Reams of paper have been spent writing management theories for companies in growth markets.
I
remember in one of my early lectures in management school, I asked the
professor, “While we talk of core competence, how is it that groups like
Tata, Reliance, Birlas diversify and continue make money in places like
India. According to the definition of core competence, they should not
be in these markets”. The professor quasi-dismissed my question – and
this was a question asked post 1991 reforms (the real ones).
But
later on I read that in growth markets Core competence may not be a
great strategy to work with as newer markets and opportunities open up.
For example, in India when the telecom sector opened up, a bunch of our
erstwhile conglomerates stepped in with their mobile phone service
offering. And a similar trend happened in the infrastructure sector. And
when retail FDI happens, you will see a similar story there as well.
But
then again, as the goings on the last couple of years have shown us,
any company following any established management theory is sure to come
cropper in the face of the newest of all management theories. And it
works. Especially in India. Especially with the UPA in power.
It
can cock a snook at core competence. Monopolize and capture
markets better than any marketing campaign, check. It can dance on the five
forces model of Michael Porter. It can get exclusive licenses, first
mover advantages and deliver better results than Business Process
Re-engineering. It is far more accurate than Lean Six Sigma. It is even
more just-in-time than JIT. It can arrange finance at your door step
when Accounting Standards tell you that you are not eligible for
finance. It can win contracts when you are not even in the industry.
It is, in short, the baap of all management theories. A theory management theorists and consultants has never
quite managed to put on paper: The theory of crony capitalism. It works on a simple tenet.
As Ogden Nash said,
Heights by great men reached and kept,
were not attained by exertion,
but they while their companions slept,
were busy contacting the right person.
Indeed,
the theory of crony capitalism works on a simple model. The number of
influential people, who have your number on their phone is a good
indicator. If they are movers and shakers in the government who decide
policies, float and award tenders it means you can easily grow to
stratospheric heights. If it is a minister who is deciding to give off
coal blocks or spectrum on the cheap, you are in the league to become a
billionaire. If you cannot fulfill this first step, then sorry – the
crony capitalism theory may not work for you. You will have to make it
on your own. Tough luck. Don’t forget to pay taxes, though.
Second.
Have you heard of the word ethics? If your answer is yes, then please
stand aside. If you think ethics is for everybody else, crony capitalism
is for you.
Fourth:
You need to pull strings. In the olden days of license distribution,
some companies always got licenses no matter what. They set up all
possible industries and made money. In these new days of liberalization
it is not that easy. You may have to find a foreign partner especially
when all you do is own land and you know a license to build a metro
railway is up for grabs. But foreign partners are not too difficult to
find – after all, India was a growth market, before it fell like a ton of
brics (pun intended). Or you may be asked to submit a tender in 15
minutes – but this is the information age – it can be done. Sometimes, you have to create a need, like
all you do is sell metal, while the tender is for building a hospital.
That, has to be arranged. Meaning, if the chap who floats the tender can
add the golf course expertise as a pre-requisite to acquire land for a
hospital, all you need to do is find a real estate firm which has built a
golf course in its prospectus. It also helps to know lobbyists. These days
lobbyists can be anybody – they are in disguise after the rather
infamous expose of a lobbyist. The best disguise for them is journalists
for example. Ministers can also double up as loyalists – like, if a tourism minister
can vouch for your howitzers.
Third
: You need to have a penchant for shells. Shell companies. Especially in
Mauritius. Or Maldives. Or Cayman Islands. Some smart guys have shell
companies in India itself. You can even sell shell companies.
So,
how do they make money? Oh simple. You get spectrum for cheap, you sell
it at a fortune. You get coalblocks for cheap, you sell it for
something. You get land on the cheap and then you get some ultra luxury penthouses in
return. Return on investment, you see. Some kickback is involved, but
usually it is lesser than the taxes you would pay if you are a normal
income tax paying geek.
Prerequisites:
Some knowledge in creating trusts, NGO’s and a basic course in money
laundering and tax planning. A penchant for throwing parties is
appreciated. Attendance at big bashes is a must.
As you can see, many (shell) companies in India have made their fortunes this way.
Now,
what if you are not an industrialist. You can still use crony
capitalism. All you do is write bad things about BJP, Hindus or Gujarat
2002
(though this is fast approaching its sell by date) – and you will get
funds. Another great option is to rant about persecution in Kashmir by
the Indian authorities and somebody (related to a friendly neighbour's
spy agency)
will sooner or later invite you for all expenses paid conferences and
some free shopping. If you are
lucky, the government itself may put you on a plane and give you an all
expenses paid holiday to Kashmir while you get to write a report nobody
reads. And if you are a leftist, that works
too. Sooner or later, you will be invited for a corporate funded junket
to spew leftist speeches on an unsuspecting audience.
As for me, I know this column just ended my chances…
(
Weblished yesterday on Niticentral, slightly edited)