Trading Rule No-1
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THE MARKET PAYS YOU TO BE DISCIPLINED.
Trading with discipline will putmore money in your pocket and
take less money out. The one constant truth concerning the
markets is that discipline = increased profits.
Trading RULE No-2
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BE DISCIPLINED EVERY DAY, IN EVERY TRADE, AND THE MARKET WILL REWARD YOU. BUT DON’T CLAIM TO BE DISCIPLINED IF YOU ARE NOT 100 PERCENT OF THE TIME.
Being disciplined is of the utmost importance,
but it’s not a sometimes thing, like claiming you quit a bad habit, such as smoking. If you claim to quit smoking but you sneak a cigarette every once in a while, then you clearly have not quit smoking. If you trade with discipline nine out of ten trades, then you can’t claim to be a disciplined trader. It is the one undisciplined trade that will really hurt your overall performance for the day. Discipline must be practiced on every trade.
When I state that “the market will reward you,” typically it is in recognizing less of a loss on a losing trade than if you were stubborn and held on too long to a bad trade. Thus, if I lose Rs 200 on a trade, but I would have lost Rs. 1,000 if I had remained in that losing trade, I can claim that I “saved” myself Rs. 800 in additional losses by exiting the bad trade with haste
Trading Rule No-3
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ALWAYS LOWER YOUR TRADE SIZE WHEN YOU’RE TRADING POORLY.
All good traders follow this rule. Why continue to lose on five lots (contracts) per trade when you could save yourself a lot of money by lowering your trade size down to a one lot on your next trade? If I have two losing trades in a row, I always lower my trade size down to a one lot. If my next two trades are profitable, then I move my trade size back up to my original lot size. It’s like a batter in baseball who has struck out his last two times at bat. The next time up he will choke up on the bat, shorten his swing and try to make contact. Trading is the same: lower your trade size, try to make a tick or two — or even scratch the trade — and then raise your trade size after two consecutive winning trades.
Trading Rule No- 4
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NEVER TURN A WINNER INTO A LOSER
We have all violated this rule.However, it should be our goal to try harder not to violate it in the future. What we are really talking about here is the greed factor. The market has rewarded you by moving in the direction of your position, however, you are not satisfied with a small winner. Thus you hold
onto the trade in the hopes of a larger gain, only to watch the market turn and move against you. Of course, inevitably you now hesitate and the trade further deteriorates into a substantial loss. There’s no need to be greedy. It’s only one trade. You’ll make many more trades throughout the session and many more throughout the next trading sessions. Opportunity exists in the marketplace all of the time. Remember: No one trade should make or break your performance
for the day. Don’t be greedy
Trading Rule No - 5
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YOUR BIGGEST LOSER CAN’T EXCEED YOUR BIGGEST WINNER.
Keep a trade log of all your trades throughout the session. If, for example, you know that, so far, your biggest winner on the day is five e-Mini S& P points, then do not allow a losing trade to exceed those five points. If you do allow a loss to exceed your biggest gain then, effectively, what you have when you net out the biggest winner and biggest loss is a net loss on the two trades. Not good.
Trading Rule No - 6
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DEVELOP A METHODOLOGY AND STICK WITH IT. DON’T CHANGE METHODOLOGIES FROM DAY TO DAY.
I require my “students” to actually write down the specific market prerequisites (setups) that must take place in order for them to make a trade. I don’t necessarily care what the methodology is, but I do want them to make sure that they have a set of rules, market setups or price action that must appear in order for them to take the trade. You must have a game plan. If you have a proven methodology but it doesn’t seem to be working in a given trading session, don’t go home that night and try to devise another one. If your methodology works more than one-half of the trading sessions, then stick with it.
Trading Rule No - 7
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BE YOURSELF. DON’T TRY TO BE SOMEONE ELSE.
In all of my years as a trader I never traded more than a 50 lot on any individual trade. Sure, I would have liked to be able to trade like colleagues in the pit who were regularly trading 100 or 200 lots per trade. However, I didn’t possess the emotional or psychological skill set necessary to trade such big size. That’s OK. I knew that my comfort zone was somewhere between 10 and 20 lots per trade. Typically, if I traded more than 20 lots, I would “butcher” the trade. Emotionally I could not handle that size. The trade would inevitably turn into a loser because I could not trade with the same talent level that I possessed with a 10 lot. Learn to accept your comfort zone as it relates to trade size. You are who you are.
Trading Rule - 8
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YOU ALWAYS WANT TO BE ABLE TO COME BACK AND PLAY THE NEXT DAY.
Never put yourself in the precarious position of losing more money than you can afford. The worst feeling in the world is wanting to trade and not being able to do so because the equity in your account is too low and your brokerage firm will not allow you to continue unless you submit more funds. I require my students to place daily downside limits on their performance. For example, your daily loss limit can never exceed Rs. 5000. Once you reach the Rs. 5000 loss limit, you must turn your PC off and call it a day. You can always come back tomorrow.
Trading Rule - 9
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EARN THE RIGHT TO TRADE BIGGER.
Too many new traders think that because they have $25,000 equity in their trading account that they somehow have the right to trade five or ten e-Mini S&P contracts. This cannot be further from the truth. If you can’t trade a one lot successfully, what makes you think that you have the right to trade a 10 lot?
I demand that my students show me a trading profit over the course of ten consecutive trading days trading a one lot only. When they have achieved a profitable ten-day period, in my eyes, they have earned the right to trade a two lot for the next ten trading sessions.
Remember: if you are trading poorly with two lots you must lower your trade size down to a one lot.
Trading Rule No -10
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GET OUT OF 0F YOUR LOSERS
You are not a “loser” because you have a losing trade on. You are, however, a loser if you do not get out of the losing trade once you recognize that the trade is no good. It’s amazing to me how accurate your gut is as a market indicator. If, in your gut, you have the idea that the trade is no good then it’s probably no good. Time to exit.
Every trader has losing trades throughout the session. A typical trade
day for me consists of 33 percent losing trades, 33 percent scratches and 33 percent winners. I exit my losers very quickly. They don’t cost me much. So, although I have either lost or scratched over two-thirds of my trades for the day, I still go home a winner.
Trading Rule No-11
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THE FIRST LOSS IS THE BEST LOSS.
Once you come to the realization that your trade is no good it’s best to exit immediately. “It’s never a loser until you get out” and “Not to worry, it’ll come back” are often said tongue in cheek, by traders in the pit. Once the phrase is stated, it is an affirmation that the trader realizes that the trade is no good, it is not coming back and it is time to exit.
Trading Rule No -12
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DON’T HOPE AND PRAY. IF YOU DO, YOU WILL LOSE.
When I was a new and undisciplined trader, I can’t tell you how many times that I prayed to the “Bond god.” My prayers were a plea to help me out of a less-than-pleasant trade position. I would pray for some sort of divine intervention that, by the way, never materialized. I soon realized that praying to the “Bond god” or any other “futures god” was a wasted exercise. Just get out!
Trading Rule No -13
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DON’T WORRY ABOUT NEWS. IT’S HISTORY.
I have never understood why so many electronic traders listen to or watch CNBC, MSNBC, Bloomberg News or FNN all day long. The “talking heads” on these programs know very little about market dynamics and market price action. Very few, if any, have ever even traded a one lot in any pit on any exchange. Yet they claim to be experts on everything.
Before becoming a “trading and markets expert,” the guy on CNBC reporting hourly from the Bond Pit, was a phone clerk on the trading floor. Obviously this qualifies him to be an expert! He, and others, can provide no utility to you. Treat it for what it really is…. entertainment.
The fact is: The reporting that you hear on the business programs is “old news.” The story has already been dissected and consumed by the professional market participants long before the “news” has been disseminated. Do not trade off of the reporting. It’s too late.
Trading Rule No -14
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DON’T SPECULATE. IF YOU DO,YOU WILL LOSE.
In all of the years that I have been a trader and associated with traders, I have never met a successful speculator. It is impossible to speculate and consistently print large winners. Don’t be a speculator. Be a trader. Short-term scalping of the markets is the answer. The probability of a winning day or week is greatly increased if you trade short term: small winners and even smaller losses.
Trading Rule No -15
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LOVE TO LOSE MONEY.
This rule is the one that I get the most questions and feedback on by traders from all over the world. Traders ask, “What do you mean, love to lose money. Are you crazy?” No, I’m not crazy. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly. It will save you
a lot of trading capital and will make you a much better trader.
Friday, April 20, 2007
Monday, March 19, 2007
THE KEYS TO INVESTING IN EQUITY
As an investment advisor, I get lots of queries from investors across the country. Here’s a sample:
‘I bought this scrip last week and it is down. Should I sell?’
‘The markets are trading at a peak. Is it right to invest now?’
‘I want to make maximum returns in minimum time. Suggest some stocks.’
‘Which are the stocks worth buying with price less than Rs 50?’
‘When will the market correct? I want to invest in some good shares.’
This kind of approach to investing in equity is a recipe for disaster.
There are some serious problems here. Let's pick up some important lessons.
Lesson 1
The moment the prices of scrips drop, say, by 5%-10%, we get worried. In that anxiety, we want to sell and get out.
Let's say the Reliance share you bought last week is down 10%. So what? Will Reliance business close down? Or will Mukesh Ambani run away with your money? No.
The movement in stock prices has no impact on the business. Reliance will continue to make profits and grow. Mukesh Ambani will continue to build world-class projects. If that is the case, Reliance shares will see new heights in future. Why bother about these falls which likely will only be temporary?
The problem is, we buy stocks, not businesses. The Tatas and Birlas have been around for over 100 years. Hundreds of successful companies have run for decades and continue to grow irrespective of the stock market volatilities.
Yes, some businesses succeed, some fail. There are ups and downs. That is the inherent nature of a business. But, in the long run, they will make profits and grow. That is where management counts. Good managements run profitable operations.
Second, that’s why we diversify. Even if we lose money in a few stocks, we will still make lots of money in others.
Moral: Buy businesses, not stocks.
Lesson 2
Recently, I read that if you had invested Rs 1 lakh in Infosys at the time of IPO, it would be worth about Rs 64 lakh now. But how many people made that kind of money? None, I guess, except the employees and a lucky few who bought the shares but forgot about it.
Answer honestly: wouldn’t you have sold the shares when it doubled or tripled or became a ten-bagger? How many of us would have had the patience to hold on?
The problem is, we watch stock prices, not businesses. If people had kept track of the business, they would have seen the company had the potential to grow at 30%-40% per annum. Then they would have never sold their shares.
I know many people who got out at 10,000 Sensex levels, thinking the markets will correct and they will re-enter at lower levels. They are now ruing their decision. The problem: they were so obsessed tracking the Sensex that they didn’t see strong economic and business growth.
Moral: Watch business growth, not rise in stock prices.
Lesson 3
The moment people buy a stock, they expect it to double soon. They see the stock ticker 10 times a day. They call their broker a couple of times daily to find out what is happening.
I have one question for such people. Can you set up a steel plant in one day? Can you build a power plant over the weekend? Can you start a mobile company and expect to have 1 million customers on Day 1? No.
Businesses take time to set up, acquire customers and generate profits. Only when the companies increase their profits will the share price also increase.
Therefore, having bought a good business and good management, give it time to prosper. If you don’t have the patience, you might as well go to a casino or call-up Shah Rukh Khan at KBC.
Moral: The stock market is a serious long-term business, not a make-money-overnight casino.
Lesson 4
Another interesting aspect is the stories we hear in local trains, buses, parties, offices, of how so-and-so doubled/ tripled his money.
We end up feeling like fools not to invest in the market. At the first opportunity, we buy a few stocks without proper research and understanding.
I am not saying they are lying. But I would like to ask them about their other investments too. More often than not, for every successful investment, they would have made five other poor investments and lost money. They won't tell you about those.
The point is, when our investment is motivated by others’ half-truths, we never have the patience and discipline required for successful equity investing.
Moral: Don’t be fooled by others’ so-called success stories.
Lesson 5
As I mentioned earlier, people sold looking at the Sensex levels and lost out on the huge potential profits. There are many waiting for the Sensex to fall to the ‘right’ levels to enter the market.
There are two points here. I highlighted one earlier: watch the economy not the Sensex.
Second, timing. Given that humans can switch from irrational exuberance to extreme pessimism and back in a matter of days, I believe even God will find it difficult to time the markets.
Moreover, I bet not even 1 per cent of you will enter the markets if they started crashing from tomorrow. The Dalal Street was totally deserted during the historic crash of May 2006, which was actually a great time to buy.
So I suggest let’s get over this fixation with timing the markets. Let us look at business potential and invest with a long-term perspective.
Moral: Time in the market is more important than timing the market.
Discipline and patience. That is the mantra to creating wealth on the stock markets. Unfortunately, both are in short supply. If you have them, you make your riches. If not, you could be in trouble.
I am not very sure how many would agree with the above lessons or even follow them. Such is human nature: guided by greed and fear, than by reason and logic.
The author, Sanjay Matai, is an investment advisor and can be reached at sanjay.matai@moneycontrol.com.
Source:Moneycontrol.com
‘I bought this scrip last week and it is down. Should I sell?’
‘The markets are trading at a peak. Is it right to invest now?’
‘I want to make maximum returns in minimum time. Suggest some stocks.’
‘Which are the stocks worth buying with price less than Rs 50?’
‘When will the market correct? I want to invest in some good shares.’
This kind of approach to investing in equity is a recipe for disaster.
There are some serious problems here. Let's pick up some important lessons.
Lesson 1
The moment the prices of scrips drop, say, by 5%-10%, we get worried. In that anxiety, we want to sell and get out.
Let's say the Reliance share you bought last week is down 10%. So what? Will Reliance business close down? Or will Mukesh Ambani run away with your money? No.
The movement in stock prices has no impact on the business. Reliance will continue to make profits and grow. Mukesh Ambani will continue to build world-class projects. If that is the case, Reliance shares will see new heights in future. Why bother about these falls which likely will only be temporary?
The problem is, we buy stocks, not businesses. The Tatas and Birlas have been around for over 100 years. Hundreds of successful companies have run for decades and continue to grow irrespective of the stock market volatilities.
Yes, some businesses succeed, some fail. There are ups and downs. That is the inherent nature of a business. But, in the long run, they will make profits and grow. That is where management counts. Good managements run profitable operations.
Second, that’s why we diversify. Even if we lose money in a few stocks, we will still make lots of money in others.
Moral: Buy businesses, not stocks.
Lesson 2
Recently, I read that if you had invested Rs 1 lakh in Infosys at the time of IPO, it would be worth about Rs 64 lakh now. But how many people made that kind of money? None, I guess, except the employees and a lucky few who bought the shares but forgot about it.
Answer honestly: wouldn’t you have sold the shares when it doubled or tripled or became a ten-bagger? How many of us would have had the patience to hold on?
The problem is, we watch stock prices, not businesses. If people had kept track of the business, they would have seen the company had the potential to grow at 30%-40% per annum. Then they would have never sold their shares.
I know many people who got out at 10,000 Sensex levels, thinking the markets will correct and they will re-enter at lower levels. They are now ruing their decision. The problem: they were so obsessed tracking the Sensex that they didn’t see strong economic and business growth.
Moral: Watch business growth, not rise in stock prices.
Lesson 3
The moment people buy a stock, they expect it to double soon. They see the stock ticker 10 times a day. They call their broker a couple of times daily to find out what is happening.
I have one question for such people. Can you set up a steel plant in one day? Can you build a power plant over the weekend? Can you start a mobile company and expect to have 1 million customers on Day 1? No.
Businesses take time to set up, acquire customers and generate profits. Only when the companies increase their profits will the share price also increase.
Therefore, having bought a good business and good management, give it time to prosper. If you don’t have the patience, you might as well go to a casino or call-up Shah Rukh Khan at KBC.
Moral: The stock market is a serious long-term business, not a make-money-overnight casino.
Lesson 4
Another interesting aspect is the stories we hear in local trains, buses, parties, offices, of how so-and-so doubled/ tripled his money.
We end up feeling like fools not to invest in the market. At the first opportunity, we buy a few stocks without proper research and understanding.
I am not saying they are lying. But I would like to ask them about their other investments too. More often than not, for every successful investment, they would have made five other poor investments and lost money. They won't tell you about those.
The point is, when our investment is motivated by others’ half-truths, we never have the patience and discipline required for successful equity investing.
Moral: Don’t be fooled by others’ so-called success stories.
Lesson 5
As I mentioned earlier, people sold looking at the Sensex levels and lost out on the huge potential profits. There are many waiting for the Sensex to fall to the ‘right’ levels to enter the market.
There are two points here. I highlighted one earlier: watch the economy not the Sensex.
Second, timing. Given that humans can switch from irrational exuberance to extreme pessimism and back in a matter of days, I believe even God will find it difficult to time the markets.
Moreover, I bet not even 1 per cent of you will enter the markets if they started crashing from tomorrow. The Dalal Street was totally deserted during the historic crash of May 2006, which was actually a great time to buy.
So I suggest let’s get over this fixation with timing the markets. Let us look at business potential and invest with a long-term perspective.
Moral: Time in the market is more important than timing the market.
Discipline and patience. That is the mantra to creating wealth on the stock markets. Unfortunately, both are in short supply. If you have them, you make your riches. If not, you could be in trouble.
I am not very sure how many would agree with the above lessons or even follow them. Such is human nature: guided by greed and fear, than by reason and logic.
The author, Sanjay Matai, is an investment advisor and can be reached at sanjay.matai@moneycontrol.com.
Source:Moneycontrol.com
Thursday, March 15, 2007
If Dhirubhai Ambani was a larger-than-life patriarch and Anil was the public face of Reliance, Mukesh Ambani was an enigma. Those who knew him well credited him with leading Reliance's turbo-charged growth over the last two decades.
But very little is publicly known of his beliefs, vision and motivation. In his most expansive interview ever to MoneyLIFE, a personal finance magazine, Reliance Industries chairman Mukesh Ambani tells MoneyLIFE editors Sucheta Dalal and Debashis Basu, what drives him and his business decisions
A lot of details about your life are already known. But we don't know things from your end. Your life has changed dramatically in just about three decades; will you take us through that process?
From my point of view, very little has changed (Laughs). In terms of attitude to life, little has changed. There are important lessons I have learnt during my upbringing. It is important to share these, though these are tough to practise as a parent (smiles).
We were like a joint family and I was the first child of the family of that generation. There were advantages in being the first child those days. My father navigated through life from Aden in Yemen to Bhuleshwar (a congested commercial precinct in Mumbai), to Usha Kiran (Mumbai's earliest skyscraper) at Altamount Road to Sea Wind (an exclusive tower which is the Ambani residence).
My first memories are of the early '60s at Altamount Road which was then an emerging area. We were a close-knit family and the four of us -- Dipti, Nina, Anil and I -- were left to do what we wanted. There were boundaries, of course, but within those, we were not micro-managed. Things have changed so much now. When my kids, Isha and Akash, were in the third standard, we behaved as though it was our exam.
Our own childhood was totally different. I guess when you are left on your own, you find your true potential. I remember my father never came to our school even once. Nevertheless, he was hugely interested in our all-round development for which he did some amazing things.
Give us an example.
Imagine this. In the mid-60s, he put out a newspaper ad for a teacher, but specified that his responsibility would be non-academic; he would have to impart general knowledge.
He interviewed several persons and selected Mahendrabhai Vyas who taught at the New Era School. Mahendrabhai used to come every evening and stay with us till 6.30-7 pm.
His brief was our all-round development. We played hockey, football and different kinds of games, watched matches at Cooperage, travelled in buses and trains and explored different parts of Bombay. We went camping and stayed in a village for 10-15 days every year.
Lessons from Dhirubhai Ambani
Dhirubhai Ambani: A slide show
These experiences have helped us a lot, but at that time, we were not very aware of all the learning that was going on. The two hours with Mahendrabhai every evening were great fun. A third track running at that time, apart from academics and the fun stuff, was that my father shared with me his passion for business and entrepreneurship from very early on. Even when I was in high school, I used to spend long hours at office on weekends.
So, these were the four components of my upbringing -- the academic stuff where I was left to myself, Mahendrabhai, my father's passion for creating Reliance and the last piece was his deep links with the family.
A lot of what I have learned from these influences has stayed with me. From the external perspective, my life may have changed a lot, but when I look back at myself in the 1970s, 1980s and now, I see consistency.
How would you describe this?
For my father, life was uni-dimensional. Reliance was his life. Yet, some of my most vivid memories are about spending time with him. However busy he may have been, whatever the pressure, Sunday was for his wife and kids. I try to do the same with my family.
And it has to be non-academic. It is easy to be with your kids and say let's do homework together. But we try to do things, beyond doing lunches and dinners. I learnt that from my father. He was a big nature lover and during our school days, we went to different places every Sunday -- we walked through the forest or had a bath in streams.
I have turned into a big nature fan as well. The change in my life that you talked about is that I can afford it more today. These childhood influences have shaped me into what I am today.
What about your choice of higher education, why did you choose chemical engineering?
In fact, the choice illustrates what I meant about academic decisions being left to us. Nobody asked me to do chemical engineering. I chose to study science and which college I would go to.
By that time -- the early '70s -- Vimal was a fairly successful textile brand. So everybody expected me to do textile engineering. I shocked them by saying that I would go to IIT. Interestingly, 4-5 of us friends studying together for Inter-science were all among the top 10. Ajay Parekh, who runs Pidilite, topped Bombay University. I stood fifth or sixth.
Since Inter-science results were announced after the IIT entrance, I joined IIT, Bombay. After the Inter-science results a few weeks later, I left and joined University Department of Chemical Technology (UDCT) along with my friends.
Did your academic choices help you in the process of self-discovery?
From the beginning, it was clear that we would have to find our own path. Along with that came the self-realisation that we would have to propel ourselves to achieve excellence. I am trying to learn how to do that as a parent. There is a trick somewhere; sometimes we do a lot. I feel that I am more ready for ICSE exams than my daughter. I know everything and I can beat any parent of my age in ICSE exam hands down.
How do you get the time to do it?
I am passionate about it, so one makes the time. My daughter says it is wrong. 'I will have to study it myself,' she says. The trick is to light a fire. It is not about pouring knowledge into the brains of kids but lighting that spark so that they learn by themselves.
With us, my father achieved it without trying as hard as we do. It also depends on circumstances, friends and luck. Probably, we were fortunate to have everything in place.
Many of your childhood friends are still working with you -- you clearly forged lasting bonds.
Anand and I have been friends since the sixth standard; he then went on to study commerce. I met Manoj at UDCT. (Anand Jain now leads the Reliance effort in SEZ and Manoj Modi heads the retailing venture). I have other friends as well from that period. Kiran Manelkar became a doctor; because of him, I have many friends who are doctors.
Why did you choose chemical engineering?
Nobody had anticipated that chemicals was the direction in which Reliance was headed. I did chemical engineering because it was supposed to be the future. Think of the line from the movie The Graduate, which was very popular in our times -- "There's a great future in plastics." (Laughs) I guess, it left a mark on my mind.
In a sense, it also reflected two of the tenets on which my father built Reliance: always invest in businesses of the future and invest in talent. We believe in these two principles even today.
When did you start working for Reliance?
Even when I was doing chemical engineering, I was working almost full time for Reliance. I finished college at 2.30 pm and went straight to the office. I remember, we were raided and my father was in the US.
I was literally in charge, handling the problem. I must have been about 16 or 17. After chemical engineering, everybody said, 'what would you do'? My friends and I wrote all sorts of competitive exams. It was mainly driven by a desire to prove to ourselves that we are no less than anyone in the world. That attitude has not changed either. We even took the civil services exams just to see whether we can get into the list. Then we said, let us apply to Harvard, Stanford and other colleges. I was lucky to get into the top 2-3 business schools. I joined Stanford.
Our class and faculty were outstanding. Nobel Laureate, Bill Sharpe was a professor of financial economics. He made a great impact on me. I hit it off with him on day one -- just as I did with Professor MM Sharma. These are the kinds of professors who make you think out of the box.
Prof MM Sharma's first lecture was on how you make money in the chemical business. Bill Sharpe started by asking 'how do you make a difference to the world.' It was my good fortune that I had a good set of professors and, of course, a great peer group.
While I was at Stanford, Reliance got a licence to make polyester. At that time (early '80s), the World Bank's Young Professional's Programme (YPP) was extremely prestigious. I was very keen to do it too. I had the choice of completing the Stanford graduate programme over the next six months, do the YPP for a year and then return to India. I planned to do this and return to work on the polyester plant.
But you didn't do that. What happened?
When I explained my thoughts to my father, he said, 'you are right in the way you have planned your things. I am starting work on the polyester plant.' I said, 'Oh you are not going to wait for one and a half years?' He said, 'No, I won't wait.' So, I decided to come back immediately.
This was in 1981. Rasikbhai Meswani, Nikhil and Hital's father, was my first boss. The management style used to be very open. We could walk into each other's cabin, join in a meeting or get involved in any discussion. My father encouraged it. But when I joined Reliance formally, he said you need to have a boss and I was put under Rasikbhai's charge.
He was running our polyester business, which consisted of importing polyester fibre, texturising it and selling it to textile mills. It was a new business compared to our own textile mill at Naroda (near Ahmedabad) that brought in almost 60%-70% of the profits.
When we started work on setting up a polyester filament yarn project, my chemical engineering and business school background helped me in organising the work, creating reporting structures, motivating people. . . in all this, my father and Rasikbhai were two steps ahead of me.
We worked liked a partnership; I was fortunate to be able to contribute from day one. One of my biggest obsessions today is that senior people must give bright 25-year olds the opportunity to contribute meaningfully.
The time was different. Reliance has been in the middle of so much of tumultuous growth. You did many things for the first time in India. Isn't it difficult to replicate your own experiences?
Well, I will share with you my perspective. Even before we went public, my father used to say, we need capital but we don't want to be dependent on traditional sources of capital. It was very difficult to convince banks about his ambitious plans.
In the journey of an entrepreneur, the most important thing is self-belief and the ability to convert that belief into reality. He believed that we could raise money from the capital market and return it with profits. His second belief was that India is a great opportunity.
While going public was relatively a new thing, he also wanted to change the status quo and unleash disruptive changes. May be he did not articulate all this then.
The actions were loud enough. For instance, for many years, Reliance was not part of any trade or business association. It also had nothing to do with the old established houses.
Absolutely. That was his belief. He said, 'let's build a different company.' This is my 25th year in Reliance as a full-time employee.
When I look back over the years, what did we change? We changed the mindset and we showed the way. Dhirubhai propelled the Indian capital market forward. We raised money only till the middle of 1985 and then in 1989. Then many others came along and raised money. That was a paradigm change.
The first 200-odd people who built Patalganga with me are still around, running different businesses. It has gone into their psyche that we do things differently here. We have taken money from ordinary Indians and we are their trustees. When this is drilled into thousands of people, you automatically get performance.
The other thing that is not visible externally is methods, processes, systems that moved Reliance away from a system that is totally owner-driven. We were among the last to put up a polyester plant. Before us there were Birlas, Modis, Singhanias, the multinationals -- everybody except the Tatas.
Don't miss Part II of the interview tomorrow!
Source - rediff
But very little is publicly known of his beliefs, vision and motivation. In his most expansive interview ever to MoneyLIFE, a personal finance magazine, Reliance Industries chairman Mukesh Ambani tells MoneyLIFE editors Sucheta Dalal and Debashis Basu, what drives him and his business decisions
A lot of details about your life are already known. But we don't know things from your end. Your life has changed dramatically in just about three decades; will you take us through that process?
From my point of view, very little has changed (Laughs). In terms of attitude to life, little has changed. There are important lessons I have learnt during my upbringing. It is important to share these, though these are tough to practise as a parent (smiles).
We were like a joint family and I was the first child of the family of that generation. There were advantages in being the first child those days. My father navigated through life from Aden in Yemen to Bhuleshwar (a congested commercial precinct in Mumbai), to Usha Kiran (Mumbai's earliest skyscraper) at Altamount Road to Sea Wind (an exclusive tower which is the Ambani residence).
My first memories are of the early '60s at Altamount Road which was then an emerging area. We were a close-knit family and the four of us -- Dipti, Nina, Anil and I -- were left to do what we wanted. There were boundaries, of course, but within those, we were not micro-managed. Things have changed so much now. When my kids, Isha and Akash, were in the third standard, we behaved as though it was our exam.
Our own childhood was totally different. I guess when you are left on your own, you find your true potential. I remember my father never came to our school even once. Nevertheless, he was hugely interested in our all-round development for which he did some amazing things.
Give us an example.
Imagine this. In the mid-60s, he put out a newspaper ad for a teacher, but specified that his responsibility would be non-academic; he would have to impart general knowledge.
He interviewed several persons and selected Mahendrabhai Vyas who taught at the New Era School. Mahendrabhai used to come every evening and stay with us till 6.30-7 pm.
His brief was our all-round development. We played hockey, football and different kinds of games, watched matches at Cooperage, travelled in buses and trains and explored different parts of Bombay. We went camping and stayed in a village for 10-15 days every year.
Lessons from Dhirubhai Ambani
Dhirubhai Ambani: A slide show
These experiences have helped us a lot, but at that time, we were not very aware of all the learning that was going on. The two hours with Mahendrabhai every evening were great fun. A third track running at that time, apart from academics and the fun stuff, was that my father shared with me his passion for business and entrepreneurship from very early on. Even when I was in high school, I used to spend long hours at office on weekends.
So, these were the four components of my upbringing -- the academic stuff where I was left to myself, Mahendrabhai, my father's passion for creating Reliance and the last piece was his deep links with the family.
A lot of what I have learned from these influences has stayed with me. From the external perspective, my life may have changed a lot, but when I look back at myself in the 1970s, 1980s and now, I see consistency.
How would you describe this?
For my father, life was uni-dimensional. Reliance was his life. Yet, some of my most vivid memories are about spending time with him. However busy he may have been, whatever the pressure, Sunday was for his wife and kids. I try to do the same with my family.
And it has to be non-academic. It is easy to be with your kids and say let's do homework together. But we try to do things, beyond doing lunches and dinners. I learnt that from my father. He was a big nature lover and during our school days, we went to different places every Sunday -- we walked through the forest or had a bath in streams.
I have turned into a big nature fan as well. The change in my life that you talked about is that I can afford it more today. These childhood influences have shaped me into what I am today.
What about your choice of higher education, why did you choose chemical engineering?
In fact, the choice illustrates what I meant about academic decisions being left to us. Nobody asked me to do chemical engineering. I chose to study science and which college I would go to.
By that time -- the early '70s -- Vimal was a fairly successful textile brand. So everybody expected me to do textile engineering. I shocked them by saying that I would go to IIT. Interestingly, 4-5 of us friends studying together for Inter-science were all among the top 10. Ajay Parekh, who runs Pidilite, topped Bombay University. I stood fifth or sixth.
Since Inter-science results were announced after the IIT entrance, I joined IIT, Bombay. After the Inter-science results a few weeks later, I left and joined University Department of Chemical Technology (UDCT) along with my friends.
Did your academic choices help you in the process of self-discovery?
From the beginning, it was clear that we would have to find our own path. Along with that came the self-realisation that we would have to propel ourselves to achieve excellence. I am trying to learn how to do that as a parent. There is a trick somewhere; sometimes we do a lot. I feel that I am more ready for ICSE exams than my daughter. I know everything and I can beat any parent of my age in ICSE exam hands down.
How do you get the time to do it?
I am passionate about it, so one makes the time. My daughter says it is wrong. 'I will have to study it myself,' she says. The trick is to light a fire. It is not about pouring knowledge into the brains of kids but lighting that spark so that they learn by themselves.
With us, my father achieved it without trying as hard as we do. It also depends on circumstances, friends and luck. Probably, we were fortunate to have everything in place.
Many of your childhood friends are still working with you -- you clearly forged lasting bonds.
Anand and I have been friends since the sixth standard; he then went on to study commerce. I met Manoj at UDCT. (Anand Jain now leads the Reliance effort in SEZ and Manoj Modi heads the retailing venture). I have other friends as well from that period. Kiran Manelkar became a doctor; because of him, I have many friends who are doctors.
Why did you choose chemical engineering?
Nobody had anticipated that chemicals was the direction in which Reliance was headed. I did chemical engineering because it was supposed to be the future. Think of the line from the movie The Graduate, which was very popular in our times -- "There's a great future in plastics." (Laughs) I guess, it left a mark on my mind.
In a sense, it also reflected two of the tenets on which my father built Reliance: always invest in businesses of the future and invest in talent. We believe in these two principles even today.
When did you start working for Reliance?
Even when I was doing chemical engineering, I was working almost full time for Reliance. I finished college at 2.30 pm and went straight to the office. I remember, we were raided and my father was in the US.
I was literally in charge, handling the problem. I must have been about 16 or 17. After chemical engineering, everybody said, 'what would you do'? My friends and I wrote all sorts of competitive exams. It was mainly driven by a desire to prove to ourselves that we are no less than anyone in the world. That attitude has not changed either. We even took the civil services exams just to see whether we can get into the list. Then we said, let us apply to Harvard, Stanford and other colleges. I was lucky to get into the top 2-3 business schools. I joined Stanford.
Our class and faculty were outstanding. Nobel Laureate, Bill Sharpe was a professor of financial economics. He made a great impact on me. I hit it off with him on day one -- just as I did with Professor MM Sharma. These are the kinds of professors who make you think out of the box.
Prof MM Sharma's first lecture was on how you make money in the chemical business. Bill Sharpe started by asking 'how do you make a difference to the world.' It was my good fortune that I had a good set of professors and, of course, a great peer group.
While I was at Stanford, Reliance got a licence to make polyester. At that time (early '80s), the World Bank's Young Professional's Programme (YPP) was extremely prestigious. I was very keen to do it too. I had the choice of completing the Stanford graduate programme over the next six months, do the YPP for a year and then return to India. I planned to do this and return to work on the polyester plant.
But you didn't do that. What happened?
When I explained my thoughts to my father, he said, 'you are right in the way you have planned your things. I am starting work on the polyester plant.' I said, 'Oh you are not going to wait for one and a half years?' He said, 'No, I won't wait.' So, I decided to come back immediately.
This was in 1981. Rasikbhai Meswani, Nikhil and Hital's father, was my first boss. The management style used to be very open. We could walk into each other's cabin, join in a meeting or get involved in any discussion. My father encouraged it. But when I joined Reliance formally, he said you need to have a boss and I was put under Rasikbhai's charge.
He was running our polyester business, which consisted of importing polyester fibre, texturising it and selling it to textile mills. It was a new business compared to our own textile mill at Naroda (near Ahmedabad) that brought in almost 60%-70% of the profits.
When we started work on setting up a polyester filament yarn project, my chemical engineering and business school background helped me in organising the work, creating reporting structures, motivating people. . . in all this, my father and Rasikbhai were two steps ahead of me.
We worked liked a partnership; I was fortunate to be able to contribute from day one. One of my biggest obsessions today is that senior people must give bright 25-year olds the opportunity to contribute meaningfully.
The time was different. Reliance has been in the middle of so much of tumultuous growth. You did many things for the first time in India. Isn't it difficult to replicate your own experiences?
Well, I will share with you my perspective. Even before we went public, my father used to say, we need capital but we don't want to be dependent on traditional sources of capital. It was very difficult to convince banks about his ambitious plans.
In the journey of an entrepreneur, the most important thing is self-belief and the ability to convert that belief into reality. He believed that we could raise money from the capital market and return it with profits. His second belief was that India is a great opportunity.
While going public was relatively a new thing, he also wanted to change the status quo and unleash disruptive changes. May be he did not articulate all this then.
The actions were loud enough. For instance, for many years, Reliance was not part of any trade or business association. It also had nothing to do with the old established houses.
Absolutely. That was his belief. He said, 'let's build a different company.' This is my 25th year in Reliance as a full-time employee.
When I look back over the years, what did we change? We changed the mindset and we showed the way. Dhirubhai propelled the Indian capital market forward. We raised money only till the middle of 1985 and then in 1989. Then many others came along and raised money. That was a paradigm change.
The first 200-odd people who built Patalganga with me are still around, running different businesses. It has gone into their psyche that we do things differently here. We have taken money from ordinary Indians and we are their trustees. When this is drilled into thousands of people, you automatically get performance.
The other thing that is not visible externally is methods, processes, systems that moved Reliance away from a system that is totally owner-driven. We were among the last to put up a polyester plant. Before us there were Birlas, Modis, Singhanias, the multinationals -- everybody except the Tatas.
Don't miss Part II of the interview tomorrow!
Source - rediff
Tuesday, March 13, 2007
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