Macros VS Micros

rahat-talrejaThe year 2014 looked tired. There was a feeling that things have reached a top rapidly and therefore we were entering a long phase of consolidation for economies and businesses across the world after the golden decade of 2004-2014.

It quickly dawned upon all that 2015 is even slower than 2014. The year saw fresh addition of equity and debt to balance sheets across the spectrum of economies and businesses. Existing capital was not performing in line.

And as the year 2015 eventually sunk in, people soon realised that 2016 was even slower. Actually threatening world economies and you have seen that the most active participants in the year were central banks, on whom a lot depended to let liquidity bail us all out of the slowdown.

2016 mellowed ambition and let pragmatism set into economies. All capital in the world realised that beggars cannot be choosers. Preservation of capital became central over Return on capital. Emerging markets offered short term returns on world capital but corresponding currency depreciation over the last 30 months eroded that significantly.

Let me turn the focus now on India specifically. The Indian economy was responding to this new phase of consolidation and distribution. Why not? 52 % of the sales of the top 100 Nifty (Indian stock index) companies came from exports. Also domestic consumption was muted and savings also took a hit since sustenance expenditure elevated due to real estate inflation. By the way the inflation which we calculate is based on farm and factory output data which is obsolete in today’s times to calculate urban inflation. When you sit and have a 300 Rupee coffee, you pay for the real estate on which you sit and not the coffee itself. So to take farm output cost of coffee will never reveal the real picture.

But if you ask me, how does all of the above matter at all. It is only good academic data and can be used to talk at social events where everybody has something to say on how economy and country should be running. Then eat food, gulp your drink and go home. Macros matter but Micros are the real test of your mettle.

And this brings me to individual businesses. We saw all of them realign to the newer market realities. Over stretched companies collapsed. Rightly allocated ones survived. But there are a whole lot of companies who actually became more efficient and profitable in this macro environment.

The non-performers always hide using the macro slowdown and emerge taking credit during the macro boom. But the real fighters are those businesses who use all events to their efficient realignment.

In my view, any company turning less than USD 20 million remains largely unaffected due to any macro events on the global or domestic economy level. Their industry macro decides their micro. Let me give an example: There were two boys in the same college. One dull, the other very bright. After 20 years, they met. The dull boy went on to become a senior executive of a construction company and the bright boy was the top executive of an airline. Needless to say, the dull boy was doing far better for himself because his industry macro supported him more.

What is basically required in dull times are:

Honesty: This is a building block to be courageous. We have to accept realities as they are and in their right context rather than masquerading them without own bias and inhibitions.

Courage: To take bold decisions. Brash is not bold. In fact it’s the opposite. Bold is to do what is required and not do what shouldn’t be done. Sounds clichéd but it needs real courage to do it.

Sharp analytical skills: To take the right decisions. Many pound foolish and penny wise decisions are purely due to lack of any meaningful analysis.

Change: Randomness is not change. In fact keeping business fundamentals constant are a good measure of change. Also change should meaningfully and tangibly yield a result and not just alter emotional situations.

Perform: From top to bottom, everybody has a role to play and needs to perform to his best ability. Ability to recognise ability and be secure about it is the hallmark of all successful business leaders. In fact, it is by standing on their shoulders of giants that one sees the world.

Be Strong: Strong is not speech power, it is will power. Strong is not talking, it is silence. Strong is not intimidation, it is accommodation. Strong is not indulgence, it is restraint. Strong is not rhetoric, it is reality. Strong is not intelligence, it is wisdom.

2017 approaches.

I wish everyone realigns and hope that India Inc reaches its full potential. To all my fellow business brethren, this is a small poem. I hope it gives hope to all.

He Fell.
He Faltered,
But didn’t Fail.
He waited.
Waited for Long.
Almost Forever.
And then it came,
His time.
Under the Sun.