 | Good Morning edwardlorilla1986.paxforex@blogger.com. I hope your Sunday is adequately filled with the sounds of soft music, sights of lazing pets, and aromas of ground coffee, into which hopefully one could add the reading of edition #7 of the First Principles newsletter. :) I’m back in Bengaluru after spending three hectic but fulfilling days meeting with a set of diverse and accomplished founders and executives in New Delhi, Gurugram, and Noida. Compared to Bengaluru, the scale, energy, and drive that I see each time I visit the three cities that largely make up the National Capital Region (NCR) always amazes me. Strangely, I come back energised as an entrepreneur and journalist. The vibe I see within, and outside, NCR’s gigantic office buildings is busy, intense, and constantly hustling. Ambition is visible at all levels—personal or organisational, employee or founder. In recent times, that seems to be much more muted in Bengaluru, where we are more “chilled out.” Enough about my unscientific views, let’s talk First Principles. For this edition, I reached out to Amit Agarwal, the gregarious and voluble CEO and co-founder of NoBroker, a real-estate and home services platform that was last valued at over US$1 billion. I first met Amit in 2016, when we’d just started The Ken. His affable and folksy nature was hard to miss even then. I emailed Amit last week, asking him for his favourite First Principle. He took a few days and emailed me the following (which I’ve only lightly edited for clarity). | As an entrepreneur, me and my co-founders are inherently inclined to taking large bets, and then are always on the look-out for how to quickly scale those bets. While our team takes baby steps in implementation, our role becomes that of allowing them to make mistakes, but always encouraging them to think big... and fast. While we do this, I have observed myself often asking to "Invert". I had first read this mental model from Charlie Munger, who said, "Invert, always invert". Munger used it to poke holes in his investment theses to make them sounder. I have ended up using them in my entrepreneurship decisions to balance my natural over-optimism. You can simplify the understanding of this model by rephrasing it as "what can go wrong? What am I missing? What would be the opposite of what I am thinking right now?" This mental model forces my natural optimism with preparation of "stop-loss" and putting checks and balances on bet-size and execution-steps. | | | Charlie Munger is, of course, the legendary investor and vice chairman of Berkshire Hathaway. I decided to add more context to Amit’s reference to “Invert, always invert.” Here’s a part of Munger’s commencement speech at Harvard in 1986. He titled it “How to guarantee a life of misery”: | What Carson did was to approach the study of how to create X by turning the question backward, that is, by studying how to create non-X. The great algebraist, Jacobi, had exactly the same approach as Carson and was known for his constant repetition of one phrase: "Invert, always invert." It is in the nature of things, as Jacobi knew, that many hard problems are best solved only when they are addressed backward. For instance, when almost everyone else was trying to revise the electromagnetic laws of Maxwell to be consistent with the motion laws of Newton, Einstein discovered special relativity as he made a 180-degree turn and revised Newton’s laws to fit Maxwell’s. It is my opinion, as a certified biography nut, that Charles Robert Darwin would have ranked near the middle of the Harvard School graduating class of 1986. Yet, he is now famous in the history of science. This is precisely the type of example you should learn nothing from if bent on minimising your results from your own endowment. Darwin's result was due in large measure to his working method, which violated all my rules for misery and particularly emphasised a backward twist in that he always gave priority attention to evidence tending to disconfirm whatever cherished and hard-won theory he already had. ln contrast, most people early achieve and later intensify a tendency to process new and disconfirming information so that any original conclusion remains intact. They become people of whom Philip Wylie observed: "You couldn't squeeze a dime between what they already know and what they will never learn." | | | Back to Amit and NoBroker. I asked him for an example of a decision he took using the principle of “inversion”. | If you look at online real-estate startups in India, the history is lined up with dead companies despite amazing founders. This industry is tough, growth takes time, and business economics requires tact and innovation. There are many companies who raised funds, grew, and then ran out of funds. After we raised our first funding, we were desperate to grow. Expanding to more cities would have given us this growth, but we decided against it. Our investors and employees were puzzled by it and questioned us and pushed us a lot for the next one year. Our competitors expanded cities and we kept looking. In my mind, the "invert" approach said that yes, it would give us growth, but it would also make us run out of funds faster. And it also didn’t bode well with real estate, which, from a first principle thought basis, is a micro-locality match-making business. Real estate is not like e-commerce. As a customer, if I don't get property in Koramangala, I don’t give a damn about whether NoBroker also exists in Meerut or not. We weathered a lot of criticism, but today when I look back, it was one of the most important strategic decisions of NoBroker which we got right. | | | If you want to listen to the full episode with Amit (I’d definitely recommend it), you can find it below. Amit Agarwal of NoBroker talks about his single-minded mission to disrupt brokerage, building a cockroach company, and why his office address is a secret | Episode 9, 8 Dec, 2022 |  | So what we basically say is, we are seeding these new businesses. You are doing packers and movers, you are doing furniture rental, etc. Now, we said, each of you are an entrepreneur, we are giving you some seed funding. So we are giving you some resources, you can hire some people. One page. And then, you are on your own. You figure it out. And once you start getting some traction, once you start converting some traction, then we give you series A funding. Then, the technology team will come and make a page for you… […] So I think this is the single biggest reason for our success after the no-brokerage concept. The reason why we have been able to do so many small businesses is only because we have got this entrepreneur culture in which we give a seed funding, then series A funding, and then, for example, we never change the designation of the business guy. We say you’re a vertical head. He’s called a vertical head, he always remains a vertical head because we say that if you want to get promoted, make your vertical larger. The moment your vertical becomes larger, your importance in NoBroker becomes larger and you have self-promoted yourself. | | | Amit Agarwal of NoBroker talks about his single-minded mission to disrupt brokerage, building a cockroach company, and why his office address is a secret | Episode 9, 8 Dec, 2022 | In the same vein, another Bengaluru founder who talked about inversion, albeit in a different context, was Tarun Mehta, the co-founder and CEO of electric scooter maker Ather Energy. His organisational structure relies heavily on making people more productive, not by providing more clarity and incentives to do so, but by removing all other work that might prevent people from being productive. Tarun Mehta of Ather Energy talks about doing hard things, going down multi-year rabbit holes, building companies over 30-40 years, and being chief storyteller | Episode 10, 22 Dec, 2022 |  | You want people to run faster, but for them to run faster, you’ll have to first invest in the support groups that can clear the tracks better for them. That’s right. There are a bunch of people who are not responsible for driving sales or delivery whose job it is to clear the tracks. So think of functions who are now investing in platforms ahead of time, or think of even for the live deployment, the program managers that you will need, the kind of HR folks that you need, the people who will support and take care of all recruitment issues, all onboarding issues. You don’t want execution management to be stuck with any of this. You want their job to be like, extremely pristine, very clear OKRs around delivery. Everything else is off the table. That requires higher investment up front in a lot of enabling functions, which is heavy at the start. But if you get that right, day-to-day delivery becomes a breeze. And that’s what you start seeing in many programs. Once we start getting this right somewhere, people start saying, listen, I don’t seem to have a very heavy… I don’t seem to be firefighting ever because things just happen automatically. Everybody is a little bit more empowered. I don’t have to go back and tell my manager what I’m doing. I just have to deliver here in this program. | Tarun Mehta of Ather Energy talks about doing hard things, going down multi-year rabbit holes, building companies over 30-40 years, and being chief storyteller | Episode 10, 22 Dec, 2022 | | | I hope you enjoyed this edition of First Principles. I’ll see you again next Sunday. And, oh, one last request to share your thoughts about First Principles with me in case you haven’t already done so. Your candid feedback will really help me shape it into something even more useful and interesting. Thanks in advance, and happy jazz, coffee, and doggo belly rubs! First Principles subscriber feedback: https://theken.typeform.com/fpsurvey Regards, Rohin Dharmakumar fp@the-ken.com | | | | |
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