FF Daily #387: The limits of ingenuity

June 2, 2021: Elizabeth Kolbert on climate change; Anand Deshpande’s dilemmas; Bootstrapping versus funding; Elegy for the Arctic

Founding Fuel

[Photo by Li-An Lim on Unsplash]

Good morning,

Two cyclones hit the Western and Eastern coasts of the country recently. The frequency of such occurrences are going up and the voices of concern around climate change are mounting. It compelled us to look up the works of Elizabeth Kolbert, Pulitzer Prize winning author and commentator. In one of her earlier books on the theme, Field Notes from a Catastrophe, she makes the point that there is only so far that luck and resourcefulness will see humans through. 

“This capacity has allowed us, collectively, to overcome any number of threats in the past, some imposed by nature and some by ourselves. It could be argued, taking this long view, that global warming will turn out to be just one more test in a sequence that already stretches from plague and pestilence to the prospect of nuclear annihilation. If, at this moment, the bind that we’re in seems insoluble, once we’ve thought long and hard enough about it we’ll find—or perhaps, float—our way clear.

“But it’s also possible to take an even longer view of the situation. The climate record provided by Greenland ice cores gives a highly resolved history going back more than a hundred thousand years and the Antarctic cores a history stretching back more than four hundred thousand years… As the climate settled down, so did we. People built villages, towns, and finally, cities, along the way inventing all the basic technologies—agriculture, metallurgy, writing—that future civilizations would rely upon. These developments would not have been possible without human ingenuity, but, until the climate cooperated, ingenuity, it seems, wasn’t enough.

“Ice core records also show we are steadily drawing closer to the temperature peaks of the last interglacial, when sea levels were some fifteen feet higher than they are today. Just a few degrees more and the earth will be hotter than it has been at any time since our species evolved… With six billion people on the planet, the risks are everywhere apparent. A disruption in monsoon patterns, a shift in ocean currents, a major drought—any one of these could easily produce streams of refugees numbering in the millions.”

It’s worth reflecting upon. Stay safe and have a good day.

In this issue

  • Anand Deshpande’s dilemma’s
  • Bootstrapping versus funding
  • [Music] Elegy for the Arctic

Anand Deshpande’s dilemma’s

Anand Deshpande is now chairman of Persistent Systems, an entity headquartered in Pune that he founded when he was 28. Before transitioning to chairman, he was the CEO. The kind of man who could roll up his sleeves to write code if need be and go for client meetings when needed. The company grew and started to spread itself across countries. He was on the move, all the time, doing everything and enjoying all of it. 

“Then in 2012-13, after I turned 50, I made a list of all the things that I'm not doing today but would like to do. And I found many things on that list,” Deshpande told our colleague Charles Assisi in a candid conversation.

“You must decide whether you are the horse, the jockey, the owner of the horse, or the owner of a stud farm.”

“That is also when I figured companies go through these S-curves. You are at the top of the curve and the team is not ready to transition to the next S.

“So, there’s a whole bunch of things that had to happen for that. This included introspection and asking how long I need to stay in the business. What do my kids want to do? What if they want to do something different? So I wrote a list of all the things that I like to do. I spoke to a lot of friends as well. And I finally concluded that me staying on as the CEO was not necessarily the best for me and for the business.”

But it was easier said than done. There were other questions playing at the back of his mind. What may the founding team’s reaction be if a professional comes in? Why not exit the company totally? How will the family take to it?

Deshpande shared how he went about finding answers to these questions, and his take on the future of work and technology in the post-pandemic world. “The gig economy will see a rise,” is a trend he is clear about. And that “older and smaller companies in the IT services sector will die”.

Dig deeper

Bootstrapping versus funding

Last week, online broking firm Zerodha, founded by brothers Nithin and Nikhil Kamath, made it to the headlines for an altogether different reason. The firm’s board passed a special resolution that the two along with wholetime director Seema Patil “will get a basic salary of Rs 4.17 crore per month each, along with allowances, which add up to Rs 300 crore per year.” Unlike most other entities that are venture capital funded, Zerodha is bootstrapped and profitable. But that didn’t stop a debate on whether the salaries are justified and Nithin was compelled to step in and clarify their position through a series of tweets

“[T]he reported figure isn’t the actual salary being drawn… Didn’t anticipate that this would get this much attention.” 

“Growth is a fatal attraction for all professional investors”

~ Nithin Kamath

But what got our attention was a pointer to a post he had written last year on bootstrapping versus fundraising. “Thousands of years of history shows us that from the time there was money, human beings have always found ways to acquire it using the path of least resistance and most efficiency. Of course, the world has been flush with liquidity in the last decade and this money has found its way to India due to the growth prospects of our country. This capital has made it easier for entrepreneurs to raise money. But I also think there is a far simpler reason for this dramatic shift. Everyone, from promoters of businesses to professional investors, now chase ‘growth’ and increase valuations to sell their stake in the business instead of trying to earn profits and taking the earnings out through dividends—to save on taxes and earn more efficiently.”

Why did Nikhil and he choose to bootstrap then?

“Firstly, until April 2019, we were a partnership firm. This meant no dividend distribution tax, which is almost like double taxation, to worry about. We have been profitable right from the start, which meant we could take out profits in a tax-efficient way for over 9 years. We converted to a public limited company in 2019 mainly because we had gotten too big to remain as a partnership firm and regulators wanted us to convert.”

There is much else he has to say and all of it is thought provoking.

Dig deeper

[Music] Elegy for the Arctic  

I’ve always struggled with silence. I drown out my surroundings in lyrics and podcasts as I study, bike and buy groceries (self checkout is an introvert’s dream). Almost overnight the pandemic caused one of the most stimulating cities to go quiet and I was well aware of its silence. To become comfortable with this silence I found myself listening to classical music. One track, ‘Elegy for the Arctic’, among the others I listen to, offers the right amount of background to allow you to listen to your own mind—and hopefully be inspired by it (yourself). - Shlok Paul

Still curious?

When Shlok Paul was a doctoral student researching nanoparticles, he dreamt of being a chemical engineer someday. Then, a piece of music got his attention to the climate change phenomenon. In this conversation anchored by Harsh Mall, Shlok is joined by his mum Marie and dad Josy as they talk about music, the influence it has had on them, and sing it out. Soak in the magic of Music and Life.

What’s helping you get through these tough times? Send us the song, poem, quote that is your balm now. And we will share it through this newsletter.

And if you missed previous editions of this newsletter, they’re all archived here.

Bookmark Founding Fuel’s special section on Thriving in Volatile Times. All our stories on how individuals and businesses are responding to the pandemic until now are posted there.

Warm regards,

Team Founding Fuel

(Note: Founding Fuel may earn commissions for purchases made through the Amazon affiliate links in this article.)

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