0:00 your new upcoming book, China has America by its throat, where you talk about the 90% model. >> China is a company and President Xi running that as a company. He allocates money he and he put the priority to destroy 10 industries in the west. So 90% model is this produce capacity in China equal to the world demand 90% of it. So it's a hypers scale >> you know in the budget for example the focus has been majorly on defense space [music] AI these are the industries that the government is choosing to focus on are these the critical industries to [music] pay attention to >> see we are in a geopolitical geomitary equation we saw the equation with
0:45 Pakistan there was a surprise so we have no choice we have to have that Mr. Modi Modi G [music] is managing very well the federal deficit. I admire him the way he's doing it. Excellent. Now we have to change that allocation [music] and I'm only suggesting let's pick 100 companies that have about two $300 million worth. Pick 10 industries and let's [music] go to scale them up for higher value chain value. >> How do you see this evolving over the next two to five years if China is so focused on global dominance? Hello and welcome everyone to the India opportunity show. I'm your host Shrishi and today I'm thrilled to welcome Dr. Ram Charan on the show. Fortune magazine has called him the most influential consultant alive and he has spent over
1:31 six decades in some of the most powerful boardrooms across the world interacting with promoters and billionaires of CEOs and organizations of large scale. He is a world-renowned business adviser and a best-selling author who's written over 35 books and his 36th book is just about to come out which is titled China has America by its throat. Not to name drop but he has worked with some of the largest organizations across the world GE Bank of America ICICI Bank Group Toyota Aditya Group and the Tata Group as well. He has coached over a dozen leaders who have gone on to become CEOs of their own organizations as well. If you are a founder, promoter or leader of an organization, this episode will be a masterass for you. It'll be filled with
2:17 insights that you can learn from and apply in your daily life. If you enjoy watching our content, please remember to subscribe to our channel. It really helps us in bringing you better and better content each time. Hope you enjoy watching. Dr. Ram welcome to the India opportunity show. Thank you for being here today. >> I'm delighted to be here and you're doing a great job here to spread the message, reach the audiences. These are the areas how people can improve their own thinking. >> Thank you very much. Dr. Ram, you've been inside some of the most powerful boardrooms and interacted with some of the most powerful CEOs and billionaires across the world. uh in today's conversation, I would love to distill some of those insights for our audience so that they become more accessible to
3:03 our audience and the wider group as well. >> It'll be my honor to do that. >> India is one of the fastest growing economies around the world. And if you want to be a part of this growth story, you need to be backing Indian businesses and companies. Whether you already invest in markets or are just starting out your journey, Grow is the place to be. Grow gives you a clean, intuitive and simple UI to be able to experience investing better than any other platform. You can invest in stocks, mutual funds, IPOs, ETFs and so much more all just in one app. You can also get a very comprehensive overview of your portfolio with just a few click. That is why Grow has become the most trusted stock broker in India with over 1 cr active investors on the platform which has made it the largest stock
3:49 broker in India. Check out the link in the description for more details. >> You know, I wanted to start out with your new upcoming book, China has America by its throat, where you talk about the 90% model, how China builds capacity across different industries to dominate industries globally. I would love to understand where you saw this happening at the first instance and what inspired you to write this book. >> So, I have been in China for a long time. I have worked in China with 50 companies. I have been on the board of large company and I also coach people like the CEO of BU these big names. So when you work inside you get the insights what they are doing. It is here I saw one or two American companies that were good but then their market share
4:34 begin to decline and their unit costs went up and then they realized that they should get out of China and use other places as the hub for global strategy or they came to a point that they have to sell it to the Chinese partner. It is there I woke up and I said there's a bigger phenomena. Meanwhile, I have been studying China for almost since 1980s. And here I saw the motivations of the president Xiang, President Deng, President Ho, and then President She and people have not fully aware. Their goal fully announced is to append America and the West. Don't allow democracy first in China, second around the world. It is Lennin's philosophy that the only way to
5:20 govern a nation is autocratic single person rule all the way down and have the people live with austerity. In doing that, President formulated that we should not permit American ways in China. It will destroy the CCP, Chinese Communist Party. And they formulated that we really need to push America's superiority out. So they formulated 90% model that will destroy the American industrialization and you gain the strength of industrialization in China and that is your path to victory over time to achieve the Lannis goal. That's the fundamental part most of it is in Mandarin. Number of people now have it in English somewhere. So it is here then
6:06 I begin to see the 90% model. The model is to run China as a company like a General Electric, like a Tatas, like the Amanis. And President Xi running that as a company. He allocates money. He puts the priorities and he put the priority to destroy 10 industries in the west. Initially he devalued the currency by 20%. In those industries, he gave all the help money etc. and take a losses. So 90% model is this produce capacity in China equal to the world demand and 90% of it. So it's a hypers scale and when you have a hypers scale it's marginal cost is very low. So you sell at the
6:53 marginal cost you incur losses but you bring a trillion dollar back into cash from the west. It's hard dollars yen euro Australian dollars. And so this way he is making net profit for the nation. And you use that hard cash currency for military purposes, for buying technology and keeping reserves. So we know he got 7.4 trillion in this period. 3.4 trillion. We know where it is. He bought gold. He has reserves of oil, food to do that. And continue it until the industrial base is fully destroyed. If there is a war, then you cannot compete. So America incurred trade deficit with China close to 600 billion a year and so
7:41 Trump comes into the power and he makes people aware of it and then say the America's deficit from China must be eliminated. So this is how this war began in 2017 21 to 25 Biden didn't do very much. Trump is back and he's fully engaged. Now the Chinese exports are coming from there, from Mexico, from Vietnam. Direct exports have declined but the total exports have increased. So Chinese surplus continues to increase. And then October 10th, President Xi announced and acted not to let the rare earth materials be exported and they go into a number of industries and therefore they cannot be continued. So
8:28 that's why I said they have their shoe on the throat of America. He can use at will America and India too all western countries any country and this way they now have the power. That's what it is. The goal is clear to destroy industrial capabilities of these countries in fact all countries except Vietnam and and Mexico and possibly Indonesia or wherever they can get manufacturing skills, manufacturing bases. That's how and this has been going on then encircling the world to have the corridors of logistics and trade flows the belt and road the undersea cables the the direction of controlling a ports they built a port in Peru they have a base in Argentina so they have their own
9:14 ways to get to the markets of America and Europe today they can shift from northeast China to Europe in 16 days the railroad is working so it's a very comprehensive strategy energy the first part done before 2020 to destroy 10 industries furniture toys apparel I have a list of those and at the same time they have now declared the next 10 and they're advanced so if they get destroyed and we cannot build our own then they overpower the west that's what it is >> that's a very scary reality to deal with right because if you're looking at industrial disruption across industries And the supply like you mentioned you know there was this conversation all of last year where because India is also
10:00 dependent on rarer magnets coming from China they can literally choke supply across industries and disrupt them. I should say I was so pleased the other day somebody in the press they know that they they have destroyed our furniture industry they have not succeeded in destroying the apparel industry but lot of apparel comes here Ganesh G comes here our midsize companies are destroyed it's not the large companies and the employment is created largely by midsize companies local rural so we have now over the last roughly 12 years have given in China a trillion dollars hard cash is continuing to increase it'll be more than 120 billion net going to China so Modi government has to think this one
10:47 through now Mr. Modi going Modi going to to China in October open the country here. I don't know how aware is he that it will destroy the industry. My first concern they will destroy the auto industry of India. I see that they're getting MG for $10,000. Big guys like JSU going into the business. I think that must be stopped right away because they have destroying they are destroying auto industry in in in in Germany in Europe. It's clear they don't make money in China. themselves and selling something for $10,000 a car, you know, it's below cost >> and BYD cars are everywhere across the world >> and they are very good cars. But it is strictly getting hold of the market, incur the loss and get that $120 billion
11:35 into the till and they're dollars, they're not rupees and so dollar is very important to us. >> How do companies and countries like ours prepare for something like this? >> No. See, see they are not playing by the rules. So we have to have a political military strategy with it. Company is not competing with a company in China. Our company's competing with President Xi, the president of China. People need to realize that a company competing with a nation. It's fact. They are observable. They're verifiable. People are not aware of it. Given that you interact with some of these leaders who run organizations across China, what are some insights that you can give us from those boardrooms that are not understood across the world? >> Well, on the industries that President Xi has picked, they will get all support
12:22 and they will figure out in fact it's predictable within a range of two years when an American Indian company will be asked to leave one way or the other. There's a way to calculate that. And the calculation is when a local company in China gets to about 40% 50% market share, you know, you're going to be going out of this country because they will trash the prices and they will force you to create unit cost higher. Your market share will decline and then you will say what do I do? So it's very predictable. That's uh in one sense even Silicon Valley and startups that emerge out of there try to do this in terms of disruptive pricing right is that something similar or even more serious >> it requires the scale subsidies and
13:08 currency management >> and the industry you said auto industry of India is at risk what other industries are you serious >> you see we are number one in two wheelers China is not build it go three-wheelers China is not the cars yes we're going to have a issue with pharma. We are on the cusp to be number one, number two. But if we allow the Chinese, it will destroy our industry and we should preserve pharma. We could be the worst number one in pharma. I believe that we don't do the RX. We can because it's very expensive. It takes time. But the government has to partner with these successful companies. Most companies from America, from Switzerland want to come here. Japan want to come here. This is the industry we need to nurture and
13:55 totally block Chinese input of farmers farmer farmland area because they're not very big in that coming in here yet. So we got to do the analysis which industries we want to focus >> Mr. Modi personally selling you goal personally selling things like the semiconductors that's fine the digitization that's fine you build the building of algorithms great you're not going to have too many jobs so we got to go to the midsize companies make a list of all the imports and we have to focus on a scaling up the midsize companies and block the imports of those things so they can flourish that is a blind side of Mr. Modi I asked the CEOs name the minister who's looking at SMSs none is able to to name none >> and fortunately even I don't know
14:42 >> there you go and now when I look at what he's doing it's not create the exports are increasing from them that's a good progress but we have to pick companies in the in the revenue range of 200 million to 800 million scale them up they know how to manage they know how to execute they have lend they don't know how to scale up and bigger of focus there. I admire Pish goel getting all these FTAs do that we have don't have details yet I'll have to see the details these are all large companies would you believe that 39% of the market cap is with the promoters that's huge >> yeah and only in India right like this promoterled >> and that through the stock market it's not real one so we have to get the the
15:29 the midsize companies and get them 10,000 of those India will be very different and we have to put in charge of that work people like Gkari who can get things done and they exist and you got to bring business people to do that the economists cannot do it they don't know this they never done it and we have people have retired from big companies who love to come and serve the nation so in some places the prime minister has done good selection of people he has made differences in the civil service he's getting training for them he's inserted business people there but His blind sides are two. That's one of them. Midsize companies and focus on 10 industries. Textile which is it is about heritage should be number one all the
16:14 way through with clear goals and a clear minister of state whose goal is to take it 10 times up. pharmaceuticals minister of state clear goal having publicly announced his goal what he's going to do raise this status was a minister of state under push go and the same thing ten shoes the things we know how to do but there are a higher value creating exports if we increase our value creating exports our currency will stop declining >> yeah let's talk about the currency decline as well because you know from a global competitiveness the currency declining is really impacting our businesses and even the power that the exporters and importers have had over here historically with the dollar at an all-time high and the dependence on
16:59 crude oil as well given the conflict which is going on between Iran and Israel it's becoming very challenging for the government as well right so how would you advise if you were advising our prime minister >> first part is and he is the only head of state in the world with possible exception of president she as a strong leader. He announces goals, he creates initiatives, he follows through. It is highly remarkable. So I like to have him continue do that. So he should set a goal first and say India needs to start in a number of industry to build and export higher value goods and services and improve the quality and delivery and innovation. So
17:45 if you sell higher value to do that you need technology knowhow and equipment get that in allow that and change your mix of capital equipment technology and the consumer consumable imports we do we have to import oil they don't have no choice but that's a consumption it doesn't build anything it's used for building but it's not we have cars like MG it's a consumption it doesn't build anything but if we import the technology Y of creating EV based cars for the future. We have our own but if we were to I say yeah incur current deficit get that in and then we create high value product we can sell overseas we get high value of currency coming in and our
18:30 people are very good to do that so we have to change a mindset of business currency declines I can export more they're wrong they can do that in the short run but inflation will catch up with the currency so take an example 2013 rupee is 59 rupees to a world. It's 91 now and declining. We're treading water. All the people who are listening to the podcast, they should understand that we are treading water. So, first we define the problem. Second, we define a goal. We put a time like five, six years. And then we go to work. How we change our priorities. That's how all these CEOs do. We got to do that too. And I would appeal to the people who are listening to it that please pay attention to currency management in the world. The best one has done Singapore.
19:17 When I say currency management, I don't mean use your reserves and interfere with the market. No, I'm talking build the economy with currency parity to be achieved and not decline and change production, change quality, change innovation. Don't do everything pick 10 industries. >> You know, one would say that you know in the budget for example the focus has been majorly on defense, space, AI. These are the industries that the government is choosing to focus on. These the critical industries to pay attention to. >> See, we are in a geopolitical geomitary equation. We saw the equation with Pakistan. There was a surprise. So, we have no choice. We have to have that. We have no choice on oil. We need AI stuff
20:02 for defense purposes. It's going in. Mr. Modi Modi G is managing very well the trade the the federal deficit. I admire him the way he's doing it. Excellent. Now we have to change that allocation and I'm only suggesting let's pick 100 companies that have about two $300 million worth. Pick 10 industries and let's go to scale them up for higher value chain value chain create more jobs and then we will be able to hypers scale. That's not a large amount of money. Depending on 20 large promoters is not the greatest idea. Do that. We need them. They do a great job. But we got to get another couple of thousand who are of equal caliber but never
20:47 learned how to scale up. >> Any industries that you would urge the government to focus on? >> No, I have I'll give you some more later. Clearly number one extracts are we should increase its output 10 times. We have very good thing well spun very good but they're not enough elsewhere. Get these states to compete for this but create high quality high price value chain going forward. People like Walmart want these companies to grow. They want it. So market is there, demand is there and block coming in from China altogether. You can do that. That's the first update. I have one of the largest clients in the world in in in in textiles. I advise the CEO personally and I'm saying he needs incredible amount from China. I mean from India.
21:34 There are people coming in here. We have a small manufacturers here. They will give you financial help to do this. But I don't think in our government knows even the gentleman and this is one of the largest who has a goal of hundred billion dollars in sales in textile today his business 30 billion worldwide. So ignorance is huge here. I go to see that the the export council people there they have economists they don't understand this business is different from the discipline of economics. You got to get business people in here and our business people will love to serve the country. They do. Even if they are working full-time, they'll give the time to do that. It's in our culture. It's in our DNA. Do that. So, I pick those kinds of industries. But there are high value industry that we can do. Just the
22:20 example like pharmaceuticals, we should become number one. Right now, China is on the verge to be number one. We can do that. And we have manpower, we have intelligence, we have institutions that can do that. We do seem to have the capacity but do we sometimes stay trapped in a echo chamber and not pay attention like you talking about this ignorance where you know there's a mismatch there is a demand from the west but we are not able to tap into that one >> no we did not the government is not giving the priority the priorities are pretty good but no more any good under the 90% model and here the advisors are the economists they're not going to do that it's got to get the real midsize companies CEOs form a council and create
23:07 and push boil has to pay attention to it and create a strong minister of estate for each of those industries. >> What what do you think has to be reimagined under the 90% model? >> Yeah. The the key point is that we have to block those goods coming from China that are sold at marginal cost but we are not able to do some because we don't have it. So I have one company India which I cannot name. They get the message. I sat with them showed them how that in four years we will not be importing that high technology components. Right now we have the people working full-time getting training. They have invited Chinese experts to do that and they will do that. It's an important industry. So Mr. Modi spending his own time selling to Sund Pichai and all those guys by getting FDAs. We got to
23:55 execute >> you know because your book is titled execution as well. So you were >> you got to get larger number of people engaged. It's now who consumes the time with 20 promoters. But despite all this I admire president uh prime minister Modi and his team of the finance minister reserve bank is the best in the world but he needs to now shift his attention. >> You've worked with multiple CEOs on capital allocation making allocation decisions within organizations. If you were designing the framework for India today, where would you be allocating? >> I would I will personally would want to see Prime Minister Modi to change the allocation and show him how the currency deterioration can be stopped in about five six years. It's not a genius. We
24:41 know how to do this. But the economists don't know how to do that. >> How would you do it? >> No, that have to take him all the way through. It has to be practical. But the first one is that the you got to need a team and we got to say we figure out everything we can how to increase the exports hard. Number two, we got to change the mix of the imports more on the capital equipment, more on technology. Third, we got to get these 500 1,000 companies to upgrade their technology to do all this so that we go in the hard curve. We have to I'm willing to increase the current account deficit so long that deficit increase is on building technology manufacturing. I really love to have the prime minister consider p Go consider a minister of
25:28 state full-time headed by a business person to call department of manufacturing for the hyperscaling of midsize companies and that person should be announcing in the press what's the objective as Mr. Washnav is doing it. I admire him what he's doing he's succeeding he's executing he knows he tell the people what he's doing and they are concrete only two people are actually delivering something and that is the Mr. Gkari Mr. Rashnab they are hard action state taking place goyel is great person I know him I've appeared with him on the panels he's getting all these act I think it's great but we don't yet see the increase in in the foreign exports we don't see the increase in FDI they're both essential
26:16 for the currency deterioration prevention so we need to see more actions so my suggestion state ministers open goals go at it who delivers something and then the five six items that I have broadly mentioned select 10 industries set a goal to be number one in the world set a inter intermediary goal how do we take Mr. Modi, President, Prime Minister Modi's all this wonderful job. Africa, Middle East, Southeast Asia, part of Latin if brilliant and we have these markets for us and we should out compete against the Chinese cuz the Chinese exports are not really welcomed in these countries except because they are cheap and all those heads of the states are learning that will destroy their industries. They become captive of
27:02 Chinese economics. China goal, Hitler's goal was occupy territory. China's goal is to occupy economic space and they're succeeding. >> You know this China plus one strategy has been top of mind or been talked about for the last few years. But do you think India truly has the capacity to be able to manage the supply chain >> anymore China plus one? >> These are slogans and they don't matter. They are slogans. We're going to deliver FDI is miserable. It's going to increase. Why? because Mr. Modi personally selling to Sundap Pichai Bai personally doing all that two people's efforts are admirable but you don't win you got to get larger people involved and we have brilliant people I have brilliant CEOs in this nation they will
27:49 out compete Americans any day India is the only country that has the largest number of people who really are able to see the anatomy of a business gujaratis western UP's Rajasthanis is we have them they don't speak English when I work with them sit down on the floor with them they out compete any MBA oriented CEO from Harvard personally shown that I'm one of them that I can do numbers sitting I go into the board meeting sitting in the boardroom with the numbers I don't need a calculator and be able to see what's the problem is our people are very good the Adanis the Amanis the Mahendr they are that ilk we have tons of those let's lift those you know One thing I admire about T20, you know what I mean?
28:34 >> Yeah, of course. >> How the tons of talent stood up. We got to do this here in the trade. Tons of talent, Barry. They don't speak English. They hesitate. They're shy, but they're thorough. They don't know how to scale up and they don't know how to market. So, I start publishing in Hindi newspapers. I said, let's reach out. We can understand that. So, Danish Baskar have undertaken that. They agreed to it free. I said to go do that. So my book what CEO wants you to know is for minimum 10 million merchants needs to be translated into Hindi udu that is designed for these people. It just starts telling how a tail of Allah makes a living every day. Exact same terminology as the Mahindra adanis and biras and tas but it's in Hindi it's an udu they don't know English they don't
29:20 know fancy publications of the statements and so they're scared they're feared or they give up. You know this mindset that you were talking about to be globally number one I'm not seeing a lot of people think like that in India you know that whole prominence to to have that mind shift to be globally dominant. >> Open minds we are number one in two wheelers 1970 we were number one in textiles. I lived in the house of the largest textile company in India. So we show them to the people how to do that. Absolutely. People grab it. In my work here with the companies, they grab it. We do this. You can do that. But focus. I'm saying 10 industries. Don't worry about all of them and put the targets up yet. They had put the targets. We're not
30:07 getting there yet. The minister pish go saying it's going to come. I'm with him. Sure, let it come. But it's not there yet. But he's got to have minister of states for each of the industries with goals announcing periodically what's the progress. Mr. Gutki used to announce what's the progress, didn't he? And Mr. is announcing what we have done isn't it where is in the FDI where is it in the in the creation of manufacturing here and put business people in charge go is a businessman Mr. Gkari is a businessman I don't know what Mr. professional I think it's a businessman >> you know and you always talk about how all the leaders are trained to you know build for a very different kind of world where you know there were stable alliances there was globalization and everyone wanted to work with each other
30:53 but now times are very uncertain people are turning inwards inside their countries how do leaders adapt to this new reality >> they are forced to turn inside the country because the drive of China of 90% model to sell something at a loss and they can't compete with that they have to be existential problem how do I now run my company or selected industry so self-sufficiency begin with China and they're getting it there and they don't allow everything to be done from the outside the democratic bridge totally eliminated it's very selected and that is because what they need that's causing is so this being
31:38 replaced by bilateral negotiations bilateral trade bilateral currency manipulation not if I'm on manipulate currency then the other side have to use a tariff but they will go down because both country would want to have a balanced trade so we now have roughly eight countries United States Germany France Italy UK Japan South Korea and so on the total economy is 70 trillion it's a free world economy combined they can create a hypers scale in any industry it will grow 3% peranom so in 10 years you're going to have roughly 20 trillion more and we can do that against Chinese competition but we need hypers scale use of AI and we have to work together so that's why I've recommended to the United States government they should
32:24 create a cabinet level department of manufacturing and technology has gone to the president >> yes they are trying to build a lot of things inhouse in terms of decreasing dependence on China but when you think about The US economy there are talks about ddollarization. The the debt that the US is under is extremely high to an extent where they might not be able to meet the interest payments. Even >> people this is an area most people don't understand. Don't worry about they are able to afford the investments. Absolutely. Take it out of your mind. In the next two years they will invest $2 trillion. Make no mistake about this. So two trillion will be coming from the private sector or from the government >> and also from overseas and America is
33:10 the largest recipient of outside investment. So I say you don't worry about that focus on getting things done manufacturing technology produce goods produce services. >> So the doomsday scenario for the US economy which has been going around for a while you fundamentally disagree with that? No no no the third fourth quarter once the Iran war manage if it is over you will see the economy will be will be sound there's no question about that but people are looking at daily that's how we train for Iran of course you're going to have that issue now there is no way I can tell you when will it be over anybody's guess when it if it is if and when it's over you see the change coming in yes price of oil going in well that's one should expect that but everybody
33:55 knows temporary market goes down everybody knows it's temporary Now if it expands it's not temporary market has not been affected by the Russian Ukraine war it's more like this >> you know that's amazing ability to be able to zoom out and look at the bigger picture instead of you know what's happening on a daily basis or even a few weeks months how do you see this evolving over the next two to five years if China is so focused on >> the old law every action creates reaction that's what's happening in the area of economy trade. So a large part is action reaction in bilateral negotiations among countries action reaction in Ukraine war Iran China
34:40 movement President Trump going to China 31st of March there's something that Chinese are looking forward to it Chinese economy inside is not good everybody knows that now people don't know at this point people believe that America has no real response to stop China from the foot on the throat I say yeah but I disagree because I know what It could be, but nobody can announce that cuz these things are element of surprise. And I'm talking without the military war. America has non military weapons to stop China's economy in less than a month. He doesn't want to exercise it the way I read it. That's the last thing he's going to do right now. Create reactions. Work it through. Work it through. Give them a chance to come to terms. But I have no doubt because I've talked to the people in it.
35:26 Former Secretary of Treasuries in the United States. I was the House guest. saw the whole thing. We have those weapons, non-military weapons. So people have no way of knowing these things. We don't publicize those things. But doing that will give will get nothing done in the world. It's going to work. Work it through. Negotiate, get them to see. You go. I believe Chinese know that they that America can do that. They're not unaware of it. >> Wow. That's fascinating. You know, because a lot of the insights that people get or read are usually written in the media, but these kind of insight because I am doing this and I have access to these things. >> So you know talking about other people that you have access to you've worked with some of the largest business folks across the world. What can Indian business leaders learn from some of
36:14 those global leaders? >> It's vice versa. >> Vice versa I was going to the next question would be what can Indian leaders teach the world leaders. So most of these are really promoters other fantastic businessmen. Most of the including the press don't go to see how they think and if you even get to see in one of those sessions you should because the the cutting through the business anatomy is superior than 90% of the professional managers in India and outside both it's very true now that they can teach to the outside world to learn from outside world is the there are couple of exceptions is hypers scaling using AI and technology quality and innovation. We still not have
37:01 technology application AI domain and not enough focus on that to say we're going to go up the value chain higher price, higher quality, high usage and build the investments. Yeah, they got to do that and they should go to China. They should run. Chinese allow that. They won't give you technology. They won't give the people and each industry is controlled by President Xi. So one of my clients went there said this is what we want give it. No sir we have got a permission from there. It's a fact. So they're going to safeguard. So okay we're going to go some other places. The company I mentioned to you that doing it we have it. We were able to get it from police. So we don't need Chinese for that. But it's going to take 4 years and a business house making the investment. >> And you said something very interesting that people should learn from how they
37:47 think. What can you teach us about how they think? You see I learned about money making from numbers at the age of 10 and this is 1948 though you understand the word the wooden sandals these people in the white robes will come and round up the kids of the business people kana merchant cloth merchant show merchants and they will teach what they used to call trade arithmetic Hindi name is Vargon if you master that you don't need Harvard MBA class I'm not kidding when I went to Harvard MBA first day I said what am I doing I know this but they never knew. So the anatomy of how business makes money is the centerpiece of these people. I have that. That's the reason I'm able to do work with these people. I can take your business and analyze in
38:33 about 5 6 hours any business. That's why I'm in so many industries and be able to get to the heart where the problem is. They have it. We don't teach that in any business school. Second thing we don't teach in business school how to select people. They have it. They have an eye on it. This is the right person. But we don't teach anywhere and you cannot win without having a strong a strong team without having a players and he would say you know that young man I think we take him from here to there's no confetti analysis nothing and a right decision >> how do you think they do that >> they look at the performance they have a better eye than most others what this person's real strength is the analogy is the coach is one of the best persons in the world who knows
39:19 what a coach can do well and they can use any test they want. But before all these tests came, people select the coaches selected players and now the captain in a cricket team still has to make a decision who goes in what sequence. >> Okay, that is a skill. That's a art. It's a gift. Nothing overcomes a wrong CEO. No coaching is going to do that. A good match needs help. That's different. but a wrong CEO in a Starbucks. It was the wrong CEO had to be taken out. It was his own mistake to take the job and should have realized that this is not for him and have the promoters with me. So in one case promoter sitting the whole family interviewing the candidates one at a time long time each person. So
40:05 in which case I was able to show to the candidate this job is not for you and he accepts it. That's what we call selection because that's your life company will continue. And they become very honest and say yeah I can see the the complexity of this job in this situation I know I cannot handle and they go very happy as a friend to the family. Those guys had that eye for it. I had one in the last three days and be talking about a person inside and actually I had two of them different companies two senior same thing he takes risk on people. So I wrote them note this morning. I said throw him into the pool he will swim. take a risk on him. I wrote him this morning. >> That's fantastic because you know there's so much to be said about how you
40:50 truly identify the right people to join your team. >> Right people in the right jobs. Absolutely. >> It's not the best people. It is the best match. You can get the top most person of the class. Nothing wrong with him or her but you can put them in the wrong jobs. They will suffer because there is no such thing as universal person. So the skill is to match the fit. Naras Simang did not fit in the Starbucks chain. There's nothing wrong with him. I know him. I'm a great friend of his. That's the wrong chain. Wrong fit. And now his life is affected adversely. >> What do you think people do wrong when they make these choices where they might take up a >> They don't have a methodology to judge to get data. They've never been trained.
41:37 There is no business school that I know has trained them. There is no internal program in any company including GE that was so famous how to do this they have people who never run a business they teach how to do interview as a general thing no so that's why people ask me to do this selection of se I do that all over the world it's not just here I've done here now about four of those >> and so you were talking about trade arithmetic and then being able to select the right people these two are real advantages >> right people means people and the job match. Same person in the same industry in another company may not be the right match. >> A lot of times people hire from different companies and bring them to another but then they realize that the
42:24 outsider cannot adapt to the internal culture. >> That's a risk. But before you talk to is he the right is the person's skills and personality match what the job requires. That's what you got to do. And the greatest error is the people who are starting the selection bottom up. They don't have a grasp of what is precisely required by that job. They have generalities but the person here has the clear feel. So I had this thing done about two weeks ago. It's a very important business technology. He's recruiting a CEO for a business unit. So he personally wrote the job description and I said it's pretty good pretty good specificity. I said he did a pretty good job but it's terrible. I could say that
43:09 to him it's private. So I said now you're going to talk to me. We're going to record it. I'm not going to write it and you're going to answer my questions in a nice way. Tell me three things he's got to do in the first year and I'm going to force you to be very specific. Well, now he's searching the soul out cuz I know the business and then what he should not do and what support will he need. So we did and everything I got it written out the exact words came out not manipulated big words and I said from what companies is going to come from he got that. So I put that in chair GPT but the chair GP says there are only 35 people in the world who could match it. Now he realizes that. So we redid the JD and narrowed it. I say we got to give him support for the rest of it. Now you can recruit the person. I say your
43:55 headender can't do that. So there is a methodology to it. They don't know. It's repeatable. >> And you know you've worked with some of the brightest CEOs. What if you see them do right versus the others? What do they do on a repeatable basis and get right versus people who don't fit the bill? This is a great great real great question. I want you to first think with me. I think the coaches many of them are very bright. Would you accept that? I think some politicians in their field are very bright. Would you believe that? In every profession there are people very bright. But what I just just did relative to the profession they are in. Most professional CEOs will not match the brightness of Makkesh Amani or
44:42 Gautam Madani or Ramad Mahendra or Sil Mittal when it comes to business and none of them will match the brightness of an Einstein. So we got to put in the context. There are very bright surgeons. They are the lousiest businessman you ever met. So the basic IQ premise is wrong. We have people who are high school dropouts. Mr. Ardani is a high school dropout. But when I see his business side of it, he has to be in the one of the top four five people in the world if not the number one cuz I now know exactly how he he does it. And so I'm saying intelligence, raw intelligence has to be in the context you are in. >> So take us inside the mind of say Goautamani and help us understand what
45:27 is so different about him. Are these No, I I I don't think I'm going to go there. >> Okay. Sure. >> But I can say I have a special thing. But what is in the mind of the billionaires? >> Sure. >> They go with the that the billionaires a good number of them high school dropouts. They are. So what is it? And these people have a way to figure out what a need they can supply, they can create, they can manufacture. We don't teach that in this business schools because they're very specific and they're focused on a specifics and generalities and they have undying persistence to go after. They can think big and come down and they know they can get things done. That's a different cognition, different persistence,
46:14 different intelligence. Somebody, you know, I I trained people. I've taken CEOs to the bazaar. They don't see how the things you don't see this. Did he see this? You look at a a a three-wheeler guy. Watch him when he's when he has no passenger. What is he doing? He's searching for passengers. His cognition has been so conditioned. Where should I take this to get a passenger? Can you tell how many MBAs can do that? He has intelligence of that kind. But he's poor. So is this in intelligence the knowhow as something learnable? Is it a skill that you acquire? >> When I take a CEO to see the bazar, I'm training him. >> So what are you wishing for them to know? >> It's going to come through just like this coaches teach you who play the
47:00 observer and coach you. This is a demonstration of the practice by example. Are you trying to teach them the things that you learned at your father's clot shop in his No, >> I'm trying to teach by demonstration what this person needs and I have a wide variety in business. I can do I can do that. >> See, you think awareness is half the problem solved in one sense. >> I say awareness is more than half. More than half. Yes. Awareness, defining it, searching it. There was a company I've been a long time but I've not gone for 3 four years. I had to go and see them because they had a cash problem and they called me up. This is the problem. 20 minutes later I said that's not your problem. Your problem is this. And then we did the whole day to solve it. We need them. >> When you walk into a company where maybe
47:46 a CEO has called you to come and fix their problems, what do you first notice when you walk inside their office or a boardroom that a spreadsheet possibly can't? >> No, no, no. See, there is no general thing. If they call me, they don't tell me really on the phone what's the problem. They come and have a look and so I've got to learn your business. So they show me what's happening, what's not and then try to figure out where do we need to focus. That's what we we do. >> So the focus exercise is to the objective is >> to learn first. You got to learn. If you don't learn, you're not going to do anything. You don't go and you say I have a solution. What's your problem? No, I to add value. You got to know precisely what the need is of this person, this company at this time.
48:31 That's the skill. Just like a doctor has to do that. You got to each patient is different. He or she gets the data. We got to see the data. What does it tell? He uses intuition. He uses past history. It compares to other histories and they're specialized. And so that's what you do. >> People have called you their conscience and their secret weapon in different terms, right? So people have really seen that you know you you sometimes have the courage to say things to these CEOs that no other person would. >> No, no, I don't go with the courage. I don't dominate. My job is I should be fired if I'm not adding value. It's simple. >> Have CEOs fired you for being too honest? >> They don't have to fire me. I just say that's not it. Or their need has changed. Yes. Yes. It's going to happen.
49:17 It has happened. when it comes to you know working with hundreds of organizations can you generalize in terms of top needs that a business usually >> no that's where the consultants fail that's why the academics can't do that >> so then what makes you the most influential consultant of all time >> I'm solving their problems and I have companies that have been 40 years consecutively 30 years consecutively most of them are more than 10 years consecutively because you solve problems you help them got to create value >> your book exec Execution has been on the bestseller list for over 150 weeks. If execution can be taught, why are we still failing at it? And is it an intellectual problem or an emotional one? >> Execution is taught through demonstration, not by reading. Coaches, what are they doing? They're executing.
50:03 In medicine, they learn watching the demonstration before they are allowed to practice. Isn't it? All this surgery thing they have to be under supervision practice it. Execution has to be demonstrated. >> Absolutely. So when you're working with a CEO, how do you demonstrate execution? >> Depends on the person. He there are mechanism we show them. I sometimes personally conduct in front of them and then they say, "Yeah, that's right. I don't do that." And it's not so much the CEO is that their direct reports need some demonstration. >> What's the most common mistake you've seen some of these leaders make? >> The reason I hesitate on those questions, they don't mean anything. That's why they don't succeed. That's why they they say I have a solution for a general thing. It doesn't matter
50:49 because no two human beings are the same. No two companies are the same. But general thing then I have to write a book. My book are practical. Hopefully they have to be useful. No there are tools you could use. Yes. But generalities don't make money. Business is there to make money. >> You have a framework called God's gift right? The three to five natural talents that define a person. How did you come up with that? >> See, it's in every society including primitive societies. You go to your sister's house, you see the kid and say, "Yeah, what a god gift this person has." So, you observe behavior, you observe actions. And if they are repetitive, you begin to see what that is. And you think so how many times you have heard when a
51:35 father or mother sees I think this person is gifted I want to get him or her special training in tennis I think so in 1958 I lived in Jadapur Kolkara I came as an apprentice for us I lived in a hospital I've never been to Bengal so there was a resident master and he had this beautiful little girls and every day they did the practice I say here it is you can They're gifted and this is what it show. You look at a prime minister Modi is gifted. He has a discipline like no other politician ever had. And he's a mix of huge common sense discipline and he's one of the very few ones who understand how to grow the economy of a nation with his social
52:20 touch. And I believe that would have been visible early to his bosses in the party of the sahi. So it's there. It's not some big thing. You just watch the people's actions and behaviors and say what they love to do and what is they are good at and if you push them up and they give them training they become natural that you see in tennis every sport is that every single one of them dulkar look at his record and his successes well he practiced but he had it somebody saw it somebody pushed him and look at Mangesh I should tell you Lasam Mangesh's story her father was a music person training And one day he was training somebody and this is from the press I'm repeating and he went out. When he went out la 5 years of old or
53:07 something corrected the student he was coming and he heard it and he tells mother think about that he had not heard her before. We do that. So this is nothing strange. It's very doable. >> Gift in just a single meter. Can you spot someone's gifts in a single meeting or does it take a while or >> depends if people like me will can catch a lot in couple of hours? We live with it. We can do that. Most CEOs can do that and they do it. So it's not me. It's people have that. It's very common sense. >> So apart from latamishka any other examples that come to mind that you can >> No man a lot of kandulkar Mr. Gkari I don't know him never met him is clearly gifted to get things done. It was an impossible job what he's doing
53:53 and he has done it in a way that the government has to allocate no money to him. So that's big. They get things done. Mr. Wnab get things done. >> What about some of our business leaders >> governed all these you see in the press? Sunil Mittal build a big thing. Kumar Bir building a big thing. Mr. Ba is is such a great human being and also building these businesses. Anand Mahendra you see a very quiet leader excellent very quiet is Chandra Chandra Shakhar t you don't see him in the press he's managing quietly building that fantastic stuff and then Mr. Adani Mr. money that 20 30 of these are they beat anybody in the world but you don't have to be rambunctious no if they want to follow they should follow Chandra you never hear from him never boasting Tata
54:39 Ku and it's creating a huge value for Tatas huge there are others too shal in infosys I I think it's outstanding so we had people and they are global they're global Rahul Baj for Harvard Business School built the world's largest two That's not a joke. He earned it, built it. >> What were his gifts? >> He he was a a ze doer. He had a clear goal to be one of productivity, innovation productivity innovation consumer convenience, basics. All these people are master of basics. Real master of basics. >> What about MKkesh Amani? >> I don't really know him. I believe he does from everything I read. Absolutely cuts through. I believe that. I've met him and all that, but I don't really
55:24 know him. some very important things but there's no question about the basics I'm pretty sure had it he has it excellent I mean he can run any large conglomerate in any country the language et culture separate for example America London of course it's no issue there no gautamani ammani sun they have it >> so it all comes down to understanding the basics >> mastering basic understanding is not on us absolutely that's where they really excel they really excel it's not a talk, how they fit, how they can be improvised. >> So, it's not business school jargon. It's the >> zero >> basics. What are some of those basics to train your mind towards? How do you get better at mastering basics? >> Demonstration. Listen, how the child
56:09 understand repeat, repeat, repeat. They grow. Many people stop learning after graduation. I ask that question all the time. I say okay, you graduating these days. Well, nothing. No time. So you will have plenty of time in life when you have out of a job. >> Yeah. So when it comes to you know combining some of the ancient wisdom that is there in our spiritual texts with you know a lot of business leaders rely on is there a combination of spirituality that you think benefits the Indian? >> See every culture has wisdom. So you got to see what it is. Some of this applicable today to me but not to him. Don't do that. >> Are there any frameworks or principles that have helped you personally? No, mine is very simple. Yes, that's true. Being brought up in a very simple family
56:57 and I got very much engaged in Sanskrit and I followed that as a way of living and so it got inculcated very early. We come here with nothing and we go out of nothing. I live with that philosophy. So and it is absolutely true because I know there's nothing I can take away from here. So everything I do goes through the test. My needs are very minimal. I live very minimalist and that's what drives me. And I've been very lucky that since my needs are very minimal, my health is good. I live under very little stress. >> That's amazing. That's why at 86 you're so sharp, present and all you know doing everything that you have been doing for
57:42 decades. And so Sanskrit really that has a wisdom in it has made me from the age of about 14 13 I live that way the de incident first time I was invited to make a presentation by fortune in the 80s all CEOs and the program director called me up and say we really we're going to keep you if you want to but so and so wants it I said give it to him he needs more than I do I've been adviser to fortune for 30 years after that >> I can call the editor anytime within daytime directly. I have I meet the guy who owns Fortune magazine in the world. >> Amazing. Yeah. Here I would love to ask you because you know you've worked with such incredible promoters but a lot of
58:27 them fail to get their business beyond generations, right? It's a known fact that most businesses from business families fail by the third generation. What do you think drives that failure at succession? Not in theory, not in practice, but in practice, what is the conversation that nobody's willing to have? >> You're talking about the succession in the family. The the real conflict is in many situation and usually in those situation father is dominant, mother is not and father wants either his son or his daughter to succeed in those situations. But children are not suited for it. That's where the dilemma is. You have one son which we have examples in India who says I don't want to work these dog hours. I don't want to be trained the way my father was doing it
59:14 in the early days but I can be the chairman train me and I can do more for the health of the family by hiring the right kind of CEO which is good. Yes. So that is the conflict there. But the most important part is for the father to come to terms that the children needs to be given the opportunity to what they like to do what they are best at. After father passes away the children will never forget if they were forced to do something they didn't want to do. >> That's really profound because >> I deal with those issues. Persuade father sit down mother unless then I excuse everybody sit down with the father just say remember one thing he will go away and your child will be another 60 years what will he remember >> is that a common discussion you have
1:00:01 promoted >> no it depends on the person but very direct courtesy but very direct >> and what is the reaction that people have >> no they come to terms with it because also you talk about legacy of the company think about legacy with your children >> that must be a light bulb moment for a lot of promoters >> but Who's going to tell them? >> So you're a truth teller. >> Each of them is larger than lies. Who's going to tell them that? >> A lot of them also have egos which are really really big right? So and you come in as the truth teller in one sense. >> How do they react? >> Have to develop a relationship and you have to have that you know self-interest. I don't go there for self-interest. My self-interest is is there a problem? Can I solve it? That's my self-interest. >> And most people treat capital allocation as a finance problem. But you say it's a
1:00:46 people problem. >> It's a business problem and a people problem. It's not a finance problem. >> Why does a brilliant operator sometimes become a terrible allocator of capital? >> Most of them are terrible. Never been trained. There are some who are very good but then it is it requires training. >> What kind of training should they >> demonstrate? We're going to take problems and solve problems and solve problems and solve. Yeah. CFOs end up doing it. It's a buzzword to capital allocation. There's a very complex framework to go at it and it requires courage not just techniques. I love the way Doug McMillan and Balmar did. He deliberately allocated capital in a way that the stock price went down and then after 2 and 1/2 years company has gone
1:01:32 like this. Jamie Diamond has announced he's going to invest $2 billion a week. I know him. I believe in that he's going to do it. It's publicly he knows that's capital allocation. I've known him for 30 years. Right thing to do have the mastery of it. He is one of the very few people in finance who has mastered the basics. >> Why do most people misunderstand about capital allocation? >> They don't know. They've never done that. They're forced now because they activist shareholders start capital allocation work backwards to find their loss and they have expertise in it. >> You live by a principle purpose before self. You've never married, no children, no home for most of your career and triple bypass surgery later. 11 days after that you were back in office and
1:02:18 your clients didn't know. >> 10 days after that >> 10 days I want to ask >> who knows you should know 10th day I had a appointment made earlier with Jack Welsh and my operation was in Boston. He's in New York. The question was should I keep it or should I not? I kept it and so happened he was at the elevator when I exited to come to the floor. He looked at me, put his hand on my lip and say, "You don't look well." I say, "I had a surgery when 10 years ago. What are you doing here?" He called the secretary. I said, "Call so and so and send him right back to the resort. Get him there." And no, I went. So he said, "You sit down." Had a flip chart. I was another colleague with me and I said, "Jack, I've got to do this. You sit down." So he wrote on the flip charts and I talked. That changed. By the way,
1:03:04 that was a session most people know in the company that changed the company and wrote a beautiful paragraph about me in his book. That's my 10th day. >> Wow. Just a few questions to wrap this up. So, if you could teach every business leader in India three things they could implement on a Monday morning what they what would >> learn how to make money. I did not say shahur to value all that jargon and in India the largest population who know how to make money are these tawalas and then the corner store learn from them and they do it nobody ever taught them and it's the same terminology at higher level more technology more complexity more jargon if you want to learn go and run one of those things for 10 days you will learn very quickly >> what do they do that can be learned >> how do you make money what to buy how
1:03:50 much to buy how to price what do you do when the the bananas getting rot. So I came 10 15 years ago. Fantastic hotel. It's owned by a promoter and his daughter is with me as a high price. I said, "Look at these bananas. They're rotten. How the hell did you put them in? Didn't she see that?" >> So these are trainable skills. >> The biggest mistake that can teach one the most. >> No kids. The greatest mistake at the CEO level is is too slow in dealing with the people issues. Jack Walsh have said that. Warren Buffett has said that. too slow. >> The CEO alive today who impresses you the most. >> I don't do that. I learn from everybody. But who has the best fits that I try to
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