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Anil & Mukesh Ambani

Over the past 5 years I’ve had several chance meetings with people from the Reliance Group (both Reliance Industries and Reliance/ADAG) and I can only laugh when these employees tell me how well connected they are to the Ambani’s.  I call this the IKEA (I Know Every Ambani) Syndrome.

The latest episode was several months ago when someone contacted me and wanted to setup a meeting.  He went on and on about his close proximity to Mukesh-bhai (MDA) and Anil-ji (ADA), almost as if he was the 3rd lost brother of the Ambani family. We started to talk details about how we could work together and then suddenly he developed a case of cold feet and said he needed to speak to his CEO. I have no issue with running a deal past a CEO but it seemed odd for this “well connected” individual…or he just wasn’t as connected as he said he was.

I think it’s admirable that many employees of the Reliance group feel a sense of family but it’s also very destructive. Throwing around names is one thing but getting business done is another. From the ones I have met they seem to have very similar traits – Middle aged and mid level managers. They use the Reliance platform to setup meetings not for the company but their “side business.” Unfortunately, most are too scared to let go of the Reliance name brand and instead throw around the Ambani name to make themselves feel special in an organization that probably has over 120,000 employees.

Now when someone from the Reliance group calls, I do my due diligence and go straight to LinkedIn to see where they stand in the organization. The IKEA Syndrome is not a deal killer as long as you are talking to the right people in the organization who are not affected by the syndrome.

Recently a good friend, Sahil, gave a presentation (view via SlideShare) about building a web product company. If you have a startup bone in your body I would highly recommend taking a look at the presentation not only because the information is great but the actual slides are something you don’t often see. Most presenters like to pack 20 bullets into a single slide, use 12 point font, throw in a worthless graphic or a bunch of other things that usually lead people to tune out. One word can summarize his presentation – simplicity.

That got me to think about Apple. Many people would say Apple is about simplicity when you look at their products and design. I would argue it goes one step further – the number of products.  You want a phone from Apple? Great, that is the iPhone end of story. Granted they have various models based on storage but that’s it. Look at Nokia, Samsung or Motorola, I honestly get a f***ing brain hemorrhage when someone mentions their model number of their phone.

Apple follows what German car makers have been doing for decades. Have a basic design and sell it in 3 levels, what I call SML (small, medium and large). You want a Benz sedan? The low end is the C, mid-range is the E and high end is the S class. Within those 3 classes are various models based on engine specs but at least when someone says “I bought an E class” you know the general specs of the car. BMW has 3, 5 and 7. Audi has A4, A6 and A8.  American car makers face the same issue as Nokia and Motorola, confuse the buyer with all sorts of models and then spend massive marketing dollars to “educate them.”

Simplicity is easy to achieve on day one but to maintain that same level of simplicity 10 to 20 years later is almost next to impossible. Companies that can figure it out get compensated and you have to look no further then Apple’s market capitization, not bad for a company that just sells consumer electronics. Simplicity at its best.

It appears we are weeks away from private carriers finally launching 3G services in India. The first revolution was voice calls with the launch of mobile networks in India. What really led to mass adoption was a price war that was kicked off by Ambani’s Reliance Communications which led to very low ARPU’s for carriers.

Will data be the next revolution for the mobile carriers? Personally, I think the next revolution will occur if the carriers price their offering at what people currently pay for their voice services. So if the average ARPU is currently Rs. 200 per month, I would expect plans to start at that price.  More importantly they really need to let the bits fly through the networks and offer an unlimited data plan or have a “fair-use” policy that starts at 30GB or so per month.

Yes, that sounds like a pie in the sky wishlist but if they misprice on the initial launch they will loose a lot of pent up demand since everyone is expecting low prices. I don’t expect a carrier like Tata Docomo to throw down the pricing gauntlet. Thankfully, Mukesh Ambani is back in the telecom space after acquiring a 95% stake in Infotel for USD 1 billion dollars.  Infotel has a WiMax license for the entire country and could offer low costs data plans and thus push the prices of 3G services down as well.

The first revolution for voice is still talked about and I hope it continues with data or the Indian mobile market will end up being a one hit wonder.

I understand why people want to share their thoughts, status updates, pictures and everything else in between on Facebook. What I fail to understand is the idea of sharing your financial data via services like Blippy, Mint.com or Wesabe. The current security architecture seems so ripe for abuse and hacking it’s not funny. Blippy allows you to connect your credit card purchases to a social stream that ultimately can be piped into your Facebook newsfeed. Blippy had a security snafu back in April 2010 that revealed a handful of credit card numbers but the implications are that something bigger could be looming.

Wesabe just recently shutdown after burning through USD 5 million in VC money (Union Square Ventures backed). Even Wesabe thinks internet security is a big concern, below is what they have to say about security in their farewell letter:

…because Wesabe stores such highly sensitive data, continuing to operate the service with shoestring operations and security staff is not acceptable, and we do not want to continue accepting new accounts if we cannot guarantee the security level we believe our service requires.

The idea of aggregating all your financial data to some online website seems risky to me.  At least in the US if there is a hack attack you can take the company to court and sue for damages.  In India, good luck…imagine 26 years later the Union Carbide case is still going on and that case involves over 25,000 dead people.

Some people don’t care about securing their online financial data and that is fine…I do care. If we look at Mint.com which is a great service that I would never use, they should have an option where I can retain all my data locally. Then if I want Mint.com to analyze the data I can send it to them encrypted. Once they send me the results/advice via email they delete all my financial data from their servers all within minutes.

I think we are still in the early days of online data security and people have a carefree attitude about it. It will take one major security catastrophe to shake people and make them realize the security implications of “over-sharing” their financial data.

Motilal Oswal (MO) one of the larger stockbrokers in India is launching its first structured product the MOSt Shares M50, which is an actively managed exchange traded fund (ETF). ETFs as an investment vehicle are pretty old school in the US where over USD 600 billion are tucked into them.

In India, ETFs are relatively unknown and most of the ETFs have been passive index funds tracking the Sensex or Nifty. Benchmark has been the 800 lb gorilla in the Indian ETF space with their Nifty BeES which tracks the Nifty index. The MOSt Shares M50 is one of the first actively managed ETFs in India. Which means that a fund manager, Rajnish Rastogi, is actively managing the money and can tweak the investment model in real time. According to Rastogi’s LinkedIn profile he “developed the first (worldwide) fundamentally enhanced index and obtained regulatory approval to manage an Exchange Traded Fund (ETF) that tracks it.” If you are looking for more details about the ETF you can visit their site and download the mind numbing PDFs.

For me what is interesting is seeing the ETF space grow in India. ETFs typically have a lower cost (known as expense ratio in the biz) and can be traded via your local stockbroker. When people ask for investing advice, I give them my 3 stage process:

1. Absolute beginner – get an ETF or mutual fund that tracks the index (Benchmark Nifty BeES is an example)
2. Intermediate – broadly invest in ETFs or mutual funds (for example: Reliance Growth Fund or MOSt Shares M50)
3. Expert or gambler – invest directly into the stock market by picking the stocks yourself

I will be tracking the MOSt Shares M50 to see how it outperforms against the Nifty. According to them, they will pick the same stocks in the Nifty 50 index but “remix” the index. Would I recommend this product? Potentially, but I need to see how the ETF stacks up against the index and more importantly does the ETF have enough daily trading liquidity.

For more information on how ETFs got started checkout Wikipedia.