Core Human Motivations | Kunal Shah | Knowledge Project 141

0:00 you'll rarely meet successful people who are not insightful uh i believe that inside is the smallest unit of truth that is actionable uh and and therefore people who operate in the currency of insights tend to be generally more successful at least in business [Music] you grew up in a business family and i'm curious as to what lessons you learned through that so um in india we have a deep rooted caste system where we had forecasts

0:46 and one of the cost of the forecast is the business cost and for multiple generations everybody in that has only done business right it's called the weisha or the baniya cast and for this group of people jobs is an unusual thing they are uh like for lack of better examples like the jewish family uh it's quite common for them to be doing business and they started dabbling into jobs in a more recent history uh that's a similar thing that we had in india so the the few lessons that were learned is that uh actually i i have a longer list if i

1:32 zoom out into what makes people do business successfully but i think first lesson was uh they have much lower shame than the other communities they have very little uh self uh doubt when it comes to being shameless and i think naturally they are more they are very hard to offend they are okay that even if you mock them as long as you are giving them business they're okay with that not many people would be okay with that treatment right and and makes many business communities not respectable

2:18 because they're okay to be mocked or have lower dignity or lower status as long as they get the the financial upside of it so i think that's where the status and wealth driven societies mindset comes in that they are absolutely okay to reduce their status as long as they win the commercial side of the deal that's one big lesson the second piece is just natural understanding of where is the value in everything why would somebody pay for it is almost intuitively taught from childhood you just know what are people really paying for right and a natural understanding of which products would have higher gross margins or lower gross margins right it's a very

3:06 interesting thing that when you grow up in a business family they just naturally arrive at summarizing what's the value in everything and it's sometimes very uncomfortable because i remember going to an mba school early days to speak and they invited me and i i was only interested in knowing the uneconomics of the mba school and understanding how beautiful that business is and they find that disturbing but for a business community they love to break things down to unit economics almost as if it's like a first like the small talk is unit economics which is which is quite interesting the third lesson is uh natural need for spotting trends so one of the things that is there i am

3:52 part of the gujarati community which is the business community of india and they have this greeting when the two business people meet normally people say hey hello how are you what's up they have one more thing which is called shu nawajuni which means hey what's trending what's new what are the new trends and they share that on a more regular basis which makes them spot new trends and be in businesses that other people would take a long time to enter into because they love the new new trends because they believe that the value is going to be where they are less likely to have competition

4:38 and they are constantly finding themselves to be at different places gujaratis are also the people who have you will find them in every single country having set up a business because they will keep finding ways to not compete so you will find them in a remotest african country there will be a gujarati family running a business multiple generations you will see them across the planet because they will look for ways to not compete and have a zero sum mindset and the last thing is uh the community benefits uh one of the things i have noticed in gujarati community is that just like jewish communities that they offer significantly lower interest rate to people in their community because

5:23 banks are less likely to underwrite and obviously this is pre-venture capital to give them loans to say it's okay try to make something out of it and try to return the capital when you can but a very low interest rate just nominal because they love to see more people be successful and the last lesson was uh constantly having the need to make their community successful by giving them a soft landing if their business fails oh it's okay come start doing a job stabilize and start again right and and i think uh when i started doing job i mean my early career was uh

6:08 my dad had a startup that failed so i had to start working since i was 14 or 15. my first job was a data entry operator which made like i don't know uh more like 30 dollars a month kind of a salary when i started and i think uh there's always this thing that okay you can start do the job right now stabilize the family and then you can start some business like there is no shame that oh you are just helping the family settle down from a financial setback that the family went through and i have seen within the communities people going all in getting wiped out becoming big in one lifetime again and again and there is less shame attached to failure

6:55 because oh it's business and and it's fascinating like i have seen so many stories like i'll tell you about one particular individual his name is princeton reuten he's the founder of bombay stock exchange and very few people in india know about this guy the reason people don't know about this guy because he once upon a time was the richest guy in india he still probably holds the guinness book of world record for doing the largest ever trade single trade adjusted to inflation uh it's in his wikipedia but he lost all his wealth in trying to do a real estate project that bombed so there is this guy who comes from nowhere starts his business below a tree becomes

7:41 the wealthiest person and gets wiped out and literally like 100 percent of indians and indian businessmen have no clue about this guy i just researched because there's a huge tower in bombay which is made like big ben and i was like who the hell made this because it doesn't have a british name it is rajabai tower so i researched and found out that rajabai was preempted mom and he made this clock for her because she could not see for her to hear time like look at the flex of the guy that he builds a massive clock in british india with a huge amount of spence by hiring british architects just to flex

8:28 to the community that i have built a clock because my mom can't see time that's crazy i want to go back to the shame thing for a second here uh the fear of failure prevents us from trying and i think that's something do you do you feel like we develop this as an adult or do you feel like when you're involved in a business at a very young age you get exposed to this because you're going to fail if you're doing anything you're going to fail and that's okay and that's part of business and you just keep going and you keep iterating and you keep trying whereas when we become adults and we try something we don't want to look like an idiot we're scared to look like an idiot i've thought a lot about shame as a topic

9:13 i think a lot of people who have been bullied and shamed and mocked early in life develop an unusual superpower to not give a damn about being mocked anymore right uh it's not surprising if one would say that hey elon uh the way you are were you mocked a lot when you were younger because you were not a normal guy and and one would even say that you look like a guy on the spectrum and the guy would probably say yeah probably true but he doesn't feel that anymore right so what i noticed about is the training of kids if we train kids through shame let me give you an example let's say you tell them hey in india it's very common that people will say oh if you do not

10:00 score well all your friends will make fun of you all the relatives will make fun of you everybody is going to look down upon you and they will say shame shame right and when kids are trained through shaming it's an effective tool to make them better the only problem is that it remains as a long-term bug in them that they constantly think about other people's point of view about how they are and they constantly think their social status cannot be taken risk but according to me you cannot develop substance net worth wealth experience unless you're constantly willing to risk your reputation so i think people who can feel extremely okay to risk up to 30-40

10:48 percent of their reputation wealth health are the ones who propel further but a lot of people don't do that because in their head they will say i can't even risk one percent of my reputation which makes them not propel in life but some people on the other extreme are very happy to go all in so again going back to the gujarati communities i know so many families go bankrupt all the time because going all in is not scary for them in fact i'll tell you an interesting stat india has india is a very large country but the total number of people who have invested in any kind of asset stock mutual funds any of that is around 30 million 30 35 million

11:34 i would go to the extent of saying that 80 85 of people who are having more than 200 of investment in any of these assets are people from this community that's how risk covers the rest of the society is compared to these guys that's fascinating i want to go back to something you said earlier too about um how business helped you understand what the value of something is and more importantly what people were actually paying for are there any examples that come to mind when you think of that as a child so because i had to start working full-time uh i had only an option to do a morning college

12:20 which would offer me a graduation for maybe attending seven to nine a.m because i had to do a full-time job the and and i was a science student who switched to philosophy uh as my major because that was the only class that allowed me seven to nine am right so i would go for my philosophy classes and i would uh do a full-time job but that was not enough money to take care of the family so i should do a lot of side hustles right so i'll talk about three four businesses that i did as a kid and this is all before i had legal age to do anything at all one was uh i i built uh mixed tapes which are downloaded music from the internet and made mixed tapes for people on a siri

13:06 and burnt it and gave it to them and i used somebody else's computer somebody else's internet because i had no access to any of these things and i would give them take rate but i realized that people love the idea of being making something personalized versus buying something from the store which is mixtape of somebody else and and the idea of gifting they were okay to pay three to four x more than the normal mixtape that they would get from the market because this is made by me right and and i was very happy with this guy so what i did is i started going to all the music stores and i said i will make the mixtapes for your clients uh this is my price to you you can charge whatever you want and they would make 5x more profit selling my mixtapes than the the music labels thing i understand

13:52 that business was not really legal but as a 15 year old i did not know better i had to survive so i did what i had to do then i built another business which was uh henna have you seen that people put henna on their hands i built that business where i realized that people put henat to really differentiate themselves in indian weddings to really look better than i have the better design on my hands like it's almost like a temporary tattoo that people put and i realized that the biggest need people had was design was not enough the color of henna had to change so i figured out a way to build black henna which i learned from some arabic culture was possible and sold that in the retail stores under a brand that i made when i was 16 17

14:38 and that sold at 10x more price than the regular henna because it allowed people to differentiate themselves have a superior status so that's another thing i learned that people love to personalize and put a signature and give more value people love to have higher status than others and pay more value and they didn't even care about the price because what i did is i said this is short supply so what i did i said that i can only supply you two a day it's a complex process to make it it wasn't complex process i just artificially uh create scarcity in the market and i had to learn all of this because i could really not make enough uh uh because i was having a full-time job and doing other things right the other thing i learned was i i started doing some private tuitions for

15:23 kids to teach multiple subjects whatever people would send and i realized that people loved teaching their kids exotic subjects so i would like teach them excel and and i would not know these subjects i would ask them what do you really want to learn i would learn that previous night and teach them because people loved the idea of having special skills given to their kids which were not available easily in the market so they were looking for tuition teacher who would say oh can you teach this particular skill can you teach that particular skin and i would learn that and i realized that i learned the best when i had to teach so i started doing that a lot and it was the fastest way to make money it was a negative way of learning in life right

16:08 so i think a lot of these concepts made me realize that the indian society was a lot different and in my career i did a lot of other businesses which were sold to the u.s and western market and indian market and i think most western companies do not understand asian society the the mass laws hierarchy of asian society is completely different to the western society but unfortunately all the marketing textbooks are made in the west and then they come to the indian market and they get shocked on what people really pay for in these markets and i think therefore a lot of western companies struggle to make monetize from these markets they can get a lot of daus and mau's from this market but rarely

16:54 arpu from this market because they don't understand what people pay for over here so i think that was the big lesson i learned so one of the biggest shocking thing for me when i'm doing my first trip to the us was i figured that almost everybody's first job paid them an hourly salary in india nobody has ever earned an hourly salary in their entire life now there's a dangerous thing that happens because of that nobody understands what's their value per hour you ask any indian if you ever come to india and go to any store any hotel any restaurant ask the guy what's your salary per hour

17:40 cannot answer that question because of that they take poor decisions with their time and they don't understand the value of time so products that sell convenience and save you your time rarely monetize which monetize a lot in the western society because everybody understands the value of our because their first job was i don't know 10 an hour and then now they are doing well in life but they can still do a math on approximate basis now my salary seems to be 500 an hour and they just get it and therefore they take very interesting decisions they will not try to optimize for a 50 discount on their flight tickets uh

18:26 when they are making 500 because they'll say that's not worth my time no indian will ever say it's not worth my time and that's true for many asian societies because value of time as a concept was never taught efficiency is not a dna you see in asia but a flip side i have noticed is that everything that feels soulful in life is inefficient all the vacations that we find very soulful are inefficient places the food that we really really like and find soulful are inefficient to cook right so i always find these interesting things that maybe soulfulness is a function of chaos and inefficiency which western society has

19:12 figured out how to scale and and let's compare this to our religion now uh hinduism uh isn't i would say not as scalable as let's say many other religions because it's not standardized there is no one book no 10 rules no one god so what do you really scale it's an open source religion which people make and built on some principles and tenets which are constantly evolving and people are allowed to tweak it on their own terms so it's like evolving very very differently and therefore hinduism is mostly spread through birth but not through scaling to other societies because it was not designed but it is something that you feel

19:58 more spiritual about and other things and i think that's where the nuance comes in that it is impossible to imagine scaling in life without standardizing and standardizing is the enemy of soulfulness do you think standardization is also sort of um the opposite of value creation in some ways from a consumer point of view uh i would disagree with that because once you have figured out what is called as pmf you need to scale it by standardizing it to a great extent right and it happens all the time however uh standardized things are easier to disrupt than non-standardized things right

20:45 uh just a way a standardized religion is easier to disrupt than a non-standardized religion right uh one is heart to scale one is hard to destroy uh and and i like that continuum go deeper on that the hard to scale versus hard to destroy so if you think about a hard to scale businesses let's say this great restaurant you can't make a chain out of it it's just impossible right because the guy can't teach all the skills to build five chefs ten chefs right but they're also hard to destroy because if it really works there are so many restaurant that works for hundreds of years because they have just perfected that but they can't build branches they can't do but but there is a mcdonald's which has managed to scale the version right which is very easy to

21:32 attack and say hey it's unhealthy and guys we need to move away from this and break the whole concept or the sugary drinks which have scaled so much and we can all agree and say that hey it may not be healthy for you and we need to move away from that but something that is built inefficiently uh uh is harder to destroy uh because what do you destroy uh and how do you destroy them there is nothing to attack there is no uh areas of attack that you can really say that okay these are the three points on which we can attack you can't so we're slower to take hold and then it's harder to get rid of yep and and i think uh a lot of things uh that are non-scalable let's say

22:19 movie making some directors who are really known to make successful movies back to back really don't care about timelines you can't tell i don't know the best directors that oh we need to ship two movies uh every two years they will not do that right uh and i'm not saying that the others who ship one movie a year do not create value they do but you never they will never create something that is memorable and will create an experience that you will never forget so i think that's where i would disagree with the idea of value creation happens in both but the question is that what do you enjoy and what creates a memorable experience what creates an emotional

23:05 arousal is rarely through efficient uh methods for example trips to inefficient places will be more memorable sorry trips to inefficient places will be more memorable than efficient places by design do you think you you get rewarded for creating almost like an asymmetry to creating an emotional connection versus a different type of value people pay or people give you time or money where their core motivations are mostly met or there is a hope for their motivations to be met let's take this example of like just imagine this let's say all of us are on some level of social status in life let's let's say you are at level 90 i am at level 60

23:50 somebody is at level 200 and so on and so forth unless believe this is true now products and services are also at some levels in life for example i would say louis vuitton is at level 160 uh uh hbs education is at level 200 and let's imagine these things and let's say fueling your car is at level 30 and so on and so forth by design gross margins exist when you allow human beings to jump their social status and gross margins disappear when you do not help them increase their social status for example i will keep moving to a utility server provider as long as they keep offering me lower price as long as the time required and the effort required is the same

24:38 because the department of your brain that deals with that is the cfo of the brain who's only looking for cost cuts but the cmo of your brain is saying that oh my god if i crack hbs and i will be able to jump the social status and my income will multifold and therefore it is okay to spend years time money to get a chance to get into ivy league and therefore ivy league can keep increasing the gross margin with no trouble because they promise or even if they give you hope let's give example of vegas right now vegas does not assure you you'll become rich but the hope lottery uh which is a chance of being level 30 jump into level 200

25:23 i'm okay to go all in once in a while especially poor people get sucked into that a lot more because imagine it's like being on a poker table with a smaller stack the best strategy you feel to be on the table is to go all in all the time so when we went through pandemic i believe that the whole world had this amygdala hijacked moment where they said oh my god i have to really survive and i need to take more risky behavior because i think the amygdala probably flared up during this time and therefore risky behavior seems to happen right after crisis because people just go all in and i think all of these things like i was shocked when i got to know that 90 95 of all coins

26:08 that were traded on all crypto exchanges were not in the top five not even the top ten because who wants the normal returns i i just want a chance to just play that and therefore i think the the world is getting more risky and then obviously there's a huge correction that will happen uh which will kind of flow in the next stage uh because like the spanish flu we went through spanish flu and then the roaring 20s and the great depression we're going to go through those cycles faster now because we have fast forwarding everything in fact crisis is a almost like a fast forward button to future and and accelerates eventualities because we go through that but coming back to what i was saying is that value therefore is utility and vanity and chance of

26:54 increasing social status which is constantly sucking all the gross margins and world is seeing a very interesting pattern all the businesses that are providing utility are losing gross margins to the point of becoming zero because many companies that offer vanity or social status or a chance of dealing with the cmo are making those businesses almost free because you get a chance to make across sell a high gross margin services right if you look at amazon a bulk of the revenue used to be marketplace but if you see all the avatars of amazon in different countries the marketplace revenue was made to be zero alibaba chose to not charge the merchants to sell but they made money on advertising and fintech which are skin in the game businesses

27:41 but does not charge you rent per se because it was easier to disrupt ebay and amazon in china by saying oh it doesn't you know commissions if you have to sell on our store right and i think this is where i see a lot of the utility providing businesses getting constantly disrupted by somebody at least in their technology businesses because you don't need a license to provide liquidity you can just offer it it's not like an electricity company that can keep charging you forever because nobody can compete with electricity companies for the networks but internet businesses can simply offer utility for free and google has mastered this many companies have mastered this i believe uh the future of sas companies is going to be that where the next sas company will just say oh just use our tool for free but by the way we'll charge you and

28:26 cross sell you some lending some loan some technology some some value-added services uh which could disrupt a lot of utility creating businesses uh by design so i think uh [Music] cost to provide utility is dropping and therefore the revenue expectation from that is dropping and we're going through a very interesting cycle uh of how business models will evolve and they all will have to be more skin in the game in nature uh versus rent seeking that they used to be because nobody could easily compete because the world is getting more and more like apis and and businesses when they become apis it's much easier to plug them into larger ecosystems uh one of the interesting things i

29:12 always wonder about is that uh it's very easy to find super apps in asia but rarely you find super apps in uh western societies but it's also true for superstars and and super companies and conglomerates so every low trust society which is usually non-western society a lot of them are low trust there is always concentration of trust every lotus society will have concentration of trust and when that high trust entity launches 25 things people just use it for example in india tata group is this concentration of trust and they can launch a car to a refrigerator to salt to furniture and people like oh tata group we'll just buy it uh

29:58 i would say 80 85 percent of bollywood's revenue comes from like 10 15 people again concentration of trust and and therefore by the way we even watched that kid's movie so nepotism is very rampant in india because you're like oh this this guy's son i trust him to do a good job but i'm not risking my money on this new actor and therefore super apps also emerge a lot more over here i'm like oh credit is offering this or they're launching this new service boom start using it and and but you might be doing completely different business in the past but people just say oh i know these guys the familiarity creates huge amount of trust over here and therefore you see concentration of market caps in fewer and fewer companies and

30:44 therefore i believe pareto might be extremely skewed in asia versus west and nobody has obviously studied that i would love to fund a research which shows this but i do believe that market cap of top companies would be different than uh what you would observe at least in each category like tech may be an exception but any other every other category you'll see huge concentration uh revenue from the bollywood industry revenue from anything else it just becomes more and more and more concentrated and i think that is the reason i think increasing trust in the society and i've been obviously uh obsessed with what creates trust for example the most simplest answer i've found is as trust is natural in societies that have

31:31 very low diversity of ethnicity and that is a scary thought because all sorts of bad behavior have happened in human history because we tried to attack the minority and and always try to uh make the society one uh i but it's unfortunately seems to be true that trust is biological and and we seem to trust people with common belief systems and and and ethnicity plays a huge role so you'll notice an interesting pattern that i think there's a study by some stanford professor which showed that uh almost an opposite connection or correlation to number of ethnicities and high trust of a society

32:17 and and and it's not surprising that any most societies are not multi-ethnic as they're becoming more multi-ethnic the trust is declining and you see emergence of authoritarian leaders to be much much more frequent because all low trust societies always want somebody who with strong backbone to create peace and that's also the concentration of trust point which which seeps in from that which which is constantly repeating itself in many many themes so we trust people who are like ourselves and so the the more diverse society is the fewer people that are like us the more low trust we are in general that's is that a good summary of sort of yeah

33:03 paraphrasing interesting thing that i mean i think it's a good summary there's one more nuance if it becomes too similar innovation dies it becomes too dissimilar trust dies so it seems to be in an interesting spectrum that you can only have a certain mix that keeps driving things to move forward versus become stagnant and boring and too chaotic i think there is this healthy mix that needs to keep happening and i don't know what the number is but it sounds like a scary concept because you're trying to say that hey you have to cleanse the society to reorganize itself to have 80 20 on ethnicities which is a problematic concept to start with and then one of the interesting things that you said there is sort of in low trust societies you sort of have these big companies that get this this

33:50 almost like trust grant right so i can i can create products in adjacent marketplaces that people will just naturally trust on their own because they don't know who to trust or what to trust but if like facebook were to make a car people would be pretty skeptical the trust of of the platform would not necessarily carry over yeah and it's such a fascinating concept in india because it just works and and my company i've seen that and and we're in a fintech business we launched an e-commerce platform and it just becomes so big in a month's time much to most people's surprise including our investors were mostly from the western market they're like focus focus is almost a curse in asian markets

34:38 oh go deeper on that uh the market is not deep enough to focus on one market and create a large company the per capita income the total economy and all of that so you have to do cross-sell more things to the same set of customers uh i'll give you some interesting stats about india which should be mostly not known by most people up outside india less than six percent of urban indian women have financial income of their own 94 of them are currently taking care of kids or taking care of the family and not contributing to the labor force but they're all educated

35:24 they are probably undergraduate grads or even higher but not contributing to the labor force another interesting thing is 95 of all financial products in india are bought by men credit cards car loans home loans all investments are by men uh india has now nearly two thousand dollars per capita income uh annually but if you remove the top 30 million families or 30 million individuals the per capita income would drop to maybe 600 and therefore a lot of western markets love to come to india and say oh india is the next china it's not because our per capita income is never going to beat and grow like china because

36:10 before china started becoming affluent 96 of chinese urban women were working because of the one child policy which forced it to become a general neutral society uh and and got them all on the labor force uh which never happened in india in fact it's going down that's a scary trend uh across the region india has the lowest female participation of labor now the per capita income is not going to grow and therefore a lot of foreign companies love to come to india because india is the dau farm of the world all the big internet giants will say oh i have 500 million billion users in india but look at the arpu and peel the arpu it'll be less than a dollar or two but it's great like for example uh uh if you got a lot of indian followers on

36:56 twitter uh your twitter account follower account will go like crazy your monetization quotient might go down and i think many companies like snapchat twitter have worked very hard to grow user base in india facebook is a classic example youtube my bet would be that it would be probably making less than two dollars arpu annually in india uh with probably more than 500 600 million active users in india alone but they don't mind that because the global rpu compensates for the rpo mix but the user mix cannot come from anywhere else and therefore the market will reward like netflix made the mistake of coming to india and say we'll charge you for it nobody is going to pay that and therefore the projections did not meet because india is a country where you give them

37:41 freebies and and you get all your dius you want you do not get your rpo and i think that's the lesson they learned and i think they are saying now will launch market with advertising india is perfect for that because value of time is not a concept for us so we'll watch uh in india when a series plays on tv of 30 minutes approximately nine minutes is ads oh my gosh by the way it used to be more the government regulated and made it nine minutes so if people aren't paid hourly how are they how are they compensated how does that work so we have a concept of monthly salary uh we're not even paid weekly so we are paid every month and everybody thinks in month uh it's a flawed concept because they

38:28 never solve our think about being efficient in life unless you know your salary an hourly basis you will never really know what the value of time is uh one fascinating thing i've seen in india is that you fly in the u.s and many people are reading books or doing something else in india nobody is really reading books and many of them i have seen a very peculiar behavior in india is they are going to whatsapp and deleting old pictures so that it can clear up the memory instead of buying a one dollar pack it will give you a cloud access like that's the value of time and these are by the more the most affluent people in india fly so uh there is no way uh they can spend two hours deleting pictures on whatsapp but they do uh because the value of time is not understood intuitively and i've seen

39:14 this all the time in people around me uh people who are multi-millionaires will work so hard to save fifty dollars it's not even funny that's like my parents they'll drive 45 minutes to save two cents a liter on gasoline yeah but they never worked in a society they did not grow up in a society where value of time was a concept right so i think it's a more phenomena coming from those world and western society like oh we have to be efficient industrialization value for our productivity uh if i ask 10 people in india what productivity means i don't think i'll get a good answer but then then if you try to sell something based on sort of saving people time it's not going to resonate because you have to not only convince them that this is worth doing you're really trying

40:00 to change something that's inherent in the culture right now which i would imagine is slowly changing as wealth becomes it's funny you're saying that but uh india is after the u.s maybe in the top three markets of sas providers sas business software providers right on revenue but none of them have any revenue from the local market because no no business pays for software they don't they're like oh i'm just going to hire three more people and they'll just work because they don't understand that software could make them so much more efficient and and i i i wouldn't be able to find one company that makes more than ten dollars and 10 million

40:45 dollars annual revenue by selling software to indian businesses which is scary if you think about it how large our economy is and how many businesses we have and and how internet savvy we are we are probably uh uh more savvy in using smartphones and digital payments uh in fact one of the things that is talked about in india's digital payments have overtaken china and we have like taken off most people don't tell you that it took off after government made it free money transfer is instant but nobody makes any money that's when it took off when we had charged one percent two percent mdr for do that it never took off so the thing is that this value of time

41:30 understanding credit value of time and this math of thinking of of time energy money in one equation is extremely hard i meant to ask this as the second question of our interview but uh you're on your second big startup now how do we get here walk me through your first and what you're doing right now and then then we'll pick up where we left off here sure um so my first startup i built from 2010 to 2015 um exited probably the largest exit at that point of time in india uh and that startup did the following it it uh allowed people to recharge their mobile phones in india 99 of connections are

42:17 prepaid which means they are not on any plan people refuel their is again a lot of society nobody giving credit to each other so people just top up money and use it and then top up again but none of that was top-up was done online so i built that platform but what i did is i allowed people to get some vouchers of retailers for recharging on our platform was called free charge uh and it took off in a very big way because again value of time or i'm getting some incentive people actually chose our platform versus going to somewhere else and because it was more efficient people just shifted in that direction but uh what i realized that i was going for the mass market through that but it was impossible to monetize they just did not have any money so after i exited the first company i

43:03 spent a bunch of time i was uh advising multiple companies uh uh and joining the advisory board board so one of them is a media company uh one of them was sequoia capital i spent a bunch of time understanding investments and i was also angel investing in left right and center i was probably i'm probably in angel invested in maybe 200 plus companies now in india and what i learned was that everybody was building these businesses by copying western models free charge was one of the few original ideas the reason i built an original company because i had no engineering background i had no friends who had built tech startups in fact i didn't even think i was building a tech startup i thought i was building a marketing company which turned out to be one of the largest payments company

43:49 in india because i had never read techcrunch in my life in fact i remember uh meeting sequoia for the first time um first of all when sequoia reached out to me i'm like who are these guys why i think we're using my time i had no clue who they were i ignored their emails for months till somebody told me hey they're really big deal you need to check them out i'm like okay i'll vent there and and i remember they're asking that so canal what's your cac and i had no clue what that word meant and i think it's a superpower i think vocabulary is a unique curse that we suffer every word we know i truly believe that uh if you don't know these words we'll probably not suffer them and i think uh

44:35 what i learned from that experience was that you need to focus on the right market because you can be the greatest founder if you meet the bad market you will die but if you find a market that has used tailwinds to it even a mediocre founder will do really really well right so i think market is like laws of physics and i saw a very interesting pattern in india was that a lot of smart people were building great companies that wouldn't go nowhere and and i saw some people who are not so smart would do really well consistently and serial entrepreneurs right and i found that as an interesting pattern that i i referred to the analogy that i see a lot of dam builders with no idea where rivers exist so i see them building dams in hope that

45:21 river will show up but river never shows up river exists and every time they discover that hey river is not coming to my dam instead of moving the dam to river they make the dams even more funkier and cooler and with ai and all of that stuff but the water never comes and i saw that some people were natural at finding where the rivers of motivation were flowing and even the mediocre dams were making profits over there versus these fancy dams which nobody ever used and i saw a very sort of like western idea right build it and they will come yeah it never happens i think and and it's a great idea to build in western markets where there are so many rivers and there is such a big economy that even

46:07 some accidental drivel flowing through you will make a lot of money in india there are no accidental it's like you're building in dessert right so you have to make sure you're a dessert like you have to really build the rivers the right dance is the right place because there's no unlimited rivers flowing so what i noticed is that nobody was thinking about human motivation because all of our education system in india was not teaching humanities i accidentally learned humanities because of philosophy but every single tech founder india has 100 unicorns i would go on to say that i am the only founder in the 100 unicorns which has a humanities background everybody else is stem so the concept and another thing in

46:53 india is that we never had dating culture so we never learned human motivation through the game of dating as well so we have extraordinary builders but we don't know what to build for and therefore how many indian products are used in the west right now very few but how many products are built in india which are used in the u.s made by u.s product managers hundreds and mill maybe hundreds and hundreds of thousands of them how many co-founders of many unicorns in the us are indians probably a lot of them and this is where i found this to be thinking indians were very good at cracking an exam that existed versus creating an exam that does not exist

47:38 so that created an interesting option that you can build startups like everybody knows indian spends a lot on weddings like it's a known thing people love to go to the indian weddings and they they keep hearing this i'll give you an interesting data point like i checked in my office uh most people spent close to six times their annual salary for their wedding wow okay but zero unicorn startups solving wedding problems but that's the scary thing about the market i met a founder who runs us a luggage company a suitcases they build

48:23 around the public listed companies and they wanted me to join their board and i'm like okay i'm happy to meet but i'm not joining a traditional business board but i'm happy to have a conversation and i was just giving them some suggestion they should do something branding on the airport and they're like what are you talking about i'm like yeah you're a suitcase company you should be at the airports like what am i not saying correct over here he's like 80 to 83 of all suitcases in india are bought for weddings the bride takes new suitcases and goes to the new family there are 4.4 million weddings that happen every year and on average close to three to four suitcases move with her to the new house i'm like i have no clue about these things

49:10 i met another founder who's building a interesting bio hacking kind of a startup and there's a non-treatment uh which improves the mitochondria growth rate in your thing it's a expensive treatment which is done usually for cancer patients or somebody with diabetic situation or whatever and this guy goes there that i want to try this for bio biohacking and the guy's like oh you're here for cancer he says no are you here for diabetes i said no the third question was are you here for because it's your wedding and it's like why is wedding important over here because that treatment makes your skin lighter for six months so a lot of people are doing that treatment which is so expensive usually done by cancer patient or severe diabetic patients to improve their skin tone for their

49:55 wedding and that is the fascinating thing about india that so much of the economy is running through that because in india we are saving every penny all the time but we'll splurge on weddings we'll splurge on medical events will splurge on uh education of our kids every indian family right now who have just got new kids are going to spend probably 100 to 200 times more than what their parents spend for their education because that's what we spend money on the consumption is just not there so i think when you study these patterns what i realized that these patterns were not understood by indian founders they were just building western copies

50:40 and therefore at one point of time i saw there were 10 startups that were funded for doing laundry startups which were popular in new york but in india we had maids coming at home why do we need a laundry startup but there were 10 companies that got funded so there were so many investors who were clueless so many founders who are living in india who are clueless so during that period i started working on a framework uh i call it the delta iv framework on predicting startup success because my curiosity was that how am i able to be successful more often when i'm not even one-tenth the academic smarts that some of these guys have demonstrated in the past but why am i able to do it more

51:26 successfully so i built a framework and and because i was between two startups i had a time to read up on physics and biology and evolutionary biology and trust so i was going all over the place obviously i was on your blog and like i'm connecting all these dots in my head and i found that the evolution of startups was very similar to biological evolution and nobody was thinking like that so i'll give you a sneak preview of that that framework it's easier to understand but i'll tell you for example if i asked you friend that which product or service more efficient 20 years ago than it is today if you if i have asked you this question which product or service was more

52:12 efficient 20 years ago than it is today it's really impossible to find an answer like it's there was nothing more uh more efficient all the efficiency exists in the future so humans are constantly moving from inefficiency to efficiency in one direction and like almost like arrow of time and and therefore any product or service that changes you from state a which is inefficient to state b should unlock something that is called as wealth so i built a simple framework which is sounds simple but most people still don't use it is let's say i asked you that what do you think is the efficiency score of booking a cap through uber on 10

52:58 or versus the old method that existed of booking caps whatever that method was most people would say maybe this is seven eight on ten that is maybe two on ten one on ten three one ten so the framework is very simple that every time the delta of efficiency score is greater than equal to four three things happen uh it's an irreversible behavior once you experience a delta for product or service you cannot go back there is obviously very very high tolerance uh that's the second thing that you will hate uber but you're not gonna like damn it i'm gonna delete this app and i'm gonna move to a more inefficient behavior the third thing is which i call the ubp uh unique brag

53:45 worthy proposition humans when they discover something delta four they can't stop bragging about it everywhere almost like a secret code that all humans have with each other that every time you discover delta iv brag about it and tell everybody about it and move the entire humanity from state a to state b which is more efficient which reduces their local entropy uh and and moves them forward to a more efficient medium which burns less energy uh than in any form time money uh or wealth uh to uh uh move forward to more efficient methods and i realized that most startups were not looking at this i'll give you a simple framework to think where it doesn't work for example let's say

54:30 let's talk about buying shirts online versus offline it's not delta four if you have let's say odd sizes or and you have the challenge and therefore shirts have not moved completely online uh and many products will not be found because just by adding tech it doesn't become delta four right it has to improve the efficiency score of the desired behavior and i think that framework uh i talked about it in india funny enough i i was told by sequoia in the us they've actually introduced this framework and the onboarding of analysts in the secret u.s team which was interesting because in india even if i've spoken about this framework still startups don't apply that and i see 90 of them

55:17 fail all the time back to the analogy of building a dam where rivers don't exist and and rivers are nothing but motivations right like at the core of it we all humans have the same core motivations and then it goes into streams and creates more rivers from that stream constantly right but at the core of it it's the same thing you want to increase your social status you want to improve your mating success you want to have success for your progeny and so on and so forth it all boils down to the same motivation things and then you can put them into so many different rivers that flow so when i started building my second company i realized how to make things more successful also look at more high motivation categories and so on and so forth i had the luxury to take the continent in bed and say that i told my investors

56:04 that i'm building a startup that will only focus on the top 25 million customers of india because only they can value time or will buy and rather focus on them versus acquiring hundreds of millions of customers which cannot be monetized because they can barely have money to even eat right now we are a poor nation and it's a controversial idea because india is always this country which sold this dream of hundreds of millions of customers like china but nothing between india and china is common except our population that's where the similarity ends but global companies love to win india because they lost on china so the public markets will bash them if they lose india again so a lot of them are in india to win the holy war

56:51 but the market is not big enough i would say the total gmv that amazon would make in india would easily be done by a small european nation after being here for like maybe seven eight years that they have spent over here because the people who can spend just do not exist and i think that was the genesis of focusing on startups to build for the top more thing and what we said is that uh we'll focus on those customers because nobody's really building for them because everybody's building for this lowest common denominator that does not exist and i will focus on this customers and we said that we will focus on more trustworthy individuals to increase the trust of the system we said that for these group of people i'll give you a small example uh india

57:36 even if you're in the top 0.01 percent of affluence your passport is ranked maybe 150 in the world and therefore every country is extremely hard for you to get a visa to because there's no way for you to differentiate yourself which is very similar to a lot of stuff that is done digitally in india for any service you encounter and we said we will make their life better by allowing them to have an identity that at least makes their life slightly more frictionless now this sounds like a controversial idea hey you're trying to kill a society which is like more friction but the thing is that that's what capitalism is i'll give you a small example india has this unique concept called mrp i don't know if you know about this but let's

58:22 say this bottle over here it says that maximum retail price of this bottle is 10 rupees and even if it's sold in extremely affluent neighborhood or the most poor neighborhood the price is 10 rupees because the government thought this is the greatest idea ever that we'll have the same price for everybody but i could easily pay 30 rupees for that and somebody else could pay five rupees for that and increase the market overall but we enforce an artificial concept of mrp which is stopping the the core tenets of free market and capitalism to grow and it's a very unique thing about india where you come with these things that oh i'm gonna have this the 711 will charge 30 rupees and this one will charge five rupees and the cost core will charge

59:09 this guess what all of them have to charge the same price and i think i realized that the only way you can differentiate by service and all of that is just create a separate layer to build for them and and that was the genesis of the second startup uh the reason i also did a startup is also because i realized that i i while i was doing well as an investor and i'm still doing decently well in my investments as a part-time gig i love building way too much uh and and i think uh i've been working since i was 14 15 i do not know how to live a non-intense life while i can predict patterns and see things and i could technically generate better roi of my time through investing

59:54 but the joy i unlock by building is coming much higher by building my own companies versus just being predicting and being right a lot uh in predicting future trends which can generate the highest roi of time it doesn't generate any joy so i i found no joy in investing uh it's just like oh i told you so i was right and i was right and and guess what it gets boring because you're right in the market like this when you can predict delta for frameworks and you can apply all the human insights you've learned it's not a big deal that you've avoided to be more right the problem is i felt really empty i want to go back to some of those human frameworks in delta iv when you're making an investment decision

1:00:41 what are the top lenses that you're thinking that through so one was sort of the delta iv framework which we talked about what are the human frameworks that you're you're thinking about that what are the lenses that add the most value to your sort of filtering system yeah so one i mean i i i've never thought about it from a human framework but i'll still maybe give you a few things that i do uh that was your word i think you used the word human framework yeah i mean it was more of a motivational uh lens but applying human motivation as a core loop but there are other things that make it easy to detect startup success for example a lot of founders who pitch to me are usually well prepared and make a presentation and come to me and so i

1:01:28 tell them that hey i don't understand english very well can you explain this to me in hindi what does it do founders who really get what they're doing can switch language without a problem because they really get it and language doesn't change anything for them many people who have just prepared their presentation and not really understand this very clearly they struggle with the language change and their pitch goes for a toss uh that's so so hold on one way to i just want to add p back on this because like one way that you can do this without switching languages is switch level of the conversation so often people prepare at one level and it's like oh can you go deeper or can you go higher level and keep that in context which is sort of

1:02:13 like the same idea yeah yeah and i've seen that people who are really good you change language you change medium you tell them you i don't want to read your presentation they'll still be okay uh uh some people tell them i'm not gonna look at your ppt and they'll be like how do i explain this to you uh the other framework that has worked for me is uh i tell them i don't understand anything what you're saying imagine i'm a user of this product and i have to tell a friend over dinner to try this what do i say only rule i cannot use any jargon because i don't speak to my friends in jargon so tell me what do i say and i tell them to take 10 minutes break before telling me the answer

1:02:58 most i would say 90 percent of founders fail at this because they can't really distill it to that simple transmissible message from a friend to friend if you cannot distill your idea to a transmissible conversation at dinner it's not going to spread and things that don't spread will have a huge cack because nobody really understands what the hell are you doing that's one framework that has worked the other one is asking them what is the real motivation

1:03:44 people will use it a lot of times the real motivation is different than what people say is the real motivation for example buying expensive headphones they are not really to make you hear better you want to signal to the world that you are affluent and you have good status and good taste most founders cannot distill that that is the real reason people will buy it they'll keep going to the functional utility and not the emotional benefit of the product and that's another framework i have seen that good founders always know functional and the emotional benefit of their product or service uh what else i have seen uh market sizing most founders cannot imagine how will

1:04:31 they start from here and go on to build a very large thing from here they get stuck in uh this is what i do but they can't imagine how will this become a large company ever they just don't think they don't even think they don't even they cancel their own idea and i've seen the opposite type which is i call it the swiss knife problem they believe that they have to build a swiss knife when the consumer only was looking for a knife because they love building so a lot of them are usually with engineering background they love the builds they write so much software that consumers are confused when they talk to them because they don't have a foot in the door strategy that okay let me sell a knife and then eventually become a swiss knife in their life they start with the idea of swiss knife and you're like hold on

1:05:16 i can't even process what you guys are doing and swiss knife becomes cool nobody uses it like everybody seems to have a swiss knife but never being used uh so i think that's another pattern i've seen uh i've never really thought about this from a human framework problem but uh uh another thing is that why would somebody pay for this and and it's surprising how most people do not understand that nobody's gonna pay for that like like just that basic test nobody's gonna pay for that like uh like will your dad pay for this will your mom pay for this will your cfo pay for this will your kid pay for this like they are just off on that uh the last one is uh insights

1:06:07 do they have an insight that is not obvious but when you see them talk about you like aha that makes sense uh and and uh you'll rarely meet successful people who are not insightful uh i believe that insight is the smallest unit of truth that is actionable uh and and therefore people who operate in the currency of insights tend to be generally more successful at least in business can you go deeper on that the smallest unit of insight that's actionable a smaller unit of truth that is actually truth

1:06:52 truth that's actual yeah go deeper on that for a second so if you go to ancient hindu mythology and and you study the sanskrit scripts and sanskrit was a very condensed language right because it was invented before paper was invented so knowledge was transmitted from human to human through memory so they had to distill the wisdom in the smallest unit possible that could be memorized and transmitted from human to human and in the earliest scriptures were also tight like you you'll read in sanskrit yoga line and like in one line they'll condense like really a lot of wisdom in it

1:07:37 so i think the concept of boiling something to the core units of it then you cannot divide it further becomes a powerful unit that is also the building blocks or what we call as first principles that can help build businesses right and i think a lot of times uh then it's a painful process seeking truth is painful uh shen you've been doing this for a while like how many more blogs will it take to get close to the truth you will probably not find it but the joy of seeking truth for the sake of it is not natural and therefore a lot of people do not appreciate it enough but insights become this nice building block

1:08:24 through which you can create great businesses unlock great success uh because that is something that is not commonly available everybody seems to be seeing some pattern but you see something else for example i had this view that oh india cares about status so much more than the western society let me do an thought experiment i reached out to my friend who is to be a buyer of a top retail chain in india i asked her to check can you check if the gross margin on all products sold for living room is lot more than the gross margin of all products sold for the bedroom and nobody had ever analyzed data like that in retail ever because it's like kitchen and sofa and furniture and all of that nobody thought

1:09:10 living room and bedroom has two separate concepts but i said can you please make somebody crunch it and turns out the gross margin was 3x more the reason is in a society we care more about showing to others so all the products which are showing demonstrating status were put in the living room our bedrooms are terrible in india because nobody comes to them and therefore it was not surprising that bed sheets were not bought expensive in india and bathroom products did not sell a lot we don't have a lot of bathtubs in india because it's not about me it's about showing social status to others who come to my living room and therefore you apply that insight now and i told

1:09:56 this insight to a home renovation company i told them don't keep saying home renovation launch a product line which is living room renovation and today 70 80 percent of that revenue for them is living room renovation

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