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The Promise of a Generation
Why we stand at a pivotal moment in history of world-leading economic transformation in India
Part 1 | The Past: how we got here?
Milestones. They serve many roles but three principally. One, of being a rear view mirror, an altimeter of travel. Two, as a figurative telescope reminding us how much is still out there. And third as a chalice of experiences that make the core of who we are. 2022 is an important milestone and moment of reflection in our journey. It represents the blossoming of our five-year partnership with LGT as Lightrock. Not just that but also ten years as Aspada and fifteen years since our first commitment to impact investing in India in bringing together Google, Soros and Omidyar as SONG. It is an amazing privilege for us to celebrate this almost celestial alignment with all our founders over the last decade. They are the reason we are here.
Our journey over these 15 years started from a $17 million commitment in 2008 to managing assets worth $1.8 billion today and as you can see below, visually dramatic. What this curve truly represents is a deep and steadfast meditation in the initial years to understand the necessities of institution and country building before we became ready to scale rapidly over the last few years.
The foresight and fortune in the choice of problems we decided to tackle in the beginning of our journey have broadly remained invariant over the years. This gave us the rare gift of focus across a decade in understanding both the evolution of business models and the stakeholder ecosystem -be it entrepreneurs or policy makers. The result is true conviction in backing transformational plays in our thematic areas without being hassled by short term market volatilities.
At the same time, we have forced ourselves to make important non-linear shifts in transforming our investment approach in each of these three phases of growth. Shifts that have dramatically expanded our ambition for societal transformation while continuing to stay committed to the fundamental premise of improving the fundamental condition of the individual and society.
What next? Where do we want to be 15 years from now?
Another 100x from here, no less! This is not about us managing $200B. This is to catalyse the flow of capital towards a movement to build an India that is not only a world leading economy but one that is inclusive, resilient, and sustainable.
Part 2 | The Premise of the Promise
For the last two years, the entire world has been shaken up like it hasn’t been in a century. We have had to rethink our values, examine our priorities, and rewire the days of our lives.
Amidst this period of chaos, just as we were recovering from the grief of loss and adjusting to a new way of life, we saw the largest influx capital in the Indian entrepreneurial ecosystem which changed the order of math when it came to money, scale and importance. Closely following this excitement came the fear of a downturn. We went from the exuberance of counting unicorns to the caution of winter is coming.
This everyday breaking news, the constantly churning rumor mill which has replaced reality and dying need to be relevant and important – none of it matters. It’s a distraction, a din in our ear that is affecting our perspective. We have to zoom out time to really understand what matters. The world has seen ups and downs of all kinds. And it is indeed very tempting to analyze data, build empirical models and predict the future. Except predicting the future is what we see in carnival stalls with parrots and tarot cards. The future doesn’t need to be predicted, it needs to be dreamed and willed and acted upon!
We cannot just let the pace of change distort our perspective of the future. We have to examine the moment we are in history and look into the future not years from now, but decades from now. Breaking the old benchmark, the old standard, the record does not take time, but can just as easily be redefined. Building monuments and legacies takes time and are there to last. Individuals may focus on breaking records, but the society should focus on building monuments.
Why us? Why now? Why can’t we follow the path of self-gratification and design our lives around beating the person before us? Why shouldn’t accomplishment be defined around competition and individual success? Why carry the burden of an entire society ?
These are important questions that go to the core of individual preferences and happiness. That said, we should also acknowledge that technology and the information age have obliterated barriers, decimated arbitrage opportunities, and accelerated the pace of change. This only means that focus on relative grading and individual accomplishment means short lived successes, constant anxiety of being overtaken and a constant feeling of suspicion of our fellow citizens. Doesn’t really feel good, does it? So, what will?
A strong sense of purpose that shifts the focus from winning to building. A purpose strong, large and powerful enough to galvanize and inspire an entire generation. This is the purpose of nation building. We could not live in a better place and time for it.
Every country, every society has had its epoch where in one or two generations, great monuments, works of art and a stockpile of wealth has been created. Most of the European continent built their stock of wealth in the two centuries driven by industrialization and colonization. America did that in a century with the robber barons and the great philanthropists of the gilded age on the back of innovation – both scientific and financial. China took just half a century to do the same backed by infrastructure build; scientific advancement steered by the unilateral will of the state. All of them came with their critiques and mishaps but have built in this period the foundations of infrastructure and incredible wealth that has formed the backbone of their society. While all these civilizations built their foundations, they did bring with it a dark side, an underbelly – be it colonial oppression, slavery or the distortion of social mores and demographics.
This time in India’s history is one such epochal moment that forces us to reflect what should be the tenets of country building. It forces us to examine if there is a way to build the foundation without the flipside, the loss, the so-called collateral damage. Before we go on the path of reflection on the rubric of nation building, it is useful to examine why we believe this is our epochal moment and why we believe this generation we are in is going to play a very important role in defining the future of the country.
We all have a certain confidence, an unsaid feeling that we are in an important moment in the history of this country. We feel it in the vibrancy of the streets, the voices on the road and the aspiration of the masses. It is useful to articulate the circumstances that make this moment and extent of responsibility that comes with it to form the identity and relevance of our generation.
1. Demographic dividend
The most important truth that makes this moment is the underlying population itself. In the next decade we will add close to quarter of a billion new people in the workforce highlighting a huge responsibility to ensure they are productive, happy, and valuable members of society. With an average age of less than 30, we have the youngest population in the world that is digitally savvy, aware of the world, born into a time where the normal boundaries of geography, information and access are starting to fade away, where technology is the watchword for progress, where life goes beyond surviving to thriving.
2. Technology advantage and digital infrastructure
We have the cheapest public digital infrastructure in the world. Something as fundamental as flow of money through the economy made digital coupled with the technology adoption of the digital native is leading to a digital first environment built on no cost digital infrastructure. This is fundamentally redefining how we use and think about technology building ecosystems.
3. Values and aspiration
Amidst all the diversity and disaggregation, the common thread of values and aspiration remain. Values that are built on action, progress, service, and community. Values that despite religion and caste differences remain the same. Values that are feared to be forgotten and given away to the tyranny of intolerance. Values that are worth protecting and should form the driving force of the future.
This moment in time where capacity, opportunity and aspiration come together is unique for us in India unlike any other country today. It is precious and one that needs to be made the most of.
As we think about our moment, we look back and take inspiration from the greats who came before us. We look back to 1944 when the stalwarts of business put together the The Bombay Plan - “A Plan of Economic Development for India”. This was a document written by great visionaries of independent India including Tata, Birla and Dalal, who at the dawn of a country dreamt up the way the future should unfold. It did have audacious goals like doubling per-capita income in 15 years but with it also was a blueprint for building a country. It was not a famous treatise but a document whose silent undertone served as inspiration for an entire generation.
It is our moment to write the blueprint for the next century. We will in the next generation or two build the next phase of this country. As we play an important and privileged role as the stewards of progress in society, we bear with us the responsibility of the generations of the past and the future and to ourselves.
The promise of our generation is not a choice but the reality of our lives. It is a tremendous responsibility and rubric on which we will be judged for generations to come. It far surpasses the importance of self and individuals towards a larger mission and goal of this country and humanity itself.
This is neither simple nor easy. It requires us to cut through the demagoguery and timidity. It requires us to move past intolerance, the constant one-upmanship, and the temptation to take the short cut. It requires a strong sense of purpose, the need for intensity and perseverance to get it right and the patience past barriers and daily ups and downs.
Part 3 | The Blueprint
What does this mean? How do we look at this purpose in new light? How do we convert this discourse to action? How do we break the larger mission into pieces and steps?
To figure this all out let us start at the very beginning. We must be just as smart to analyze and understand the lessons from history as we must be crazy to dream and imagine we can correct and build on it.
At the heart of it all has been the relationship between money and society. Business has been the means with which money has grown and replicated itself. This relation between money and society has been complicated with its ups and downs and has evolved and changed forms. At the core of it all has been power. Money has often thought to be the source of power when it is in fact a metric for measuring power.
The source of power has moved from the divine right of kings to the courage of the conquerors, to the access to resources of the landed gentry, to the savvy of traders and now to the innovation and disruption of current day tech Moguls.
All these are driven by arbitrage and control. As arbitrages fall away and barriers are obliterated, power moves from control to influence, from being concentrated in the hands of the few to groups of many. This process is just as messy as it is exhilarating and brings along with it a paradigm shifts in the very foundations of capitalism.
Capital has historically had parallel relationships with business and society. The rich and the wealthy have contributed to societal development through philanthropy on the one hand and built arbitrage driven businesses that has multiplied capital on the other. These businesses have sometimes built for society and sometimes built for extracting value from society through arbitrage opportunities. But at its core capital truly multiplies only when society progresses and becomes more valuable. When business doesn’t build for society and capital backs short term businesses that extract from society, we eventually see financial crashes, social disturbances, and market downturns. These become more frequent and more amplified when business moves farther from building for long term societal progress.
For true long-term gain, businesses must build for societal progress and capital must take a directional role in building for society. This paradigm shift thus requires closing the gap between business and society and understanding and redefining the tripartite relationship between capital, business, and society where business is not just a tool for capital to grow but an integral part of the trifecta.
The relationship between capital and society is best understood by understanding the role capital plays in helping society progress. To this effect, business should work towards designing and innovating at a systemic level to build for society. Capital also has to redefine its relationship with business by fundamentally redefining value. When all three relationships are transformed together, over the long term, society, business and capital all grow in the same direction without frequent crashes and downturns.
1. Role of Capital
The role of capital is not just to multiply itself and it can’t do so in isolation from purpose. There are different types of capital that come at different stages of evolution of a business. But at the beginning of it all – in the field we play in, where we create and innovate – capital is normative. It drives a purpose towards the most efficient solution.
Growth comes primarily from solving the problems of society to design solutions that drive progress and make the world better. Purpose drives the solution along with design that drives the creation of business models. Normative capital stewards this design to foray into the unknown and uncertain and create the roads to progress.
The role of normative capital is to build towards the greater good, in an undefined, unknown space which comes with complex codependence and interaction with multiple stakeholders. Capital here plays not the role of just fuel but one of designer, creator, and convenor towards a desired future. This does not entail betting on the best version of the future but in effect imagining and driving the path towards the best version, iterate towards bettering the answer and convening all the minds, resources towards the cause. This in turn results in the conversion of uncertainty to risk in the creation of tangible solution models that provide a deterministic path towards the solution.
The propagation and continuous scaling of this solution is the role of positive capital. Positive capital follows and takes its cues from normative capital and helps scale to build a large future.
2. System Design – the operating system
The future will not manifest from incremental change of the past but a transformative force that redraws the scaffolding of businesses and value chains fundamentally altering the ways of doing things. A complete reimagination and transformation of everyday life may sound unsettling but when given a chance it in fact it unlocks. Technology has bestowed on us this luxury. It has not only broken barriers of information, geography and access but has reduced cost of production, distribution and transaction and redefined the source and value of money and currency.
This allows us to shift the balance of power from what is available to what is wanted. It disallows the hoarding of resources and information and opens it up letting a thousand flowers bloom. Web3 NFTs, crypto, blockchain – the buzzwords that have become synonymous with the future are all is in a way a manifestation of decentralised power and influence, a realisation of the preferences of society unbounded by constraints.
We need to build the reimagined scaffolding for this. One where the flow of goods and information is through a network with equitable access, responsible engagement and sustainable resource utilisation. We call it the operating system. The operating system is not the owner of anything, but the designer and custodian of the environment where stakeholders interact.
The operating system is built heavily relying on design and agility over brute force execution. It requires for a deep understanding of the system, the ability to learn and adapt and keen sense of responsibility and purpose. The operating system does not suffer from the vagaries of the market, does not sway with winds of speculation, and does not die with changing circumstances. It stands the test of time, creates significant value for its stakeholders including shareholders and, in the end, makes the world a better place.
3. Redefining value
Economics started off as the framework for defining the relationship between capital and mankind. It encompassed the eccentricities of human behaviour, the complexities of communities and the philosophy of the human existence. But somewhere along the way, economics isolated itself in the walls of analytical rigour and empirical evidence and forgot its grounding in social sciences.
We relook at the core principles of economics that needs a paradigm shift and understand its implications to tenets of building businesses.
The analytical platform of economics was built on the dual legs of capital and labor. Resource was thought of as an infinite source of wealth leading to uncontrolled extraction. This flaw has led to significant depletion and pollution of life sustaining resources like air and water. It is about time to give resource its due place and reverence and shift it towards regenerative applications.
Price discovery, cost curves, profit and loss – these are the basics of market economics which solve for local optima and the then and there. While this is a great framework to understand ideal markets, markets are seldom ideal. They are in fact complex systems that continuously evolve and cannot fit in a two-dimensional framework. We need to shift to look at markets as complex systems with ever evolving components trying to find their equilibrium.
The rational consumer has long been the corner stone of defining an economic actor. But the consumer is a reductive form of characterising actors in economy, and it excludes the social nature of human existence. We need to shift the understanding of the actors in this ecosystem from the preferences of the rational consumer to the aspirations and interactions of stakeholder communities.
These shifts in thinking find their way into business principles. Business moved from the scrappiness of the most visionary and savvy entrepreneurs who broke new ground to the theory and textbooks of business school graduates. Reimagining the axioms of businesses of the next era needs us to push past our boundaries of comfort and theorems in books and question the status quo.
1. Change the raison-d’etre of the business from exploiting an arbitrage or a gap in the demand curve to being focused on making the overall system better. Redefine the purpose of business to manifest the progress of society and in the process turn a profit. In other words, solve for the global optima.
2. Redefine the temporal orientation of business objectives more long term. Quarterly results and market speculation of a company’s value has driven vagaries of the market much to its peril making value both temporary and mythical. In an environment of constant day to day change what really matters is long term goals. Long term orientation grounds business to stand the turbulence of change and create real value that lasts.
3. Change the goal of business from maximising shareholder value to maximising value creation in the ecosystem. Maximising shareholder value was a great single point goal that helped build large businesses but also brought with negative externalities to environment and society. Shifting towards building for all ecosystem participants increases the defensibility of a business much beyond temporary advantages and crowd sentiment.
Part 4 | You are The Promise!
This movement starts with all of us. As we put forward this blueprint, manifesto, dream and vision to all the founders who have been with us, we already see the building blocks of this in place and the leaders of this movement recruited.
We have laid out a framework that may seem abstract, audacious and almost scary to go after. As the American cultural anthropologist Margaret Mead said, “Never doubt that a small group of thoughtful citizens can change the world, indeed it’s the only thing that ever has”. You are this group of thoughtful citizens who have been steadfast on creating long term value while standing up to the winds of short term market narrative. You are recruited – to realise the promise of our generation!
This is a prose re-telling of the presentation made at Lightrock India annual portfolio dinner in Oct 18 2022.