts of subjects and tried to make himself an expert. He was convinced that he could turn himself into a dentist, doctor, auto mechanic, handyman, attorney, financial advisor all rolled into one so he could save millions. 

As a teenager the prized possession in my room was a color television from way back in the day when color television came first in India. It had a wooden frame and eight hunky steel buttons tuned to the rabbit ears of the day. Rigged to one of those buttons was a cable box so we could access hundreds of cable channels through one button. To watch cable I had to go to the back, gently prop open the TV and connect the cable wire to the box. I'm not sure how it worked actually. My dad had set the whole thing up. I have a huge flat screen TV now, with a surround sound DVD system, but my chest does not swell with pride the way it did showing off the literal junk of a television with grainy picture quality that was miraculously showing hundreds of cable channels with some very nifty fix-it job that my dad had done. I took great pride in showing off to everyone how it worked.

So you can see why 600m for buying a company is far too excessive. It is a number that I'm not even evolved to process. Trying to acquire a 600m company is like buying a top notch home theater system of the latest technology and design. It would be immensely satisfying and worth the price, but why would you when you can possibly get an alternate for much less and actually has a satisfaction quotient of infinity. Our hubris does not come from acquiring the finest, but deriving pleasure from junk.

Indians also bargain like no one can. It comes from the frugality syndrome above and the fact that we believe that there is always an undisclosed catch expense. If you quote a price to me, I'll offer to pay you 1/4 of it an negotiate furiously till you reluctantly sell it to me for half the price. I''ll walk away if it is too high with no remorse that someone else can have it. With no regrets even if I find out that I let go off a great bargain. Money is my precious. Granted the good life in America has made me indulge and spend a lot more than I did as a teenager. Deep down though, I'm still a true desi.

So let me walk you through the mind-frame of a desi executioner when you trying to sell your 600m pharmaceutical company to their firm. Obviously you are delusional, tooting your own horn and embellishing. We offer to pay 200m. You tell us that there are several aggressive bidders vying to buy you out. We think you are desperate and hiding a devious catch. We offer a 100m instead. You tells us that the drug is a miracle drug and will rake in billions. Now that gets our thinking juices going. What we will do is leak to our rivals that we are aggressively bidding 700m for your firm and want it. Hopefully, they will buy your overpriced junk for at least 800m. Now with half the 100m we are willing to bid, we can bait, lure and bribe your key scientists who are making this miracle drug happen. For the remaining 100m we build a small factory, hire some brilliant chemists, compounder and loyal desperate for work degenerates on the subcontinent. As soon as FDA approves the drug and it hits the market, our knock of factory is making the drug for less than half the cost thanks to your easily swayed scientists. Our packaging and everything almost matches what you have. Yeah, the drug will have a stronghold in USA and make the billions your promised. But USA is not the only market. There is a whole world out there that does not have access to quality drugs, people dying because they can't afford to save their lives. They will be happy for cheap knockoffs. Our ROE will be much better than yours as we didn't throw the 600m.

Now thats murders and executions bitches! Desi style! Pharmaceuticals, designer jeans, expensive equipment, the latest gadgets, you make the products, you merge and acquire companies - we make the knock of millions baby.

It sound unethical. It sounds wrong. It sounds unfair. Someone else steals the credit for the hard work firms put in to make things happen. It punishes innovators, pioneers and great inventors. However, in the grander scheme of humanity is it really that unfair? There are millions of poor people in Africa, Asia and South and Central America. Millions of people who can't afford medicines, can't afford luxuries or do things the western world takes for granted. Many of them bust their backs in sweatshops so that the western world can wear fancy shoes and clothes, play with their latest i-gadgets. Is it really that unfair that some enterprising ones amongst them build a knock off empire. The thing about knock off empires is that they don't even erode the market share of the maker or steal their profits. They serve a whole different market no one would care to sell to. Wall street actually carries out the murders and executions, bringing down the world for common man everywhere. The frugal, miserly, deviously cunning, diabolically deceptive, dishonest, lying, cheating, third world entrepreneur is actually merging benefits and acquiring opportunities for forgotten people.

The entire sentiment is hard to explain but quite eloquently and wittily portrayed in this SRK song.

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