The Fifth Commandment: Be Happy ‘Standing Out’

Summary: If you do things that most others don’t, you will be criticised. Don’t abuse the haters. Enjoy the journey of ‘standing out’ from the crowd and walk down the path less trodden.
[To find out what the Ten Commandments of Indian Entrepreneurship are, please click here]

“Successful risk-takers are conscientiously contrarian. They have theories about why and when the conventional wisdom is wrong.””- Silver, Nate. On the Edge: The Art of Risking Everything (p. 240). Penguin Books Ltd. Kindle Edition.

“The writer-physician Atul Gawande has written about the phenomenon of ‘positive deviants’ in the medical profession, that small set of players who are mired in the same environmental conditions as everyone else but stubbornly refuse to allow themselves to be constrained by conventional wisdoms, and as a consequence are able to identify fresh and often counter-traditional ways to address seemingly intractable problems. In business, I believe that there will always be positive deviants, brands that are exceptional, not because they are able to run harder or faster than the rest, but because at some fundamental level they have made a commitment to not taking the status quo for granted.” – Youngme Moon, ‘Different: Escaping the Competitive Herd’ (2010)

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It was a beautiful winter’s day in December 1990. I was a leg-spin bowler in my school’s cricket team and along with 12 other high-spirited cricketers, I boarded the St. Columba’s School mini-bus at 8am for the 20-minute ride to Sardar Patel Vidyalaya (SPV). SPV had a terrific reputation for producing high quality cricketers who would go on to represent Delhi in the Ranji Trophy and then don national colours for the Indian cricket team. Ajay Jadeja, Murali Kartik, and Deep Dasgupta are all products of the SPV production line.

Nevertheless, we the Class 10 boys from St. Columba’s were in high spirits by the time our bus reached SPV. A pep talk from our Dronacharya Award-winning coach Gurcharan Singh and a nutritious breakfast of jam sandwiches, bananas along with sugary tea had in equal measure served to fortify our spirits.

However, as soon we walked into SPV’s ground we noticed the glum look on our opponents’ faces and saw them staring at the pitch with downcast eyes. It soon became clear that overnight rain had left the uncovered pitch too wet for cricket. Whilst we chatted with our opponents regarding which school had the better cricket facilities, the coaches from the two schools discussed what to do next. At 10am the coaches decided the call off the match. Soon, we boarded the bus to go back to St. Columba’s.

By the time the bus reached our school, the combination of sparkling sunshine, high spirits and lack of text books in our school bags (which had been gleefully packed with cricket gear rather than books that day) meant that none of us wanted to go to our classrooms. So, we did the logical thing – we went to the cricket nets in one corner of the school playground and started practicing in earnest for the battles to come in the weeks ahead. Soon, the morning air resounded with divine sound of the crack of cricket ball impacting the willow.

Naturally, the headmaster took notice of our activities and came out of the school building to speak to us. His peon asked all twelve of us to line-up on the school stairs. Then the stern Brother who ran the middle school with an iron fist asked us “Who gave you permission to play cricket during school hours?”

I remember the pin-drop silence as clearly as I remember the birds chirping in the background and a faraway ambulance going “nee-naw, nee-naw”. At that moment, all of us knew that we were going to be sent back to our classes for four hours of Maths, Physics, Hindi, and History. I decided to speak up since I felt it was impractical for us to go back to class without notebooks and textbooks. I cleared my adolescent throat, mustered my courage and said “Sir, our scheduled cricket match has been called out and since none of us have brought our books to school, we are practicing for our next match.”

The headmaster gave me a look which implied “How dare you speak up?”. Obviously he did not say it but his face said it all. Instead what he said was “Right, all of you back to your classes right now….And you Mr Mukherjea, you will be coming with me to my office.”

Everyone immediately knew what was going to happen to me. My teammates gave me furtive glances as they trudged off to their classrooms whilst I walked with the headmaster to his office. I had been caned before and I knew how much it stung but strangely that winter’s morning, I wasn’t scared.

As the headmaster’s long, thin cane swooshed through the air and stung my buttocks ten consecutive times, I knew then that this is what happens to people who speak up and stand out.

Fast forward to London. The date is 7^th February 2007. Britain and the whole world is in the grip of a four-year old equity bull market. In the preceding four years, the FTSE100 had cumulatively risen 80% and the S&P500 has gone up by 70%.

I was working as a Financial Services analyst in an investment advisory firm in London which I had co-founded. In the middle of this breathless bull market, my colleagues & I pushed a 36-page note titled “Risk Amplifiers on Full Volume”. On the opening page of that note, I wrote:

“The advent of structured finance has allowed financial institutions to take on much more leverage through increasingly complex credit derivatives. This has created a credit economy which is both more susceptible to shocks and less capable of mitigating the negative impacts of these shocks. Not much of this risk is currently factored into prices in equity or credit markets…

Whilst optimistic investment bankers are once again talking about a ‘robust structural change in the economy’, major central banks have over recent weeks voiced concerns about the widespread use of credit derivatives. We highlight four risk amplifiers which could both hasten the turn in the credit cycle and exacerbate its negative impacts once the cycle turns:

• The growth in credit derivative volumes seems to be largely driven by speculation rather than hedging.
• UK lenders’ exposure to the rest of the financial sector has grown twice as fast as their exposure to the non-financial sector. In particular, LBOs and MBS’ appear to be major receivers of credit from UK lenders.
• Multiple layers of leverage are being applied to LBOs and MBS’.
• Risk is being transferred from stronger and more sophisticated lenders to market participants with less sophisticated risk management systems.”

In that note in February 2007 and in the notes which followed over the next six months, my colleagues & I accurately forecast the Great Financial Crisis of 2008. Thanks to our prescience, our clients sold billions of dollars’ worth of stock before the financial system imploded in Europe and America. In fact, some of our clients made fortunes by using our research to go short on major British lenders who would go bankrupt at the height of the financial crisis. Just as importantly, that note allowed us to sell our firm before the GFC ravaged the British economy in the autumn of 2008. The sale of our investment advisory firm in London in turn allowed my wife, myself and my six-month old son to migrate to India and build a life in Mumbai. And thanks to my outspoken research, by the time we left the UK, I was one of the highest ranked small cap analysts in that market.

The broader market’s reaction in London when we published “Risk Amplifiers on Full Volume” in February 2007 was similar to the headmaster’s reaction in December 1990 i.e., ‘Who on earth are you that you believe you have the right to say things like this?’.

This time, however, the investors who tried to cane us (intellectually speaking) were financially destroyed by the GFC. If the cricket ground caning was my coming of age as an adolescent, the research which allowed us to pre-empt the GFC was my coming of age as a finance professional. The courage of one’s convictions being tested in the face of the realities of a harsh world is what allows successful risk takers to stick their necks out repeatedly.

In between these two formative episodes, I had discovered a role model who had not only given me the courage to ‘stand out’, but studying his life had also made me happy ‘standing out’. I had discovered Cassius Marcellus Clay.

“Muhammad Ali had been one of my heroes since I was a teenager. While I could never get his looks or his strength and power, I aspired to speak out like him in favour of causes that I believed in. In fact, it was exactly this trait of mine that used to rile my erstwhile colleagues and other powerful people in society at large.

To be more specific, what makes Muhammad Ali an utterly singular hero was his willingness to take a stance no one else in America at that point in time had the courage to take. David Remnick’s Pulitzer Prize-winning biography ‘King of the World: Muhammad Ali and the Rise of an American Hero’…captures the spirit of the great fighter and the era he dominated.

Ali became the world champion in boxing in 1964. Then, in 1966, he refused to be drafted into the US military, citing his religious beliefs and opposition to the American involvement in Vietnam. Ali was arrested by the US authorities, found guilty of draft evasion and stripped of his titles by the World Boxing Federation. Refusing to bow down, Ali took the authorities to the Supreme Court, which overturned his conviction in 1971.

What followed was equally epic. Through the 1970s, Ali beat twenty-one boxers for the world heavyweight title and won fourteen unified title bouts. These records remained unbeaten for thirty-five years!

Remnick’s book highlights that Ali’s refusal to fight in the US Army in Vietnam—at least three years before it became fashionable for young Americans to take such a stance—was driven out of conviction rather than by a desire to look like a liberal. His belief in his convictions did not falter when the World Boxing Federation unlawfully stripped him of his titles and robbed him of his income at the peak of his career. He stood his ground and waited for the tide to turn, and when it did, he took what was rightfully his.

We named our firm Marcellus Investment Managers in honour of Cassius Marcellus Clay, better known as Muhammad Ali. This man’s career, his beliefs and his actions inside and outside the boxing ring make him an inspiration for ordinary people like us who are trying to build something greater than ourselves with modest resources. For the team at Marcellus, whose investment philosophy and business model often pit us against the mainstream, the courage of Muhammad Ali’s convictions is an ideal we aspire to.” – From ‘Unfiltered’ by Ana Lueneburger & Saurabh Mukherjea, pg 100

Saurabh Mukherjea is the Chief Investment Officer at Marcellus Investment Managers (www.marcellus.in). This material is for informational and educational purposes only and should not be considered as financial, investment, or other professional advice. The inclusion of any book does not imply endorsement or recommendation by the writer or the publisher of this material.