A Masterclass in China’s Hypergrowth: Org Structure Insights for Founders with OG Adi Sehgal

In India, we are sitting on the

potential that we cannot even dream of.

If you see what happens in China, you

can predict your future.

>> Is there something else? Is there

something that we are missing? What can

we learn from China? Like as founder,

>> so people think that China is a copycat

economy. This is the number of patent

applications by China. So when you say

that India has startups and they are

very innovative and so on, just see

those numbers. But let me give you some

interesting factoid. The trade between

China and ASEAN is greater than the

trade between the US and the EU. Wow.

I can already see a very cool razor

coming out

from

if we see someone who's driving a BMW,

we look pittingly at him. He is driving

a car that is 20% of the quality of the

car that I drive. And second, it is at

double the price. It's a critical

framework because if you get this

framework right that defines the

structure of your sales and marketing

team, the business goes up in an

exponential way because these are

multiplicated. People say why are these

Chinese companies winning? The answer is

this.

[Music]

Hi everyone, welcome to episode 35 of

the asymmetric podcast. Today we have a

really really special guest. Uh uh Adi

Seagel has been a close friend mentor to

Bombay Shaving Company ever since his

investment uh into Bombay Shaving

Company as CEO at Wreckit. He was

president there managed a you know uh 12

to 14 billion business and always had a

reputation that preceded him of being an

exceptional thinker on everything

business. So I think Adi I think just

put his put his imprint on his

intellectual, emotional and personal

imprint on a lot of things that are

interesting and important to founders

particularly two topics. Uh one which

we're going to cover today is the entire

China story. What happened in China

since their liberalization in 1979? What

are the micro factors? what it is it is

culturally to be a a founder or a

citizen of China or even what it means

to be a government uh functionary there.

I think Adi has had a lived experience

of almost a almost a decade building a

business and uh Adi has been kind enough

to of course agree to a two-part uh

asymmetric presence with uh with part

two being uh uh an episode deeply uh

involving AI which we'll come to uh

probably a week or two from now. But

Adi, welcome to the asymmetric podcast.

Thank you so much for taking the time

and we are super super thrilled to

engage with you. So thank you so much

for taking the time.

>> So interestingly today only Chamat has

put out a post. Have you ever wondered

why all companies independent of size

all seem to have the same or chart?

He's making this long post about that

mostly system of records have been

similar type of companies.

>> Hence you know software decides your

choice of orchart not the company. to

totally right and and one of the things

about you guys as founders

>> is one of the key decisions you need to

make is what is your or structure

therefore what is your business

structure and then as you go forward

depending on 0 to 1 or 1 to 10 or 10 to

100 how that needs to change and then

who are the people who can make that

shift and how how do you help them? when

you had told me this you know revenue

growth uh profit growth and working

capital growth and it should apply to a

channel person versus a marketing person

versus a supply chain versus HR I had

gone back to the org saying hey we

should do this let's find what these

three are given our stage and what we

want to incentivize as behavior um uh to

our you know to our uh to our people uh

and we actually went through the process

it was damn hard to find something that

worked at our scale

I I still I still want to kind of get to

a place where we can do some do this

with a high level of predictability

across the organization but it was just

damn hard to do. I

>> I think there are two very different

axis that you are struggling with. One

of the first axis I think is relatively

in my opinion easy because your company

structure is the same. It's not very

different from how a wrecket country

would be. The issue that you want to

really talk about is a bigger issue

which is how do you calibrate your what

is what good looks like in a fast

growing startup and I think the answer

to that has to be that as a founder you

have to anchor to something so at the

start of and and the second question is

the period so the first thing is as a

start as a founder you may say that look

I think 20% growth or 50% growth this

year is great now actually you grow 100%

then maybe you need to have

um you know honesty to say I had said

20%, it's actually turned out to be

100%.

And we've done very well

right and in that scenario maybe at uh

because it's a very high growth business

at 50% there is certain reward but you

don't cap it right you basically set it

up and say that if it goes to 7500 200

this is how the reward moves and so

people know what they're going to get

out of it and there's always an

incentive to grow faster. So that's one.

The other thing you can do is you can

change the pace of the organization. And

this is something that's so important

and nobody I mean people don't seem to

get. One of the most important things to

think about how to scale a business is

the organization cycle speed. And we'll

come back to this for China because

people say what why are these Chinese

companies winning? The answer is this

amongst other things but the most

important answer is organizational cycle

speed. And what they are doing is

essentially they are speeding up the

organization cycle much faster. So you

can also say that listen I'm not going

to give you a full year target because I

don't know what it's going to be but I

damn well know that in the next quarter

we are going to achieve 50%.

If you achieve this then you get

whatever number of points and then next

quarter I may give you 50 I may give you

30 I may give you 100 depending on what

it's going and now suddenly your targets

are more um you know achievable but of

course this requires a lot of target

setting and you require an industry to

do it and of course you can use AI to

solve for most industriesization

cycle I heard today only that in India

public companies report their earnings

year on year startups do it quarteron

quarter but in China startups are doing

it week on week. So if you just change

that

>> that you know nobody would report a week

on week growth of 1%. So you're forced

to like think more that how do I uh do

faster growth. Maybe that changes the

decision but I don't know if that is

true also. Adi would let us know.

>> We'll we'll we'll come to this. So uh

you know I I spend a lot of time

thinking about uh what's happening in I

I've left China. I used to live in China

for seven eight years. I've left China

for the last 10. But I make sure I'm

well connected because I feel that if

you see what's happening in China and

you learn what's happening in China, uh

it's really gives you a superpower

because you can predict the future and

to some extent the same is true of

America but more of China in my opinion

where whatever happens in China today

will happen in America 3 years later. Uh

Europe 7 8 years later, India maybe

between 2 and 7 depending on which

category or whatever. So if you see what

happens in China, you can predict your

future. And the first point I want to

make to you is if you compare China and

India, you need to set a start point for

both. And in my opinion, the start point

is the year of liberalization.

So China liberalized in 1979. And what

the story there is that there was this

leader they had called Deng Xiaoping and

he went down to and totally communist

country just after Mao and he goes down

to this town of Shenzhen which is mega

city megalopolis today but then was just

a collection of hearts and he and in

typical cryptic you know Chinese

whispers he says one line which changed

the world and the line was to be rich is

glorious

to be rich is glorious. That's the only

thing he said

when he said that. In any case, China

like India is full of entrepreneurs and

these people sniffed the direction of

the wind and they were like, "Yeah, this

sounds like a good idea. We've been poor

for so long, so let's be rich." And then

that started this process of

liberalization. In the case of India, it

was um Narimaro

Man Singh. And the delta between these

two is about 15 years. 1979 to uh to uh

sorry 19 um 79 to 1992 or 19 whatever

1991 9293.

So if you take both of those points as a

start point, I want to show you a chart.

So this one chart shows you the GDP in

trillion dollars of China and India

from liberalization year 1 to year 32.

Year 32 in China was 2007.

Year 32 in India was 2022.

>> This is the first time I'm seeing this

chart. Everyone always shows the

India is

>> they don't have a common starting point

in China.

>> Yeah. It's very interesting to see.

>> Oh wow.

>> Okay.

>> So this this is almost identical like

this is it is identical.

>> Yeah.

>> Yeah. Though there was a little steeper

curve in China after this from what I

understand we we extension that we can

actually say okay this is where where it

is headed.

>> I I'll come come to that next. But the

other point I wanted to make to you was

before we started recording I was

telling you guys about scurves and about

how human beings cannot compute scurves.

I was telling you that every business

grows on this scurve. It's not every

business. Every distributor, every

business, every country, every uh you

put bacteria into a petri dish, you blow

air into a balloon, the growth of

everything follows this exponential

curve. Let's not call it an XS scurve

until because it becomes an S-curve. But

to begin with, it's kind of an

exponential curve. And the crazy thing

is you can't get to where you are in

year 30 without going through the pain

and grind that you had to go through to

get there. And so therefore the valleys

going through the valleys makes you

makes it possible to create the hills

later. Now there is a very interesting

way to think about this. What speeds up

these scurves and we'll come to this

also. So what happens here is that

you're going like this but actually you

it's not straight. What you do is you

try something you learn you get you try

get results learn change try get results

learn change. So this is a series of

these things and it's this better

knowledge and learning that takes you up

the performance curve. So if you can

speed up that cycle of try learn change

your scurve instead of going up in years

starts going up in weeks starts going up

in months starts going up in days but

the shape of the growth is always the

same you can just change the uh change

the uh unit of time at

>> x ais

>> the x axis right so now this happened to

China so if you go further the first 30

years that happened it went to close to

4 trillion and then In the next 15 years

it went to 17 trillion or 19 trillion

and that's the nature of scurves. So

when you are sitting at 4 trillion which

is here you're thinking oh we've done

well it's it's good and you are planning

the next 3 or 4 years of 15 10 15%

growth as a company and you're saying

yeah it's not going to get faster. It's

impossible for it to get faster than it

is today. But guess what the natural

thing is for it to get faster. So what

ends up happening is because you have a

if you're a company who's going on this

trajectory, right? And now you are

sitting here and you are like a let's

say this is a 3.5 means you have a 350

cr business. It's gone from zero over

whatever number of years. So now now are

you thinking that I'm going to put in

resources and try and grow even faster?

No. You're saying 350 cr business if I

overcommit and if I overspend.

So I don't want to tell my boss or my

shareholders. So you tend to

underinvest.

So at a time when your business could

take off because awareness and

availability is now getting to be

strong. You tend to underplay and be

cautious. But if you are not cautious

and if you basically keep driving, you

get those kind of results and you should

expect those kind of results. Now will

India achieve the same as this? Who

knows? Probably not because uh India is

in a different uh you know world. When

it is growing when China was growing,

everybody wanted Chinese product. For

this scale of growth to happen for a

billion population uh country you need

to create products or services which

need to be consumed by 12 billion people

around the world for them to have enough

weight to drive this kind of growth. In

the case of India we don't have the

manufacturing industry. We have service

industries which are likely to be

disrupted with AI and we'll come back to

that. So it's going to be much more

difficult. So if you think about what

that means, India in the next 15 years

if it achieves what China did can become

a 17 trillion economy. If it achieves

80%, if you take a discount, it can

still become a 14 trillion economy and

it achieves half of what China did will

still become a 10 trillion economy.

>> Even if it becomes only a 10 trillion

economy, there is a dramatic growth that

is going to happen. So what does this

growth look like? So here is this very

badly formatted chart and I have another

chart. If you want I can show you the

skyline of what Shanghai looked like in

1999,

1979, 2011 and 2023. And you think it

can't grow and it gets better and

better. I have a chart with the skyline

of Bombay also right which shows the

same trend. So here if you look at

number of skyscrapers 1979 10 2007 which

is the first 30 years 1300 went to 3,500

urban okay highspeed rail 000 went to

42,000 km highways 5,000 50,000 160

let's look at uh air conditioners 1% 30%

70%. Cars per thousand people from 1 to

24 to 210. Value of the apparel market

from 1 to 50 to 350 in billion dollars.

Shoe industry 0.5 to 20 to 90. Number of

cars sold.1 to 5 to 28 million.

So now in a sense where you are sitting

in India is this 2007 number and what is

going to come is this delta between 2007

and 2024 and you can discount that by

50%. So in India

we are sitting on the potential

that we cannot even dream about. Of

course there are issues, there are risks

and we can discuss all of those.

>> Yeah. Yeah.

>> Okay. I I I just love these charts

because you will be I don't know if

you'll be surprised to know but a lot of

VCs here are podcast they are smacking

their lips saying LP chart

[Laughter]

so this is what happens then so let's

take a couple of charts just to frame

this what the situation is like in China

at the moment so this is um and some of

this data is 21 22 it doesn't matter the

the concepts are right and I again on

this also I've written a long substack

like a 100 page thing on what really is

happening in China after I spent a week

there in November.

So this is what happened to GDP at

purchasing power parity right. So you

can see China versus the US and you can

see on the real economy as well there is

a forecast which keeps moving that the

US that China will become the largest

economy in the world may be true may not

be true but the direction of both of

those the fact that it's a super

significant economy is of course clear

but it's not just about the economy you

can see what happens to the country look

at the life expectancy today China has a

higher life expectancy than the US on

average look at the

>> this I didn't know huh I didn't know

that China's life expectancy is now more

than What's happened? This is postco

it's just plummeted right the US. Yeah.

Uh postco it's plummeted and well the

latest year is it higher or not? I don't

know. But I think the key thing to say

here is that it is in the same ballpark

right. So China from even though it

still remains a developing country in

many many ways on the whole they managed

to uplift their people. They have a 99%

literacy rate. They have a situation

where it's a cold country. China

everything north of the Yangze river is

heated. There's no home. There are no

katcha homes. You go to the even 15

years ago you go to the smallest village

in China there are only paka homes. So

again I would say India is going to go

in that same direction right the way

India has been

>> but on this on this the most common push

back I hear is the inclusivity of growth

somehow China has figured out a way to

make the growth more inclusive across

its 1.5 billion people.

>> No we we'll come to that I have a chart

I have a chart on the genie coefficient.

So there is this myth. Okay. Not a myth.

There is a thought that China is a

communist country. And you know

>> um let me see if I can find that chart

for you first.

>> Yeah.

>> Uh wait a second.

>> Yeah. So look at this. So look at this.

This is a top 10% ownership of national

income and wealth. So China both income

and wealth looks like the US.

>> It's almost like a capitalist any

capitalist nation.

>> Not almost. It is the most capitalist

nation. So people think that China is a

communist country and maybe it's called

the communist party but actually it's

not. It's the communist party is the the

most meritocratic thing in the history

of the world. We can come back to that.

Uh but also what is the characteristic

of a socialist country? Social

expenditure right? Social welfare.

>> Okay look at yeah this chart

>> social benefits as a percentage of GDP

only Mexico is lower than China.

>> Yeah. and China is half the US.

So they are essentially they're

essentially pushing the country into

saying that GDP

there's enough income opportunities

>> you're not going to get any benefits as

such.

>> So China

they are remember there is a Chinese

dream. What is the Chinese dream? for

the last, if you think of it from their

perspective, for the last 3,000 years in

history, other than an 300 year period

where they feel they've been, you know,

colonized, crushed, demeaned, they have

been the biggest GDP on the planet by

far, the biggest civilization on the So,

China has a the way the Chinese language

works is that you have a very long view

of time. So you can talk about the first

emperor who built the great wall in

whatever 100 BC or whatever it is in the

same tense as if the person is there

today. So in a sense you know when the

UK gave um uh uh had a deal with China

which says we're going to give back Hong

Kong in 99 years the UK was saying oh

that's such a long time and China was

saying oh that's such a short time. So,

so from that p from that perspective, uh

they have a lot of patience and it is

about how we are going to uplift the

whole society. There's a lot most of

China dominant religion is atheism but

there is a very strong sense of um the

Chinese community and how that needs to

be uplifted and so on. So there is a bit

of there's a lot of individual growth

that comes but there's also some level

of uh collective feeling in that

country. So what happens in China is

that if you look at all the job

generation that's happened in the last

20 years, the number of jobs in the

public sector are flat or may even have

gone down. The entire job creation has

been created in the private sector

mostly by small MSME industries in the

drive to get rich themselves and then

uplift their communities and people and

these things that were small MSMES are

today the BYDs of the world.

after doing those iterative learning

loops over a period of 25 years with

unlimited demand coming from China uh

from the US and this huge um you know

national uh focus on um um getting rich.

So in China they're quite commercial.

It's almost like Gujarati Cindi kind of

mindset

that we need to make money

and

>> there's also a feeling that I'm

responsible for myself. I'm responsible

for paying for my family.

>> It's not that they expect the government

is going to come and rescue them.

>> So they're hardworking people

>> and that I think accounts for some of

this but it's so China is very

misunderstood in many ways. So let's

quickly go over a couple of other

things. So

>> so totally understood the I think the

focus of the government. Now is that

something that has translated to how

startups also here have evolved in the

country and the workforce mindset

essentially like a lot of times we have

seen the like I think the last 10 years

whenever there was a question mark on uh

like we get a lot of grief on work life

balance. Shantum has his infamous post

of 18our workforce and obviously Mr.

Morti's uh chided enough for his 70 hour

workforce. But China celebrated for the

996 culture, right? 9 to 9 9:00 a.m. to

9:00 p.m. and 6 days a week. And what

essentially you're saying is that

culturally the people in the country are

very pro

fending for themselves and therefore in

some ways they may not be okay with it

but it's not so much of a grief for them

to work such work hours and therefore

startups have a distinct advantage to

move fast or

>> is there something else? No, no, I I

don't think it's that Chinese people

intrinsically want to work harder than

any other kind of people or there's

anything very different. People are

people everywhere, right? And in China

also um it's it's just a different

contract. So if you see what the

government is doing in China, the

government is setting the agenda. So the

government basically in um the 2011 2000

sorry 2015 to 2020 uh period they have

these fiveear plans and these five year

plans they have themes.

Um there was a theme 5 10 years ago

which was talking about the large

industries of the future are climate

focused right so solar cell uh batteries

electric cars and we need to uplift

ourselves from low-level manufacturing

and basically go into high-tech high

level manufacturing and uh R&D in these

areas. So even when I was in China 10 12

years ago, we've had conversations with

cities in which our factories were where

they were like look you guys are

relatively um low tech uh business and

we are going to try and make ourselves

more green and whatever these are the

things that you need to do uh or uh

there's some places where they wanted to

relocate our factories to other areas

because they wanted that area for uh

something else and these are all

commercial discussions that you have

with the government and basically there

lots of incentives and they'll work in

that direction but they'll also frame

what the narrative is. So in the last

five year thing they've talked about

this thing called common prosperity. So

common common prosperity is um similar

to what you have in the US and uh the

west where because income inequalities

are rising. The question is how can we

actually grow in a more inclusive

fashion and then the government will set

it place rules and systems and

incentives more than anything else and

maybe some disincentives sometimes to

try and nudge people in that direction.

This is one of the reasons why Chinese

startup the Chinese startup ecosystem

has kind of tanked in the last five or

six years because it is no longer uh

sexy to be a billionaire startup founder

in China without taking care of all your

other stakeholders. So the people are

asking what are you doing for your other

stakeholders?

>> So uh so I think that's one of the

things to be aware of in China.

>> Second this uh wolf warrior culture that

they have it's very uh niche. It's in

very uh specific areas that are very

competitive. But in general, I I

remember a conversation I had with the

mayor of a city. And the mayor tells me

this. He says, "Look, I have and this is

a communist party official. He's got 15

years of experience. He's come from the

bottom." Uh and when I said it's a

meritocracy, remember that in China the

way you get into government is by

passing an exam called the cowoka, which

is like the most difficult exam in the

world, much more difficult than our IIT

or IAS. and you have 10 million students

take this exam and there are 3,000 seats

and the top 3,000 seats are the people

who go into the base level of the

communist party government system. So if

somebody is a mayor, this person has

come through that and has had 15 years

of service where his KPIs are not about

how many bribes he has taken but his

KPIs are he told me his KPI says I have

KPIs on three levels for my city. First

GDP,

second uh happiness and satisfaction of

people there. And I am looking to create

a city where people can live, work and

play.

And if you go to Chinese cities, you can

see it. It is live, work and play. So it

is not this uh people from who never

been there think is this dull kind of

culture. There will be people in these

gray you know clothes riding cycles and

it's not like that at all. It is

intensely vibrant. People have dramatic

levels of self-expression and um you

know vibrancy on social media and in

real life. Of course there are bound

>> but that's a huge like a yeah there a

huge huge mis not a miscond huge uh

>> something unhappy

>> unhappy and with no control not speak

upazar say dazar be stuck till co from

what I understand it was let's go for

glory but I think I don't know what's

changed in the last 5 years adi you may

know better where you right like you

know they went after these billionaires

who were not pro-China I think Alibaba

tried to list a subsidiary in the US and

like did the diddi the right hailing

company was not allowed to list they

took the app off so anything that was

seen as not nationalist really got

screwed so I think it's almost like they

be like they don't allow dollar now

inflow like all VC funds are leaving

there's no US investing in China what

changed is very unclear to me

>> so what what changed is very much a

mindset of government so basically the

feeling was that we are getting all this

growth but we're getting this growth in

a way that is very non-inclusive.

So and this was the whole common

prosperity thing. So I I'll give an

example of an industry which was this

education tutoring industry. So this was

a massive industry right and there were

all kinds of startups all over this

industry and all of these people were

basically tutoring people for this exam

that I told you about and they were

making thousands of dollars per student

and people were willing to pay because

people in China have incomes most

important thing is education of your

child. So you will spend whatever you

need to spend. And then what was

happening was people who were coming

through this had an unfair advantage on

people who were poorer. So the

government overnight one day said this

ain't happening. This industry you

cannot have this. So all the VC money in

that all tanked overnight. So the thing

with the government there is they can

take very quick decisions and they don't

really care about you know hundred

billion here or $50 billion there. those

these are all very small things in the

national calculus the way they see it

but this can be quite disorienting for

investors. So um and I think maybe China

overplayed its hand and where it thought

that its hand was much stronger than it

was. Uh and also a lot of the growth

that is now coming in China in

industries where China has a techn IP

advantage. I'll show you that in a

second. And they don't necessarily want

external investors in this as well. So

uh let's come back to this but I just

want to make a couple of other points.

So people also have this feeling that

China has really slowed down. China is a

disaster grow you know China is really

struggling these Trump tariffs are

really hurting China and the answer as

in everything else is only partially

true. So this is the growth rate of

everybody. So forget the forecast which

is a JP Morgan forecast for 2029. Look

at the 24 number 4.8%.

The 25 number year to date is 5 a 12%.

In contrast, the US which is supposed to

be growing so fast is growing at 2% 2

and a.5%. So the economy is not that

different 26 trillion and 19 trillion

and China when it grows at 5% on a $19

trillion economy it adds 35% of an India

every year

right so this is the slow avatar of

China adding 30% of India in a year so

it's not really that slow if you just

think about how many cars how many

services how much they need to do to

maintain this growth at that base it's

quite incredible So if you were looking

at it zerobas based you would be saying

oh my god China is growing so fast but

because you have this uh media uh thing

which you're caught up in the narrative

you don't nobody thinks about the

numbers

right now if you go a bit further uh

okay and why is that happening well one

of the reasons is this this is the

change in US sentiment towards China and

you can see what happened in 2017 that's

where Mr. Trump first started

right so China

>> so it seemed like we are China was like

okay we are my read is there was a

globalization of economy China realized

that we could participate in this

globalization by creating a

manufacturing machinery and getting all

of China to prosperity and we will

manufacture for the world as soon as

people started becoming more

nationalistic and started shutting down

the globalist policies which is what

Trump is trying to do now as well right

in some sense

make locally

at least there is a level playing field

they realizing that now

the next 20 30 years it's almost seeming

like if every nation is going to go like

India did that right India said we

should not import from China now US is

saying that what will happen to Europe

we don't know right uh they anyway

hardly have any GDP growth so if the

largest growing economies and the

largest economies don't want to work

with China is let's uh focus on our own

and play the long game. It's okay to now

not try to just do lowcost

manufacturing. It's okay to grow a

little slower because we are now very

sizable as an economy. But let's have a

more inclusive growth when we have it

which is largely around still moving to

higher up the chain in manufacturing. uh

AI uh also looks at if I look at the

amount of infrastructure they fund in

Africa or in Southeast Asia also

enabling all of these economies I it

almost seems that you know there is this

uh I forget the name of these two

individuals I'd heard them

>> sorry

>> the belt and road initiative

>> yeah yeah so um but I'd heard these two

individuals where there's something

people like to be a local I I I I I

forget the word right key they want to

control their part of the world and US

did that for a long amount of time if

you see World War I, World War II, cold

war etc. NATO effectively they wanted to

control dollar being the global currency

reserve etc. And I think China now wants

to flex its muscles to say that a we

will grow large but we will also

fundamentally want to control as many

countries and have like a nexus where

countries GDP growth like we will fund

the GDP growth or make some countries

dependent on

>> so I have a that's like the long game

>> I have a slight uh twist in that

narrative I'll tell you what I said

first first just go to the start of what

you said so China decided one day to

become big in as a manufacturing

powerhouse actually what happened was

China did not know how to become big

China just had this thing we are going

we have a lot of people and we are open

for business and we joined the WTO it is

American companies to begin with and

European companies who figured out Name

they have qualified people and they have

the raw materials and they have the

capability. So they came and set up

factories here to begin with and that

set up the start of the infrastructure.

So you're a car company, you're

producing in Chicago and now you realize

that you can produce for 30% of the

price in China

>> because they wanted low cost

>> labor. So that's the that was the role

of China to begin with. But what

happened over time is that this hollowed

out America. So if you go into the south

side of Chicago for example, it looks

like a devastated place. It's almost it

feels like you're driving through Syria

or something like that. It's I've been

to these places which look bombed out

almost. It's that bad.

>> And that backlash is what is now causing

the these issues because now people want

these jobs reassured even though they

themselves may not want to work in a car

factory anymore. So, but in concept they

want them back in America, right? But

what happened in China was that was the

starting building point and then China

built expertise and expertise. They

built an ecosystem. They built all the

ancillary parts and all of this actually

was done by the private sector. It's not

government. It's not state-rown

enterprise. And then what eventually

happened with China is China used to be

30% urban like India 70% rural. And

there used to be a uh because to become

prosperous as countries become

prosperous people move from rural to

urban. So there were 15 million people

moving every year from rural to urban

China.

And remember one thing about China if

you remember anything at all. China's

primary focus is inwardlooking.

China was even when it in the you know

1200 AD or whatever it was never wanted

to engage with anyone outside. So and

you can see this in the name. So China

if you see the name is like a rectangle

and a line in the middle. It's called

the middle kingdom. But what that middle

means the rectangle is world.

Middle means center of the world. So the

Chinese see themselves and even write

themselves as the center of the world.

So for many Chinese people, there is no

aspiration that says, "Oh, I want to go

and live in America. It's such a

fantastic country." There there is for

many also because there are so many

people. But for the vast majority of

Chinese, why would they go and go away

from the best place in the world to some

crappy place somewhere else just

searching for some money or whatever,

right? So China a lot of what you see in

China is about maintaining internal

harmony. So now you have this party

communist party who has control over

China for so many years. But the way

that contract works is I help my people

increase their quality of life. I give

them a better life. I give them a place

to work, play and live. I give them

better life expectancy. I give them more

challenging jobs. I I give them purpose

in life. And in return they don't

challenge the way that the country is

governed. So the party remains in power.

So what ends up happening is now you've

got 15 million people coming from rural

China to urban China. You need to give

those people employment. If you don't

give those people employment, you have

unrest. If you have unrest, it's not

good for the party or for anybody

actually. So to get them jobs you will

invest in creating the infrastructure

that allows industries to be created

which they did. So 15 million people

coming in corresponded to a 10% GDP

growth every year for so many years and

it absorbed all those jobs. 70 80 100

200 million jobs later you now have this

massively skilled workforce who needs to

continue to have jobs otherwise there

will be unrest. So China's number one

focus always is the prosperity of its

people and looking inwards they in my

opinion they couldn't care less about

going and controlling anybody. The only

reason they are interested in

controlling or appearing to control

anybody is the making sure that their

supply chains are secured that they get

their minerals from Africa or Australia.

But they don't want to go and you know

you you you don't in China when you live

there nobody ever tells talks to you

about going and occupying you know some

other country. That's not the discourse

at all internally. It's all about how do

we maintain this system that people once

you the communist party in a sense is on

a tiger right and the tiger is the

Chinese system cannot jump off the tiger

because the tiger may eat it up so it

has to so this is the reason that this

happens so if you look at the top that's

2000 and blue is countries where America

was the dominant trading partner and

that is 2018 and that is countries where

China is the dominant trading partner

of

So I will show you the numbers in a

minute. So in the case of India, there's

$ 110 billion of trade approximately out

of which hundred billion is China to

India and less than 10 billion is India

to China. But that's also maybe because

of protectionism, but actually that's

both ways. It's much more because Indian

products are not competitive in China.

And we can come back to that.

But for people who think that China is

going to get crushed by these American

sanctions, actually China has been

working very hard for many years because

they knew this was coming. So you may

not believe this fact, but let me give

you some interesting factoid. The trade

between China and ASEAN is greater than

the trade between the US and the EU.

Wow. like de developing economies with

much smaller GDPs are able to do a lot

more trade with China has a trade with

everybody. China is the number one

trading partner of everybody excepting

USA, Canada and Mexico

and therefore American trade as a

proportion of China's total trade is

very small. So let me illustrate that to

you. So this is the importance of

Chinese trade to the world. You can see

imports and exports about 15% of world

trade. Here you can see the balance of

payments right? So you can see US 340

billion compared to 100 500 billion from

China 100 billion imported from America.

I also have a chart which I can show you

if you want about the nature of things

that are exported. So America's primary

exports yes there are some airplanes and

there are some things but America's

primary exports are things that you

would expect a third world country to

export. Petroleum is the biggest export

that America has. agricultural products.

Yes, there is about a 100 billion of

planes and high-tech but it's very

small. China the majority of export

today is high-tech.

Now if you look at EU again you can see

that China EU now look at ASEAN how big

that trade is. Look at Japan South Korea

and the only countries where China has a

negative balance of trade is Taiwan and

South Korea really and that is because

of semiconductors.

But if you go further now, this red

chart here is showing you the US goods

import by market.

Okay. So you can see from 2018

>> just fallen off a cliff. Huh?

>> Yes. Absolute fallen off a cliff.

>> But it's fallen off a So Chinese have So

but the interesting thing to note is

it's not just fallen off a cliff in 2024

when Trump came in. It's continuing the

same trend. So the Chinese have planned

for this. This was their base scenario.

So in spite of this drop in trade, China

is still going to continue to grow at 5%

as an economy. It makes no difference

because they have already planned for it

and they have compensated by increasing

the strength of trading relationships

elsewhere large enough to

>> balance the American deficit. And if you

go forward, this is now showing you on

the right

>> the so you can see how the trade has

fallen from to America. You can see that

the Chinese trade is not growing at the

same rate as before. Chinese export,

it's not declined as well. It's still

growing

>> in spite of the drop to America.

And I can also argue it's basically

eaten. It's basically eaten everyone

else.

>> Yes.

>> Yeah. Everybody else is dropping know

the US. But what is more interesting is

Shantanu what Adi said, right? If you

moved from a agri economy to after the

industrial uh revolution we were largely

a cars and planes and stuff like that

and then fundamentally there's a

technology economy right like what is

our biggest export IT services right

that was the software exports as such

but now the world is moving more to

semiconductors high-tech precision

engineering and if it is raw material it

will remain petroleum but also maybe

rare earths right because in the end if

you Think of all the AI chips that are

getting made by design. need uh GPUs and

GPUs need semiconductors and you know

you just go back in the um in the chain

to understand what is going to be most

valuable and in the world of unlimited I

don't know if you've seen this the

energy sufficiency of China is largely

now dependent on solar also nuclear the

number of nuclear plants that they are

putting because see electricity

sufficient energy sufficient then your

petroleum dependency also comes on and I

mean US and India I think investing more

into solar. China has done solar but

their nuclear power capacity

uh seems to be like off the charts right

I don't know if you have a if you have

some data on that AI

>> there's one

this consumption of energy huh so

renewables is effectively becoming a

massive part plus nuclear as well and

you're reducing your dependency on oil

and coal which effectively reduces your

dependency on every other country for

that matter like whether we run out of

oil or coal or not that's always a big

debate let's assume we never run out of

oil but fundamentally the luck of the

draw

but it's not the primary driver for

China. So what what's happening with

China right now is while this chart

looks very nice, this is a percentage

chart. When you make this into

absolutes, what's happening is that

essentially fossil fuels which is coal

and oil is flat in China. It's not

declining because the energy needs are

climbing so rapidly.

>> So all the incremental energy is coming

from here. So what China and China by

the way is more than self-sufficient in

coal. So it's only oil which is the

issue for as far as China is concerned

and there is no problem with oil because

they can get as much oil as they want

from Russia also. So the reason for them

making this shift actually is not

necessarily only a supply chain

constraint. The reason they're making

the shift is this.

So this is a country where 7 years ago

they said we are going to fix the

environment. We understand how much

impact it is. Remember the whole thing

about making it a better world for

themselves. This picture below is what

Beijing used to be when I used to live

there. And this picture on top is the

picture from 2022. This has been

recognized as the Beijing miracle by the

UN. In 2022, Beijing had 288 clear sky

days like that one. In 2007,

>> wow,

>> it had something like 300 and something

smoky days like the one below.

So this is Delhi and Delhi's future 25

years later if we can make it happen.

So it is all so this country is a

country that has a forwardthinking plan

which goes for the next 25 years. So the

industries that they are putting in

massive money in for them the Manhattan

project is semiconductor but not just

it's green cars, it's batteries, it's

energy. So it's um uh uh fusion, it's uh

nuclear, it's um quantum computing,

it's those kinds of things. And I've got

a full analysis also if you're

interested which compares each of these

on competitiveness with the US and where

the Chinese situation is. But if you

look at one thing which I will show you.

So people think that China China is a

copycat economy and it was at some

point. This is R&D expenditure as a

percentage of GDP.

But this is the number of patent

applications by China and every other

country in the world. So when you say

that India has startups and they are

very innovative and so on, just see

those numbers. China had 1.6 million

patents which was more than US plus

Japan put together

and India has entered this list at

64,000 patents in the year.

Now if you assume that a pat filing a

patent has some correlation to some

invention

which country is the most inventive

country at the moment.

>> Yeah.

>> Yeah. China it's probably more than all

from 2 to 10 put together.

Yeah, it's crazy, right? It's

>> But tell me this like I think this is

clearly a cultural nuance like you said

the the Communist Party of China,

there's one party that thinks 25 30

years ahead and puts in policies or

governs in that manner, right? How have

you seen startup founders in your

experience in China take like there is a

nationalistic pride? Yes, I think India

also has it. A lot of us are very like

right but there is somehow a cultural

nuance where we've seen the value

creation of Chinese startups we at a

very different level than compared to

what you know we do whether it's like

going back to the 996 culture or whether

it's just the sheer uh need to win um or

is there something else is there

something that we are missing what can

we learn from China like as founders or

is it like is it just the long-term

orientation which you said 99 years also

>> it's not the long term it's not the

long-term orientation so founders in

China are like founders everywhere else

they have to survive for the next 3

months in a hyper competitive market

right and it's a market that's totally

unforgiving so as you saw it's not a

communist country where people are going

to give you the dole you have to fight

with extremely smart people with a

population that is extremely discerning

so what is the playbook for winning in

China so in preparation for this podcast

I actually put some thought into this

and I actually put together some a few

charts. So I can show you the charts and

we can chat around them. So the

>> so here is a playbook for

>> 10 drivers of success in China.

>> So the first thing

>> iteration speed as strategy

>> and this this I'm now moving very much

from a country length to almost a

company and brand length and we'll bring

this back to what Indian starters can

have. So you have that at the bottom use

case for Indian shers.

>> So

>> what China does is

dramatic innovation and speed. So let me

give you a specific example from my old

life. We used to have a brand called

Morfree. Wreckit still has a brand

called Morree in America. This brand was

a brand of supplements. It does um you

know u glucosamine chondroit and these

kind of things and a very nice solid

brand $100 million kind of business in

America growing well five six 7%. And

has a strong multinational kind of

innovation pipeline like one or two or

three big innovations a year couple

brand restage like that. So when we

launched it in China, we started with

crossber

the Chinese team and the Chinese uh

there's a very very interesting Chinese

partner basically said listen we need at

least five innovations in every segment

of this thing every year and we were as

a company or the Americans were like oh

that's too much why would you need that

how can you even execute it and they're

like look I know some of these things

can die but we need to do this so what

happened was we pushed the thing and

eventually we got a pipeline of five and

the next year five and then 10 and then

15 and 50% of these things died but now

think what happened you had let's say

two products to begin with now you added

five in the first year in America you

added one so in America you had three

but in China you added five two died so

now you had five the year after China

now had seven America had three the year

after China had 12 over a 5year period

it diverged dramatically

and because for each product you get

learnings, you get insights, you get

some consumer awareness, you find a way

to uh you start asking the question, how

do I bring my range together? What is a

higher order benefit? Which one should I

promote? How should I promote? You end

up building a much more um much stronger

ecosystem with much more insights and

because so there is this very old um

experiment. The experiment is there are

two groups of students. They are both

given the same amount of clay. One group

of students has told that your job my

friend is you're in competition. Your

job is to make pots with this clay and

if you make more pots in kilograms of

pots you will win. The other group is

giving a given a computer and CAD

software and a design expert and told we

are going to make the most beautiful

pot. Whichever makes the most beautiful

pot is going to win. Whenever this

experiment is repeated, guess who wins

and makes the most beautiful pot? It's

always the first group

because it's one thing to design a pot.

It's totally another thing to make it.

And in the act of making 50 pots, 100

pots, you realize what is the most

beautiful pot and you create an become

an art form on how to make it rather

than to visualize it. So what ends up

happening is that these companies are

executing so much and so fast and

building those learnings inhouse and

that causes these rapid product cycles.

So luck in coffee screwing Starbucks.

Starbucks share is down from 60% to I

don't even know what it is 6% maybe like

it's a disaster.

And why is that? Is that because Linen

is a better coffee? No. I think I would

say similarly but they have so much

innovation. One week they have a bio

flavored coffee. Two weeks later they

have something different. All of these

short life cycle. They do a bio flavored

thing. They sell 10 million dollars in

the first two hours.

and

>> wow

>> and on they go right so this rapid

product cycle with instant feedback loop

and realtime R&D so R&D is not something

sitting making a plan for 4 years later

R&D is like I need 10 products here is

the consumer feedback

>> it's coming to you real time I need this

converted into a new product next week

>> and so on this we've seen brands in

India and

I don't know if I mean I don't think we

were this fast but some brand

like you it to the answer but let's say

let's go back to the first question I

started with company

and we I'm being told you have to slow

down you have to bring high quality

products because now you're a large

brand you can't afford to screw up right

things have to become a process etc etc

um at the same time we have to now still

how how do we not lose what got got us

here while trying to

>> again you have to structure it so that

it is a system that does it. So I'll

come to this point and I'll bring it

back. So if you look at the second

point, it's platform native commerce.

>> Yeah.

>> So

>> you have so much innovation. Where do

you get the ideas from innovation? You

get it from the platform that you are

closely integrated with. So when I was

in China, we set up this whole

e-commerce thing which is so by the way

the wreckit China business today. Uh so

wreckit in India was has started in

1930. Massive business. It used to be

you know it still is a very successful

business. Wreckit China when I went

there in 19 2008 was a $15 million

business at that point of time India may

have been I don't even remember 300

million 400 million today the Chinese

business is much bigger than the Indian

business and not just that it is growing

at multiples faster

like not 1x faster or 2x faster more

than that right why is that well the

answer is

>> Arjun Arjun is the answer

>> arjun is the answer partially

The other answer is what Arjun and the

team there have enabled. So they have

built a business which is sitting on

platforms. So for example when I was

there the Alibaba store was massive.

Today the Tik Tok store is much bigger

than the Alibaba store. They have live

streaming like you there's a five-story

building which is full of rooms which is

24/7 live streaming 50 rooms all the

time. And this is in Wreckit. Wreckit is

doing live streaming.

>> Like Wreckit is doing live streaming

like you would not believe it's doing

live streaming.

>> It is.

>> Wow.

>> So I I haven't been there of course and

I I would even if I was I would not tell

you exactly what but I can tell you this

that you study what these companies are

doing and you realize that

>> uh if you think of Tik Tok right people

are thinking it's not a great platform

but Tik Tok is a platform which

compresses your entire

>> or real. is a platform which compresses

your entire cycle. You can get

acquisition, you get people, you can get

interest because you can give them

something new. You can get direct click

to purchase

>> in one platform

>> in 30 seconds. Of course, you're going

to iterate on that like crazy and have a

different product every 30 minutes and

have a different presenter. The someone

was telling me that when they do these

things they are down to the level that

when they open a bottle what sound it

will make and how much conversion it'll

whether it'll open with a plop or a top

or a tick

>> makes a difference in the bloody

conversion. God,

>> it is a

art form masquerading as science in the

sense that what they've done is you've

got pipelines of data and information

which is coming back in real time every

day to the sales and marketing and also

the product teams for the product

iteration to happen and the

communication iteration to happen in

real time

>> and you can do these iterations because

the cost of the iteration is nothing

anyway you putting an you know that out

of every thousand Tik Tok videos 990 of

them are going to be useless. So it

doesn't matter. So you can try whatever

you want. But

>> but tell me this Adi there is a there is

a growing concern among businesses that

everybody's falling slave to the

algorithm.

>> Yes. Because these algorithms of these

platform which is either an Instagram or

a Google before or a YouTube before now

a Tik Tok is essentially going to govern

that and every 6 months you need to

change and meta is now also reacting to

how well Tik Tok is growing right like

Amazon in my view has been the most

stable algorithm if I can call it that

because they've set up as a

transactional marketplace and they are

also now struggling because US is the

bell weather but apart from that they

are not able to scale anywhere else

because all these other markets or top

of funnels are now realizing customer

right whether it's YouTube I don't know

if you know YouTube in India has now

integrated uh shorts which is the reals

or the Tik Tok format you can directly

shop on flipkart or myntra because

people are doing the same affiliate

shopping that Tik Tok does let's say in

China right

>> so the future is that that you will want

to control

>> behavior through the algorithms and get

people to do what you want to but in

some ways brands then become slave to

these algorithms right So I know it's a

very uh old man thinking way of it.

>> So I have a full uh you know sec thing

about this which is about how AI is

going to develop and the role of brands

and we we should come back to that.

That's that's a much bigger discussion

but in in essence what I think is going

to happen and uh okay this is an I'll

divert from China because this I'm so

interested in this I'll divert for like

one minute and come back but I won't go

too deep right and we can discuss it

some other time. So basically what I

think is going to happen is that we are

moving into this thing which I'm calling

entity AI. So what is entity AI? Every

brand, every company is actually an

entity and will appear

>> okay

>> and be visible and available in

anthropomorphic form like a human being.

So we are not far from a world where we

are going to have this conversation and

we are actually all virtual avatars on

Zoom and I'm going to say something like

uh okay Google uh do you think Raven is

right and another chat window will open

and a Google that looks like Google

which will be like a person will pop up

and say I think Raven is right because

of whatever this data is and this Google

will be having this conversation in a

million Zoom meetings and a billion

phones at the same time in human form

like Shiv G praut kind of thing and the

same opportunities there for every

brand. So if I want to have something

about shaving I should just be able to

get into this virtual room and say hey

Bombay shaving company uh I have this

issue with ingrown hair what am I going

to do with it and Bombay shaving company

who looks a bit like Shantanu will

appear and say this is what and these

are the four products. So until we get

and I think uh I have frameworks on how

brands and companies can will get to

there in my opinion. Uh but until we get

to that point, we have to iterate

through the owners of the platforms

where our consumers are because as

consumer brands until we can become

personal friends with a billion

consumers

and be on their direct dial list as a

brand. Until that happens, we are at the

mercy of the place where these people go

to to shop.

So if they going to Amazon to shop, you

need to be platform native to Amazon.

>> If they go to Tik Tok to shop, you need

to be platform native to Tik Tok. If Tik

Tok changes the algorithm, you better

know about it and change as quickly as

possible. And if you don't, you're

screwed.

>> Okay, coming back to China again. So

that was the idea about platform native.

We are at the cutting edge of

innovation. My CTO is going to do a

presentation to the board because he got

some pat on the back from couple of

people saying

let's get back.

So then let's come to the third point

which is price performance engineering.

So when I so this time when I went to

China in November, we sat in a car and

this car navigated us across 40 km in

China uh in Shanghai

with basically no driver, right? Like

the in the US also. But the difference

is unlike the US Whimo car which had all

of those gizmos on top, this thing has

nothing. It's just a normal car. You can

buy it. You sit in this thing, it will

take a U-turn on a crowded road. It will

cross a sevenpointed

uh you know sevenway roundabout. It is

driving in a road where 50 cyclists come

and break a red light and it still is

fine. And so I'm in this world and I

look at this and I'm a user of Tesla. I

my bought my first Tesla in 2017. For

the last 8 years I've driven a Tesla and

I'm like if I had this car. So this car

has an AI assistant, right? 7-seater car

by the way. 700 mile range. If you're

sitting on the last seat on the left and

you say, "Turn down the temperature."

The AI will automatically figure out

where you're sitting and turn down the

temperature there. It's got massage

seats everywhere. It's got a 30 in TV

screen that comes in from the back.

Okay. This car, which

is priced at a price of, let's call it

$30,000.

I bought my Tesla in the UK at £52,000.

That same Tesla is available in China at

£26,000 and it's getting its butt

kicked.

>> So

>> I started seeing BY in India also by the

way.

>> You will see it everywhere. It's going

to be

>> it's fantastic.

>> Well, in let me tell you about the UK.

Tesla in the first quarter, also aided

by Elon Musk's gymnastics with Trump,

>> has become the number four electric car.

>> From a situation three years ago where

the Model 3 was the bestselling car in

the country,

>> it's become the number three electric

car. Number four, the top three are

Chinese.

>> In the UK,

it's not just that. Go to Singapore.

>> You you go to Southeast Asia, all the

Japanese car companies are totally wiped

off the map. So what's happening is that

you have this situ coffee Starbucks same

thing Starbucks you buy for 40

>> R&B or 50 R&B like5 $7 Lin coffee $9.99

>> so when I used to live in China the top

car companies used to be the Germans so

Volkswagen um biggest car company in

China at that time uh JM from America uh

uh BMW, Mercedes, Volkswagen used to

sell 17 million cars in China. 17

million. I mean just compute that

number right?

>> What happened was and these were

high-end. So you would say I want to use

a Volkswagen car because it says

something about me and so you drove a

BMW because a BMW said something about

you. Today when I go and I see all these

people, all of them have switched from

their BMWs to some Chinese car. So I

asked them that my friend why have you

moved to a Chinese car? You know when I

was here if I was not driving a BMW and

because my company was cheap you know

because it should be also I was driving

this bloody Buick nonsense and people

used to look at me pittingly and say

so

why are you not driving be so they say

that look 10 years ago people used to

look we used to look pittingly at people

who were driving who are not driving

BMWs because

BMW but now if we see someone who's

driving a BMW W we look pittingly at

him. So I said why? He says how stupid.

First of all,

>> he is driving a car that is 20% of the

quality of the car that I drive and

second it is at double the price

keeps telling right you have to sell

status

correct

it's intellectual status now are you

smart enough how smart are you smart

enough to get 90% % quality at 50%

>> not 90 or 20% quality in the case of

cars 200% quality I can tell you

>> having driven that car I would throw my

Tesla in a dustpin in 2 minutes those

cars are so much better

when

I have both

at least I I remember once that

>> that

>> so China maybe

>> sorry sorry one

>> China maybe iPhone still remains the one

foreign brand that still survives and

does okay in the sense that it's by

volume it would be like a 15 20% share

but even there

the highest end phone highest end people

may still to be 50/50 between iPhone and

uh you know the Xiaomi or Huawei but the

vast majority of people it's um would

see iPhone as aspirational. It is true

in China also. So there are some so

China has always been a brand conscious

market right so it's the biggest luxury

market in the world but even in a market

like that there is a flip and I'll come

to beauty in a minute because I'll come

to your categories in a second and you

can see this flip starting to happen

here. So if you see here there is this

question of price and performance

engineering. So getting 120% of the

quality for

50% of the price or 60 or 70% of the

price is good. And what these companies

then do is their tier. So companies will

not have one brand, they will have three

brands and they will cover all the price

tiers. And the top end will not be 120%

better. It'll be three times better

quality wise.

>> Wow. But one view I have seen very

different in this case sorry shar is uh

so my team recently had gone to China

>> for a neutrautical because that's our

business right we are largely in

wellness supplements neut neutrauticals

and uh we are the only fiberbased gummy

in the world not just India in the world

right and we are very proud of that and

I told you

we were shocked to know that the

bestselling brands in the US all procure

from China and the manufacturer told us

key they say for example creatin is a

big supplement in the US now getting

bigger in India as well and we are the

only ones who have solved their gram in

a gummy and people are like

and they're like scientifically possible

I have written confirmation that the

creat gummies selling in the US that are

manufactured in China don't have

creatin.

So that fake things still exists at

least in some things where there's no

way to test like see car quality you can

experience there's nothing you can

experience in a supplement

you're totally right so China there have

been two markets and both these markets

are the biggest in the world so the

first market is a very cheap market

>> and the second market is a very premium

market

>> and these two markets coexist so in

China you can buy a Hermes bag from the

store and come back and outside you'll

find a fake which is 90% % of the

quality and 20% of the price in the

doorstep of that store. Right? It is

your choice which one you want to buy

and whichever you buy what whatever you

pay for you will get that quality.

But

>> so just just think about the supply

chain margins here. Right? So um one of

the experiments I do quite often when

people ask me this question is I open

two apps. One is the UK Amazon app and

the second is the Alibaba app. So and I

look for something for example sheepkin

drug. So if you look in the UK pundra 15

to25 you will find a good sheepkin rack.

Then you open Alibaba and the same thing

exactly the same picture you will find

between 0.5 and $1

and MOQ of 20 pieces. So of course there

are people billionaires or millionaires

who've been created in Europe by just

doing this drop shipping model. But what

happens is that the Chinese factory

price in general is 10%. So is

Lululemon. So when this Trump thing

happened, the Lululemon factories came

out and said, "This is the price we sell

to Uluru Lemon." The leggings that they

sell for $80, these people sell for $2.

So the point is

You can always find both qualities.

And what point I'm making is even the

best quality product in China equivalent

to the US, the same product will be at a

third of the price because their supply

chain is so strong and the people cost

is so low and the robotic use in those

factories. I mean people I've seen a

factory which is the size of a football

field with 500 robots with one person.

They're just saying, "No, in the factory

of the future, there are two people, a

man and a dog. Why is the man there?"

To feed the dog. Why is the dog there?

To prevent the man from touching the

machine.

Anyway,

>> another

amazing thing about China, my team is

there right now is every time we go

there like one is of course their

high-tech ability to like just churn

stuff and innovate is amazing but even

their emotional quotient and people

orientation is insane. So there will be

a huge board outside any factory any

vendor factory which will say welcome

Shantu, welcome Adi, welcome Rayant.

Then they'll serve you chocolates. The

rappers will have Bombay shaving company

uh branding on it. They'll all be

wearing bombsh but it is insane how much

they innovate on even the playbook every

year. Look I know a lot of people from

the UK for example who s so let me tell

you two stories. One story was when I

was in China we used to we have a brand

called beat or wreckit had a brand

called beat. We used to source it from

the France and then wreckit had a

factory in uh badi in um India and that

factory basically was getting better

gross margin. So we said let's source

from there. The first year we sourced it

it was a disaster. it all got rejected.

Why? because the best quality in India

and of course with quality testing and

all that was not acceptable because

printing China has an AQI level of 1 in

10,000 record AQI level was 1 in 100

acceptable quality right so then what

happened the next year we figured that

it is much better to still source from

India because they still didn't have the

factory in China but what we did was we

imported the thing from India we threw

away every carton we reprinted all the

cartons in China which then were the

good quality and for 3 years we did this

all the time where we imported the crap

from India we fixed it and we sold it in

China

and we still made more money than we

would have made and then eventually

there was a factory that was created in

China. I know people who in the UK who

source wipes and things like that from

China and from India and the quality

difference is so dramatic and the

professionalization professionalism

difference because in China they know

the rules they know the regulation

they've basically done it for a thousand

people before they know key how to ship

it so it gets to you on time in India we

are still in the learning curve in many

of these things right and it'll improve

so India is like China was 15 years ago

in quality China was also like this

there's

you know culturally about it but it's

just that we we'll get better. So that

those are the things to learn from

China.

>> This is amazing. Yeah. Adi I think uh

while while we'll continue I think we

need at least five to 10 episodes

we can do one on this and one on AI.

>> So actually AI is the more interesting

one. There is much more interesting

things there.

But let's quickly go through this. So,

so you had made a point about uh local

things in China and local things in

India and if there's something that we

can learn and the answer is absolutely

yes. So, it's not just about made in

China though there is a bit of that. It

is made for China. So the insight is

that Chinese people are different from

American people and they have different

needs right?

>> So how are you going to basically um

make it which is in ways that work with

us culturally but also work with us

physically. Indian hair is different

from you know American hair. So should

the razor not be subtly different? And I

know that Chantanu keeps telling me

about how it is subtly different or it

should be subtly different. Right? And

there are all these examples where it's

been known there is skincare with

traditional Chinese medicine. The number

one brand in toothpaste in China is um

Yunan Bay which is basically a Chinese

traditional medicine brand which

basically made a big uh actually was a

Chinese traditional medicine company

originally and they basically said we

make toothpaste that helps with gum

bleeding

>> and that's basically beaten all of the

Colgates and Kur and everybody else in

China number one. So there are uh and

then um there are brands like leaning.

So leaning is now very close to Nike in

size in China. Leaning was the was an

athlete in China and he started his own

brand. So there is a Chinese way to do

it and I think more and more as we

mature in India there will be an Indian

way to look at a category or look at a

brand and those brands can actually be

very premium as well.

I really hope so bad because uh if I see

what is happening in Ayurveda and uh the

alopathy doctors chopying like I'm very

happy to see that the largest skincare

brand is something that embraces Chinese

medicine and they don't like somewhere

no it's becoming a little

uh popular in India to on our

traditional 5,000 year old wisdom like

nationalist

or let's adopt you Okay, our uh ayurvea

or herbal has always been been like the

mainstay of how we have evolved as a

community and we should go back to our

rootist. So China that people nobody

cared about Chinese traditional

medicine. I mean they did but more as a

medicine. But what has happened is there

is a fusion. So there is a western way

of doing science, western way of

bringing out the ingredient of proving

the claims of showing demos of clean

labeling of making it look aspirational

of making it look technical. So when you

do that but it is then powered by a

herbal or natural ingredient it becomes

really powerful and it's also Chinese.

But if you're thinking of so if you look

at traditional Chinese medicine you go

to a TCM hospital it's like a western

hospital in terms of all the diagnostics

it's not for

they are doing all of the same CT scans

that the western hospitals will do. So I

think the trick here is to take

extremely good design, extremely good

consumer insight, science behind it,

clean it up and then present it back in

as something that is powered by your

cultural heritage but is relevant for

today.

Okay, the next one I love this always on

engagement. Yeah, my team hates when I

actually tell them this

like I I actually believe India is now

ready for live commerce like Instagram

stories have already started live

commerce and I I keep telling my team

why not do it and they're like

but like this is the future I can see it

already in India also like there is no

reason why a broadcast channel won't end

up being a sales channel or a live live

stream uh

like

Shant if you remember Instagram lives

used to happen but then they faded away

but I don't see a reason why I I know

the platforms are not very

uh trending on that but considering

India doesn't have Tik Tok there is no

reason why Instagram yeah Facebook

so maybe maybe Shantan you guys you guys

if you're interested and you should be

want to do a live master class on this

with Arjun.

>> We have Arjun coming up, right? Shantanu

>> I think on 20 uh I think three episodes

down.

>> Huh?

>> So then we should ask him to cover this.

>> So he he'd be really really expert

because his business is the crown jewel.

So if if you think of every

multinational in China, they all

suffering, right? PNG, Uni Lever, uh

everybody Tesla, BYD, uh sorry, uh BMW,

everyone is declining. But there is one

multinational that is not declining that

is growing leaps and bounds

that is powered by all of these

principles.

Okay.

Let's ask

this is what we really crave right our

jobs largely ai is now becoming

predicting the future and

learning how to prepare for it or get

our teams prepared for it in some way

and that's why largely we do this so

very helpful

>> and in the past we were online you're

offline so like I've been very guilty of

this which is there's an offline

business and I'm like growth online will

focus more on online in China the and

everywhere is flipping in China it's

totally flipped so it is it doesn't

matter online offline whether you are in

a village town city what platform Tik

Tok uh ping duo whatever the brand is

going to provide you an experience and

be available to you everywhere so there

is comprehensive channel coverage on

every channel it's a multi- channelannel

business each channel has to be managed

differently and just because you are a

great brand if a new channel comes up

There is no reason not to be on that

because some of your consumers will be

there and they will not find you and

they're not going to leave that channel

and come to you searching for your

brand. Right? So different strategy for

each channel and there are 10 15 20 30

40 50 channels there is more channel

complexity coming in your lives and we

have to deal with it

embedded AI and data infrastructure. So

this idea about the learning curve

growing very fast and driving the scurve

of the business through that

experimentation etc can only be driven

if every experiment is captured with

data

learning captured and the new experiment

is designed and the learning of that is

captured. The faster you can run the

cycle time of doing that the faster your

business will grow.

and in China which is so datarich.

So ju just to illustrate what I'm

talking about. So when we started direct

to consumer sites in China uh in um

whatever it was 2009 or whatever uh 16

years ago there were four KPIs that we

used to track which is unique views

people seeing your platform multiplied

by um per uh conversion rate multiplied

by basket size multiplied by repeat

rate. Okay. So this is a very simple

formula and actually there's another

workflow I've uh sorry another uh you

know substack thing I've written on this

this framework it's a critical framework

because if you get this framework right

that defines the structure of your sales

and marketing team and it each of these

people works on linear improvement but

the business goes up in an exponential

way because these are multiplicative

so yeah if you have 100 people coming to

your store 10% of them convert so that's

10 people let's say they buy 100 rupees

so that's 1,000 rupees and they come 10

times a year so that's 10,000 rupees

sales now improve each of these by 20%

only so it's a linear improvement you

can give your team the target 12 people

come 12% conversion uh 1200 people come

12% so basically that immediately

becomes 120 multiplied by conversion%

multiply that by 12 and then multiply

that by 12 again suddenly for a 20%

increase in each KPI you have a business

that grows up by 50 or 60% % to make

your business 10 times. If you have an

80% increase in each KPI, your business

grows up 10 times. So you can set up a

team over a period of 10 years to

improve a KPI by 80% over 10 years. And

if you do that for four KPIs, which are

multiplicative, your business is 10

times. So each team is working like

this, but the business goes like that.

So I've done all the mathematics. It's

there in a framework and it's called

what I call the hyperrowth framework. So

we've been doing this in China since

2009. for each of those websites over

the last 25 years every single day. So I

don't have access anymore but Arjun can

maybe show it to you or maybe not. There

is a daily report that comes with today

for dur

10,000 people came to the store 7%

converted average basket size 20 rupees

or 20 R&B multiplied by whatever and

this then translated into a million R&B

of sale and the KPI was when we started

we used to have 3.4% 4% conversion.

Today the conversion rates are in the 15

to 20% of traffic is converting

and that is driven through continuous

experimentations every day over 20

years.

And that business that's the reason why

that business is whatever it is in the

region of 1.3 1.5 whatever billion

dollar plus with 80% from e-commerce.

>> Outstanding. Outstanding. I'm already

excited for having Arjun in. Uh but this

is another interesting thing you're

saying uh across the pyramid they have

been able to make money and we keep

debating this that in India it's very

hard to make money at the bottom of the

pyramid.

>> They have a mass market brand called

Ant, a premium tier called Fila and a

luxury brand called Desente. Now P the

supply chain is the same. The uh

strength of the partnerships the

ecosystem is the same. So basically they

and American companies also have done

this. So in the past PNG Unilo also do

bold and so you can tier your brands

right and because you're doing so much

experimentation each of these brands

stands on its own and what may happen is

from a profit pool point of view that

pyramid may be reversed

and you also have a system where people

come in at the mass market and you

upgrade them to the premium tiers and

then where it is useful bring in

nationalist power. So where so Huawei

was hit by these American sanctions when

that happened

they had to stop but when they came back

on day one they already had 20% share.

>> Wow.

>> So there's a new

>> they played that up that because you

know US doesn't want from us let's buy

in China.

>> Yeah. And our product is anyway better

than the iPhone and it's totally

different. So try so I give you another

example. The Xiaomi the new car that

they've launched Y whatever

>> the pre-orders

in one day is4 billion pounds.

Wow. Pre-order pre-order n billion.

Okay. May not be 40 maybe 20. We can

recheck the number just for correctness.

But it is in the

>> crazy number. It is number which is more

than the revenue of the biggest company

in India probably

I can already see a very cool razor

coming out handle

me Marati or Marati pan from Shantano

and entire Maharashtra is going at least

Bombay is going away

time this is just a final summary

Basically it's telling you four PS.

So basically product

>> platform price positioning and pace

pace is I think the hardest at scale.

It's amazing that a scaled up company

like a DDI or or a PDD

>> I think has to be with technology that

you design what he's saying now system

design has to be in such a way that you

are like that's probably one of the

cultural things which you build.

>> Yes. And this will take

>> you framework on that.

>> Yes. We will come come back to this.

This will take us nicely into the AI

discussion. I'll tell you why. Because

one of my frameworks in AI is something

which I call the swam framework. And

Churag will understand this because he

the business that he's built is that

kind of business. So the idea here is

that in life there are agents. So what

is an agent? An agent is anything that

replicates itself. So money is an agent.

If I put you know dollars into a bank

account, they'll be baby dollars the

next day. Similarly, people are agents.

So if you leave people and give them a

task, they will there will be they can

recruit more people. You can have

content is also an agent. It's an agent

is something that can basically inspire

others to create more content and scale.

Bots are agents. AIS are agents. So what

you can do for your to scale a to scale

a business you need to scale agents that

are actually getting worked up. So in

the past a lot of the agents that were

scaled were slowcale things like people.

But in the future, the moment you have

agents which are built on AI, bots,

content, money, these are things that

can live almost like SAS things in the

crevices of your business and keep

scaling themselves. And then the

question is how do you set these up in

series or in parallel in various

circuits almost to automatically and

with the right supervision mechanism

whatever to automatically scale. And

what they do is they scale not just the

business but they scale the information.

So when you get the information back you

can then have a backend that actually

uses that information to actually create

a virtuous kind of flywheel. So when we

um so again I have a framework which is

called the swarming framework. Don't

build a company build a swarm. So if you

think of someone like telegram sole has

um whatever number 50 employees but a

billion users. How do you get a billion

users with 50 employees?

By automating all of these things and

using agents. So the question and this

is the big opportunity also in front of

India. People ask me about UK. UK is

this country where aging population.

There are not enough people working. But

I'm like okay there are whatever 60 70

million people in the UK, 300 and some

million in the US. But what if the UK

had 60 million people and 500 million

bots?

Then what productivity could you

generate out of that? Got it.

Outstanding. I'm already getting a to go

to the next room and give my people key

or speed

system not don't give people

and we have this advantage of like

before it gets released.

to AI pay there are two lenses to

discuss whenever we have a conversation

and both are very interesting.

>> So I've spent a couple of few years now

trying to become the best user of AI

that I can be.

So and I love to do this for companies

and I do this again and again and I

knock people's socks off totally because

they cannot

nobody believes what you can do with AI.

that I can show you I can actually show

you guys to personally use AI what it

means people think they use AI but they

don't they're using really the top level

so that's one and the second thing we

can have a discussion which is very

interesting of course is also what will

change in the world one of the things

I'm doing is I've written all these

frameworks around entity AI and I'm

writing actually

a disruption manifesto for 25 industries

one by one by one by one so I just

finished education yesterday So, so we

can go into that's too much. We won't go

into that kind of detail. But we can

have a discussion about uh how we should

think about AI from a societal

perspective. How it's going to mean for

India. There are some very interesting

AI companies coming out of India. I can

give you demos of Indian tools that you

don't know exist. But for example,

Shantanul, I can show you demos of tools

that can do market research or creative

development for you. I'm not talking

about creating an ad, but developing the

campaign conceptually. I can show you an

AI tool that comes from India where you

just plug in your Amazon page and it's

going to incre tell you exactly what to

change to have a 20% conversion

increase.

>> Wow.

>> Made in India. And just for

entertainment, uh it's a totally

different topic and I don't know whether

it let me show you something. I'd asked

Shantanu for this is just a taster

preview, right? So I'm going to show you

uh

okay. So this is something which is

called venture GPT.

>> Okay.

>> And what I'm going to do is I'm taking

Shantanu's

pitch deck.

>> Yeah.

>> Of 2016.

>> For the for the viewers, this is a

9year-old deck. So please forgive

anything that comes out as output from

>> this. This is for entertainment.

>> Roast rose deck.

You've trained it well, huh?

Bomb shaving company team slide roast

consultants as consultants as simple.

The founding team reads like a McKenzie

alumni party with group M VIP pass.

Six people, five NDS, zero clear

operator FMCG

>> own the team of thinkers. But who's

doing

>> who's

uh men use what's in the washroom. The

real insight is that women buy 60 70% of

men's grooming products. Your entire

strategy hinges on bypassing the primary

buyer. That's either genius or suicidal.

trying trying to educate men and

changing buying behavior and build a

brand. Triple threat or triple trap.

Oh god.

Uh expensive in the might need to shave

shave the pricing logic too.

This I called out.

You are pricing like Apple and selling

like a D2C startup. Yeah.

Oh god, this is too good.

>> Final roast line. Now this

>> now I understand how VCs are enjoying

their life. Adi, we have all got this

roast.

>> Tough questions to ask the founder.

And what's a good bad start? Red, black

answer.

Wow.

>> Uh, tight and tough. Okay.

What customer behavior insights? Good

answer. We learned. Red flag. It looks

premium and no one else is doing it.

>> Was that a typo? Was that toy a typo or

is toy actually tough and tight?

>> Uh, no.

>> It caught it. Tight and tough.

>> In a prompt to do to

>> tight question.

>> Is it does it mean something or was it

an actual typo?

>> No. No. It was a typo.

>> Why is CAC increasing your FRA? What is

plan? K. CAC is under our projection. So

it's all fine. It'll go down as we

scale. Red flag. I agree. But this is a

standard answer all of us give

a my ex- chief of staff Shanton. You

remember Marmik? He put out a he's at

bloom now, right? He put out an article

saying k goes up and then comes down

over time.

So anyway, just to show you an example

and you can use this to uh clean up the

pitch deck. You can so you know you can

create an amazing pitch deck in very

quickly

uh using tools like this. So just

>> I can't wait for next week.

>> Can't wait.

>> Yeah, can't wait for the next one. Yeah,

really really helpful. Adi, I think we

had a lot of fun.

>> Yeah, we pride ourselves on using AI

well. like we do a lot of our briefing

outputs you know people of uh structures

etc on AI like we have some really good

super users but I think this is going to

be a lot of fun this is going to be a

lot of fun

like I don't know if you watched our

episode on wealth game versus status

game we keep thinking about how to align

employees who will be here for wealth

creation versus status and large

companies become more about status

designation etc right so in that journey

uh as you were saying that

which problems

but as a founder and a CEO maybe we are

a little focused there but as you're

saying that the market doesn't know that

and neither do the employees think like

that so would love to hear a little bit

more thought on this

>> okay so uh that that's a great question

because uh eventually um you know life

is a continuum you start off as a

founder and then eventually you build

business but I think the important thing

is to separate the founder from the

business. So a business happens to be

started by a founder and then if the

business creates products or services

that are actually amazing and they

consume it gets consumer love then it

takes on a life of its own. It's a legal

entity of its own also. So it's

different from the founder and it it is

something that can live for a 100 years.

So in a sense a founder is almost um

like a parent of a business right. So a

founder or a founding team is like mommy

and papa. So when you start when you

have a baby you behave in a very

different way from when the baby is in

school when the baby is growing up when

the baby gets its first job. Now it's

not a baby anymore. And then eventually

the baby goes off and becomes you know a

real person in the real world. and then

they have children of their own and the

company keeps growing. So all of us who

worked with large companies actually all

stand on the shoulders of giants and we

forget the founders who came before us.

Every large company today is a founder

created and founderled company and the

only variable that has changed is

longitudinal variable of time. So if

your product and service is compelling

enough the company will create its own

uh future. Now your job is to think of

the company as an entity that is going

to have this brilliant future. This

entity has a purpose. This thing exists

to provide some service or some benefit

or do something for consumers but also

make money for shareholders and there

are multiple stakeholders. So how do you

enable it to do that best? And to begin

with you have to nurture it. You have to

nurture it with your time, your

attention, your creativity. And then as

you go forward, you realize that you

still have that, but at a very senior

strategic level, but you need to have a

company that mostly runs itself. It's

got systems, processes, and very often

that's how how you set the culture is

very um linked to how you set up the

processes in a company and how you set

up the structure of a company.

Eventually culture mimics structure,

process, and reward. So if you do your

job in setting up all of those things

right the company will be kind of self-

sustaining at some point of time the

company will continue to live on and you

will die and when that hap assuming that

you stay with the company right or you

will leave and at that point of time you

know there will be other people who take

it up and then the question becomes how

you pass the baton to the next

generation. So it's a very long-term

thing. If you think about it on from a

very short-term perspective, you can say

things like in the beginning it's a bit

more art. And then as you go a bit

forward, it's a bit more science. And as

a founder, if you are going to span that

0 to one journey, but also the 1 to 10

journey and then the 10 to 100 journey,

you have to change yourself. You have to

change what drives you. You have to also

change who you surround yourself with.

And also you have to have a system where

the structure and the system works for

you rather than you working for the

system and structure because otherwise

you will kill yourself as a founder. If

you apply the same uh you guys are you

know relatively recent founders of

potentially very big global businesses

eventually if you maintain the same

level of levers of control that you have

today and your same personal passion and

your personal involvement 3 years 5

years 10 years from now there are not

enough hours in the day. You can't scale

yourself that much. So you have to find

scaling agents that scale the company.

>> First place where I think the wealth

game should be differentiated from the

status game is at the founder level,

right? Like you you have an operating

responsibility and part of that scaling

up. I I love what you said, right?

There's a limited amount of time that

passionate we can't be everywhere. So we

need to professionalize, set processes,

get the right people and then get the

right culture because what gets

valued by the CEO or what the top

management or what the CEO really uh

indicates that is important to him or

her or to the company is where the

behavior and the culture will start

growing. Right? But this is all easier

said than done and we've read about this

and I'm sorry because you know I know

you've seen this across 35 years but our

mind sort of boggles

reconcile because we in the thick of

things

is something that I'm sure after 10

years we'll reflect back and say hi this

was the pivotal moment but how do you

stay

self-aware in while you are in the thick

of things is something that I think at

least I grapple with a lot

>> so I think all of us grapple with it

right and um I I'm always reminded on

this by something my dad used to tell me

he used to say key you have to be like

the bird on the tree.

Bird's eye view

and you can basically figure out what

the relationship between things are,

where the food is, where the danger is,

and you can have a strategic view.

It's down on the ground and it's pecking

at the stuff at the grain on the ground.

Now you have tunnel vision. You are

focused on the grain on the ground. That

is the task that you're doing. And you

are in execution mode. So you have to

have self-awareness.

So first of all, you have to have the

ability to do both. You have to be able

to zoom in and zoom out. You have to

have a telescope. But remember that when

you flip the telescope, it becomes a

microscope. And any good manager or any

good leader has to know when to use the

telescope and when to use the microscope

and when to use the wide angle and when

to use the you know zoom. And that's a

very defining uh thing because if you're

standing on the ground and you're

looking trying to you know zoom far away

it's not really going to help you. So uh

so you should always try and be aware of

where you are and what you are doing.

And this links back eventually to

prioritization. They go whether you are

um uh you know Shantanu or me or Chira

or Donald Trump doesn't matter. You only

have 24 hours in a day. If you take out

eating, sleeping, golfing, whatever and

you have like 12 hours a day in or 10

hours a day or whatever number of hours

a day that you're going to work. So you

run a business which is I don't know

what like 300 400 crores maybe a,000

crores. Tomorrow you're running a

business that's 20,000 crores. It's not

that you're going to get more hours in

the day. It's not that you know you're

you're Donald Trump or Barack Obama. You

run such a complex thing. But you don't

have more hours in the day. The only

thing that you can control is not the

ours. The only truly democratic thing in

the world is ours. The only thing you

can control is your priority. Right? The

ability to say priority

I'm going to look widely and formulate

my strategy.

And some other time I know my strategy.

I'm going to be in execution mode, but I

know I'm in execution mode. And if I

have a problem, I can step back and get

into strategic mode. And having that

self-awareness almost like that BERT is,

I think, what every senior leader or

manager

goes through. And getting this balance

right is so important. There's this very

famous thing about this um Japanese

Aikido master, right? Uh so basically

this guy uh was never out of balance. So

once like 10 people attacked him and he

threw all of them and somebody asked him

how do you do this? How do you always

stay in balance? He says it's not that

I'm not in balance. I'm I'm always in

balance. I'm actually out of balance but

I come back into balance very fast.

>> Excellent excellent analogy.

>> Maybe what you you are saying now that

law of physics or chemistry apply uh

when you're scaling up and it becomes a

lot more art in 0 to1. Maybe we we view

it a little bit differently. We find

that at least in zero to one stages we

know a little bit of playbooks that how

does this work speed matters more than

quality and let's ship fast even if it

is broken. Let's get to few merchants

you know and get the feedback going. I

am I whatever I think you were saying I

was at least finding judgment in terms

of when to zoom out when to zoom in when

to focus on this. That looks more hard

to me clearly.

you know we we keep worrying what Rand

is saying what we keep worrying okay sol

or if you're doing this oh I would have

done a new product at that point of time

so you know that keeps struggling or uh

you know we've got someone new in the

team will they deliver uh how do I make

that guy successful am I am I putting in

the right things so we are in that stage

where let's say the kid is growing up

and he has many options in life and he's

figuring out

okay

Okay, I would have been a next Roger

Federer also. We are going through those

kind of challenges.

>> You're you're you're right. You can call

that art also. But in a sense, what I

mean by art is art is something that is

opiniondriven. And as a founder, you're

making these quick opinions to say,

let's ship fast. Let's do this test,

let's do that test. And you do it based

on available information very quickly.

And essentially, you are doing lots of

experiments. The cost of each very

quickly. And we'll come back to pace as

a very important thing when we talk also

about China. Uh so you do these

experiments very quickly and then you

come in you are able to pivot very

quickly. But the reason you can do that

is the cost of each experiment is very

small and therefore you can do many

experiments and even if you fail it

doesn't matter so much. So in a sense it

looks scientific but it is art in the

sense that eventually it's judgment.

There are three things that are equally

likely and you are like let me test

these three quickly.

That choice is art in a sense in my

view. But when you are a very large

company and you're going to do something

which is going to uh you know you're

creating a new piece of content or

you're doing something that is needs to

deliver $30 million uplift in the next 6

months otherwise you're not going to

meet your plan. That's a very different

thing then you may actually spend you

know a month to get that right.

something that I would have done like I'

I've gone full circle right so I started

out like a in a company that was

relatively small wrecket India was quite

small that time when I joined it was 120

crores right and it was like 20 cr

startup in India and eventually when I

left the company at that point I was

running a business at some points which

was like 10 12 14 billion uh 30,000

people in my team and then from there

I've come to a situation where I have

some between six and 12 people in my

team depending on the time And it is

totally um you know remote working and

it is totally driven by technology tools

uh how how you work. So in this whole uh

kind of flip you can see that the

because the cost of a decision or cost

of a judgment is totally different based

on context the same person ends up doing

a very different value judgment on how

you spend your time and um uh then

eventually it's about as a founder

whether you enjoy the art or the

science. So uh somehow the art can also

be in deciding which science to deploy

right so if you uh and depending on who

you are so in my case I figured that

I'll enjoy much more this more gut feel

kind of thing work faster so which is

one of the reasons I I decided to retire

from a large company and you know start

a small company because this is more fun

and I'm in the lucky position of doing

whatever the hell I want

to but you guys uh are in the other

thing where you are starting from where

I'm trying to my aspiration and you're

trying to get to where I was. So, it's

almost like a circular thing, right?

How do you how did you as a uh

as an employee who was seeing that

growth happen

your thinking if I can call it that

or was it just high ownership agency

like you were always a founder at heart

even though you were working for a large

company was it more intrinsics or was it

is there a professional way to

set the functional expectations for a

high growth company management team. Uh

is it possible or people to figure it

out themselves?

>> It's a great question and I'm totally

the wrong person to answer it from a

personal experience. The reason is that

I'm this crazy person who always was in

a large company and was very bored with

what was happening. So I was always

looking for a more fun thing to do and

then that fun thing ended up being the

high growth thing that transformed the

business and that then became you know a

few years later the core of the business

and that happened again and again and

because of that that's the reason why I

grew relatively fast but the your answer

is um um the answer you're looking for

actually I have that answer and that

answer is from somebody else's

experience so and it goes back to my old

company wrecket and I've written a whole

I write these things which I call

frameworks which are about u uh you know

how uh how you can think about these

things in these kinds of things in

repeatable ways. So uh when Rekit and

Coleman and Benkeiser was formed and it

became Rekit Benkeiser right there was a

merger we had a CEO called Bbeck and he

had a leadership team. So these guys

created a master class in how you

structure a company in a way like I said

before where structure

defines exactly the culture and exactly

defines a growth momentum and it creates

a culture of entrepreneurship and

ownership

and this is something that is scientific

and in my opinion totally repeatable. So

let let me just tell you like a few of

those principles. So the first principle

that they used was that um you always

need creative conflict.

So and constructive conflict. So what

that means is that for you structure

your organization in a way where for

everything there is somebody who's the

clear owner and there is somebody else

who is an who has an opinion. So in this

case it was a global business. The

country had clear ownership of the P&L

but the brand equity rights was owned by

the global category director. So what

will happen is that the country will

propose this is what we are doing or do

whatever they are doing and this global

category director can have a point of

view. If the and will support and if the

point of view clashes then there is a

forum that escalates this decision up

one step to the regional head up two

steps the next day or next week to the

president and if nothing happens then in

a week any decision or any so in a

country like India or Chile if there was

some disagreement with category and

country it would get escalated to the

CEO within a week and then there would

be a decision. So what creative conflict

allows you to do number one is to is for

the organization to um to surface issues

rather than hide issues. The second

thing that they did was everybody had a

set of metrics which everyone

understood. So in the case of wreckit

the metrics were very simple net revenue

growth profit growth and negative net

working capital. And the question was

how negative right that's the only thing

everybody had individual targets which

they could control for this

these individual targets tied up to

something very important which is

incentivization.

So in a company what you incentivize is

what you get.

If you want something you incentivize

it. If you don't incentivize it you're

not going to get it. You can put all the

posters on the walls but nothing will.

So on incentivization

the way it worked in wreckit was uh a

genius system for that time. So

essentially what what would what the way

they designed the system was let's say

that you join at a particular level

industry salary is 100 you get 75 is

your base salary of industry. So you're

slightly underpaid relative to your

peers right somebody else is in uni

labor they're making $100,000 you will

make $75,000.

Then what they say is if you achieve

your target on those three KPIs you will

get a target bonus which is let us call

it 40% of your base salary. So 40% of 75

gets you to the industry average. So far

so good. So if you're an average

performer, you make the same as

industry. Now if you are an standout

performer, so let's say your target is

to grow at 20% and now you're given a

stretch target of 50%. You achieve that

50%, you get a multiplier on that 40%

bonus. That multiplier could be up to

3.57 times. Why 3.57? Because 3.57

multiplied by 40% means you can make

150% of your base salary.

Simple. So if my salary is 75,000, I can

make 200,000.

But it'll only happen if I have kickass

results, right? And now what happens is

that at the end of the year, people end

of three years, people who have

consistently not made their bonus

actually are earning a bit less than

everywhere else. and anybody from uni

liver or PNG can recruit these people

and they will likely leave and that's

totally cool. So it self- selects people

out. But the good performers in Wreckit,

nobody could ever recruit them ever. If

you recruited someone from Wreckit who's

a good performer, they came at a 50% pay

cut and they chose to come. But you

could structurally not recruit them,

right? So that structurally keeps the

talent in the company, right? So that's

the second thing. The third thing the

company did was it built a

almost like a family of people who came

in and competed with each other but who

also were put in positions of

personal um difficulty. So every other

company will take you and put you in a

different country. So you're from India.

They'll say your home country is India

and I've put you in the Philippines and

eventually you'll come back to India.

Your salary is still in India. Benchmark

to India whatever. Right? That's how

multinationals work. In wreckit what

will happen is at some point you reach a

particular level and then you are a

global your career is global. So you are

taken and specifically put into

Indonesia and then you're put into China

and then you are put into Europe and you

basically

start from scratch. You are you have to

learn the local language as much as you

can. you have to you know see a very

different world and then these people

are shuffled between sales and marketing

and there is a career path that takes

them through all of this and this is

defined and held by the CEO of the

company right so these 200 300 400

people who run a massive company like

that each of those people is a special

individual person who the CEO knows and

they are moving through this kind of

mesh and what ends up happening is that

you create people with tremendous levels

of responsibility with tremendous levels

of knowledge but Most importantly,

because you've maximized serendipity,

you've given people experiences in

things they are uncomfortable in

personally and physically, they learn

much more. So, just to illustrate what I

mean, when you take a flight today, you

don't learn anything new. You're

probably on your phone. But the first

time you took a flight, your eyes were

really open. You could see, you wanted

to know how to get through this barrier.

You wanted to know who is stamping your

passport. The learning that you had the

first time was much more than the

learning you have the 25th time. So the

point is how can we make you have

different experiences like taking a

flight but then doing something else but

then doing something else in a

structured way related to the business

so that your brain is always in learning

mode

rather than I know it all mode and then

when you get senior enough then you put

in with people who have the opposite

experience so that and then you're made

to have constructive conflict with those

people right so that way you're forced

to see other points of view so you can

actually set up an organization and

there are these um I and share the thing

with you the framework I I just gave you

two or three. So there are these eight

or nine principles that you can use to

set up a business which then create a

culture which is entrepreneurial which

has ownership which basically people are

well remunerated if they do well uh it

basically makes sure that you actually

create something that feels very

cohesive and it's not just in record

many companies have done things like

this uh and there are um you know there

are playbooks that you can roll out and

you will if you roll that playbook out

you will get that culture so

an ex-record person I won't name the

company and person for I know has gone

and implemented this in another large

company and I went and actually uh you

know did some work or helped those that

company with something and I could see

exactly the same culture and

interestingly that that company globally

is growing at 4% this person manages

let's call it a quarter of the world and

his business is growing at 16%.

>> Wow.

>> Wow. Outstanding. Please do share those

list of frameworks with us. I think uh

if nothing else this is a big takeaway

>> that uh I'm going to sort of do and you

know go go through those and see I mean

every time we do a podcast by the way my

HR hates it because I come with three

new ideas saying okay

and for reading your blog

>> uh the most recent one I had shared with

my team was the promotion uh framework

you had put out that how to appraisal

season was going on I had sent it to my

team that this is how you need to think

I was asking related to what Adi is

saying that when you say constructive

contract it's more like maker checker uh

kind of a system wherein you know there

is one guy who is like the owner and

then there is opinion needed for that to

happen and how do you just out of

curiosity how do you like I know from

outside I know and I may be completely

wrong that wreckit is a very

performanceoriented company what you

said in terms of like selection uh is

around having those winners and if other

people want to like quickly move out

that's Okay. But how do you ensure that

cultural alignment is there or that you

know takes care of its own? Uh you know

we for example in a company there will

be people who are who great performers

but uh are not scaling let's say from a

seniority point of view. Is that all

into consideration or it's like

performance matters? So, so I think what

happens um so first of all the company

I'm talking about is the company that

existed a few years ago or many years

ago right and every company evolves so

and in every system there is good and

bad so even in the system that I told

you about there is of course some bad

because what ends up happening is that

you end up creating a culture that can

be quite aggressive very

performance-driven and uh therefore it

may not be as inclusive to people who

are um uh you know not driving that

performance

uh it also may be very uh direct to

people who are passengers and not

contributing.

So what ends up happening in this kind

of culture is that you end up with a

culture that is pointed that is sharp.

And the thing about sharp things that

they cut through crap and they kind of

make things happen but on the other hand

they can also be pointy and you know if

you are nice and cuddly then it can be

kind of uh it can poke you a bit and you

may not like that too much. So it

depends on what kind of business you

want to create. Anything that has an

edge typically uh has a double edge. And

in the case of wrecket I I would say

that uh because the culture was so

important and the c these cultures end

up becoming aggressive in the sense that

people who don't fit the culture tend to

realize very quickly they don't fit the

culture and then you get a mmite

reputation. So the old record had a mite

reputation. People loved it or people

hated it. People who left wrecket would

say what a bunch of you know terrible

people. They're so aggressive. They're

always aggressive. Anybody who competed

with the old wicket would be like oh my

god these people are crazy. But inside

you never realized that it was like

that. If you fit the culture you were

like this is fantastic. This is great.

The business is growing. Everything is

fine. We are providing such a great

service to our consumers. You know we're

having so much fun. So uh it depends on

what what you're looking for and

sometimes you have to be careful what

you wish for because if you dilute the

culture too much it makes so think about

it like this right the larger a

population is the more likely it is to

be average so what do I mean by this if

you think about wreckit versus let's say

PNG or uni liver in I would say uh at

the risk of my uni liver and PNG friend

jumping on me I I would say in many

markets during the heyday of wrecket

when we competed with uni liver or even

PNG we pretty sure that we are going to

win this. It's not really that tough.

Uh and that sounds arrogant and we were

perhaps a bit arrogant but what happens

is if you are a 100,000 people company

like PNG and you're a you know 30,000

person company like Rit or you're like a

thousand person 500 person company like

Bombay shipping company you are hiring

from the same pool which is the business

schools or whatever. The more people you

hire, the more likely that these people

are going to become average because you

can hire one Roger Federer. Can you hire

like 50 Roger Federers? No, they don't

exist. So can you train 50 people to

become Roger Federer? No, maybe you can

make five or 10, but also very

difficult. So the Roger Federers of

business, you cannot hire so many. If

you hire 100,000, your company will

become more average. So the only thing

that differentiates large companies from

each other, makes them better than the

other is the pointedness and the

sharpness of the culture.

Because you everyone will say I have

better people but the larger you are as

a company the more you are lying you you

don't have better people you cannot

statistically

you have a better culture

>> and interestingly you are saying that

you you have culture playbooks which can

be implemented depending on what you

choose

>> totally and the culture is driven by the

structure

so there's a fantastic book um on uh

system design uh I forget the name but I

can share it later in this book the guy

makes the argument ment that when you

design a software system,

the design of the software system

typically reflects the design of the

team of the organization that created

it.

So if you want to design your software

situation in a particular way, you first

design your team in that way. So what do

I mean by this? Let's say there is

something which has a front end,

middleware and back end. So let's say

you have three uh teams that are in the

front end, right? So one is doing uh you

know trimmers, one is doing razors, one

is doing something else and then you

have one team which is providing all of

the supply chain and then you have you

know maybe three teams at the back. Now

supposing you were to design an

supposeding this is the team and you are

designing this as a software that

delivers then you're going to have a

software an app which has a section for

trimmers a section for razors a section

for something and you've created some

the product you create or the is the

mirror of your organization and you

don't realize that you think it's the

other way around but if you had done it

differently where you had a team that

just said consumer experience

now you would have one interface and you

would have fed trimmers razors whatever

is needed needed depending upon what the

customer wanted.

>> That is so true. That is so true.

>> I really like the Ari you have a

framework on this that I think most

people are busy doing execution tasks on

AI. What about the strategy part? I read

that blog. I have somewhere gotten lost

on the entity AI piece. I think there

are many pieces first second thoughts.

No, I'm I must apologize to people

because actually for the first six

months this year I was very busy with my

Ascard stuff but I was kind of writing

on the side. Then suddenly I woke up one

fine day and I basically started writing

this thing and then I said this is great

fun. So I spent like 2 weeks doing it

and I've written uh something like um

50,000 words already on this stuff which

is too much right I have to control this

and kind of condense it and this 25

>> it's it's fascinating it's provoking so

much thought so much thinking it's it's

quite fascinating I've been downloading

on my remarkable and then reading oh

wonderful amazing amazing

>> wonderful

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