The Five Best Things: Nov 14, 2020

Happy Diwali! Read on about developments in India.

Today is Diwali! It is the biggest Hindu festival, which celebrates the victory of good over evil. That theme feels particularly resonant this year.

It’s also Children’s Day in India - November 14 is the birth anniversary of Jawaharlal Nehru, India’s first prime minister and the patriarch of the Nehru-Gandhi dynasty that still holds away over much of Indian politics. He was a big advocate for children’s education.

I decided to focus this week’s note on recent developments in India. I am admittedly biased, but I think there are a lot of tailwinds on India’s back as the world slowly breaks up with China and discovers that India will be the engine that finally could in the upcoming decade. A young, digitally native, English-friendly country with a huge local market, loosening restrictions, increasing digitization, and better adherence to democracy and rule of law than many other emerging markets around the world.

Yes, there are lots of problems in India, but I choose to focus on the positives today.

The Five Best Things

  1. Livemint: A short history of Indian economy 1947-2019

    • This article provides a summary of the major milestones in India’s economic development from the year it gained independence from the British empire (1947) till last year (2019). As a new country with the lowest per capita income in the world, Nehru adopted a pseudo socialist/ benevolent state economic philosophy, with Soviet-style 5 year planning commissions. Over the next 40 years, India slowly gained food security, fought a couple of wars with its neighbors, and established an industrial and banking base which has always been inextricably linked to the state. In 1991, faced with an economic crisis where it was 3 weeks away from defaulting on import payments, a raft of economic liberalization measures were introduced. This opened up India’s economy to the world, and a burgeoning middle class was born. Cut to today, India has embarked on measures to ease investments and deal-making, and several unicorns and decacorn companies have popped up, with Flipkart being a notable e-commerce exit.

    • Imperial British rule prior to 1947 had depleted most of India’s natural resources, exploited India’s labor, destroyed local industry to favor British exports, and de-stabilized the geo-politics of the subcontinent with an ill-thought out and implemented border partition with Pakistan. I was born in the 80s in India, and have memories of the pseudo-socialist era when Coca Cola was smuggled into the country, and it used to take 7 years to get a permit for a landline phone connection - that’s if you were lucky and bribed the right people. Witnessing the beginning of India’s economic modernization, and internalizing the role of tech in this journey have had a seminal impact on my life and career choices to date.

  2. Vedica Kant: Reliance Origins

    • This blog post covers the origin story of Reliance India Limited, India’s largest and most diversified conglomerate. It was founded by Dhirubhai Ambani, an intrepid businessman, who learned how to bend and twist the rules of India’s post-independence state-run economy to his will. After beginning his career in the oil industry - as an immigrant in Yemen - Dhirubhai returned to India and built the synthetic fabric manufacturing industry from the ground up. Following success here, the company listed publicly on the Bombay Stock Exchange in 1977, integrated its supply chain backwards, and embarked on petrochemicals and plastics. At his death in 2002, he was worth well over $25B.

    • Dhirubhai Ambani’s story is fictionalized in the 2007 movie Guru, available to stream on Netflix. Ambition with a penchant for rule-bending led him to much success; an investment in Reliance’s stock listing in 1977 would have appreciated 2100x. Dhirubhai left control of his company to his two sons Mukesh and Anil - who have since feuded and split the company. Mukesh got the petrochemicals business and kept the Reliance name; Anil took control of the telecom arm. As anyone with an elder sibling knows, they usually get their way; Mukesh ended up being the champion of the Indian telecom sector at the end of the day after all.

  3. Packy McCormick: Reliance: Gateway of India

    • How Mukesh executed Reliance’s transition away from oil to retail and telecom is described in this article, beginning at the section “Reliance Retail and Jio”, about 3/4ths of the way in. Between April and July of 2020, Reliance raised $20.4B from the biggest names in the game, at a valuation of $66B (image below). There are rumors that Amazon may invest $20B in Reliance retail at a valuation of $60B. How did it get here? Reliance leapfrogged investments in legacy infrastructure and built a data-only network - allowing it to flood the market with free-data SIM cards and force its competitors into price wars, leading to default after default. Four years after its 2016 launch, it is the #1 mobile provider in India and the #2 largest mobile provider in the world. Reliance has now announced its intent to connect India with 5G as soon as spectrum is available, and to export 5G solutions as a managed service to other countries. 

      Source: https://notboring.substack.com/p/reliance-gateway-of-india
    • When I visited India in 2016, my mom handed me a Jio SIM for the duration of my trip. “It’s free”, she said. Mukesh’s brother Anil’s earlier foray into telecom had not ended well, so I turned my nose up at this as another doomed, desperate attempt to gain any meaningful market share in India’s saturated mobile provider space. How wrong was I?! Not only did Jio’s cost structure let it wipe the floor with competitors in this space, its zero upfront cost SIM cards opened up mobile telephony to previously untapped consumers. Jio today has nearly 400million subscribers, or a third of India’s population, and more than the entire population of the United States. Build, and they will come.

  4. Whatsapp payments

    • Remember how Facebook was the first to invest in Jio platforms in April, and had the largest share of any foreign entity? This past week, they announced that WhatsApp would allow in-app payments India, beginning its transformation into a WeChat like superapp.

    • For those who live under a rock, WhatsApp is a Facebook owned messaging app. Facebook acquired the company for $22B, and as is the pattern at Facebook, the original founders quit in a huff when they realized Zuck actually wanted a return on his investment.

    • WhatsApp has 2 Billion daily active users as of Feb 2020, and is installed on 97% of all mobile phones in India. The first thing people in India do when they wake up is turn on WhatsApp and send Good Morning images to every one of their contacts. These images clog up people’s phones so much that Google launched an app to get rid of them and free up space.

    • Zuck has tried for years to a) figure out monetization on WhatsApp, and b) capture the Indian market. The previous attempt at providing Internet services to India was so ham-handed that Marc Andreessen got driven off twitter for “imposing digital colonialism” on India. With Indian digital transactions growing at 55%, and 97% penetration of the mobile market, Zuck may have finally found the best way to kill two birds with one stone. The investment in Jio was key to this, with Reliance’s particular skill in greasing the wheels of India’s bureaucracy. As Reliance Retail modernizes the corner grocery market in India, WhatsApp as the front end of this makes a ton of sense. India also banned hundreds of Chinese apps from app stores - including TikTok, allowing Facebook to flourish. Ramneek Kundra was the first to call this when Facebook’s Jio investment was announced.

    • For more conjecture on what Jio’s other strategic investors might do, read here.

    How does one invest in Reliance? Investing in Indian stock exchanges (Bombay Stock Exchange and National Stock Exchange) is kind of a pain. MSCI’s INDA ETF is a good index fund for Indian blue chip companies; a NASDAQ listing for Jio may be coming in 2021.

  5. Vogue India: Gita Gopinath on the road to economic recovery: “Going forward, the world has to be one that is less unequal”

    • This is a profile of Gita Gopinath, the first woman of Indian origin granted tenure at Harvard’s economic department, and the first female chief economist at the International Monetary Fund (IMF). She was hand picked for this job by Christine Lagarde.

    • Not often you see an economist headlining Vogue! She shared this cover page with KK Shailaja, the health minister of the Indian state of Kerala, which has done a remarkable job of containing the Covid-19 pandemic. It’s been a banner week for Indian-origin women in power, even ignoring United States’ VP-elect Kamala Harris. Priyanca Radhakrishnan will be the minister in charge of DEI efforts in New Zealand. Take a look at some more achievements by Indian women in STEM.

Honorable Mentions

  • Bad Boy Billionaires, a 3-part Netflix documentary series on some of the shenanigans the seriously rich in India pull off. It’s based on the excellent book Billionaire Raj, by James Crabtree.

  • Ant Financial, Alibaba founder Jack Ma’s payments company, was expected to list in Hong Kong and Shanghai indexes last week, at a mind-boggling valuation of $300B. It was inexplicably scuttled at the last minute on the same day as the US election - Nov 4. Seemingly to send a message? It appears this is due to personal affront Xi Jinping took to Jack Ma’s criticism of financial regulators.

  • The Tap Comics, memories of India. The Tap is drawn by Ramya Sriram, a good friend from undergrad, who threads the needle between heartfelt and rip-roaring funny like no one else.

Job Drops

  • Google Cloud is hiring for various functions (software, hardware engineering, research) in Waterloo Canada, Warsaw Poland and Bangalore India. Please reach out if you’re interested in moving to, or are based out of any of these locations!

  • Related, there is also a role opening up in Google DeepMind for an enterprise PM with 2-4 years experience.

Disclaimer: The views and opinions expressed in this post are my own and do not represent my employer.