Brain drain

Better than Brain in the drain

Why Corporate USA wins on meritocracy ?

Iconic Japanese, British and German brands are dead. Cadbury was acquired by Kellog which was acquired by Heinz. Sony is a leader in nothing. Philips makes low end electronics. Ericsson no longer makes mobile phones. And Nokia is rarely seen. The new brands are all American – Apple, Windows, Office365, Android, Google, Amazon, Netflix, FedEx, Nvidia, Qualcomm, Facebook, WhatsApp.

And many of these brands are owned by promoterless, professionally managed, board run companies. And led by IITians. It so happens that the IITs come from India and so they are Indians. There are some non-IITian CEOs who went to IIM or Manipal type Indian universities but they are more an exception. IITians are the rule.

Newsweek has some complicated theories to explain why this is so. I find them too convoluted. In fact it is a junk analysis.

Start with nature of the employers. There is no owner or family. Therefore there is no dynasty rule. Professionals rise to the top.

Second these companies are about valuation. Profits come later. Amazon lost money for 19 years. It is about market share of eyeballs. Profits may come from sources other than the consumer. Google search continues to be free. The real business is selling eyeballs to advertisers. Search is incidental. Consumer nos, not consumer revenue is important. These numbers come from emerging markets – India being the largest.

They don’t come from China. Because most of these new economy brands are not allowed to operate in China. Therefore it doesn’t make sense to hire a Chinese CEO. This is rarely understood as being the key reason for the absence of Chinese CEOs

I have had the privilege of knowing most of the IITian CEOs for decades. Most from before they became CEOs. For example Raj Subramaniam of FedEx is my batchmate and classmate from IIT. Others like Rajat Gupta have been guides and philosophers. Through them, I have got to know the company founders. The reason that the IITians make sense to the founders is because they are NOT a threat to founders. The job type IITians don’t usually set up competing companies. They retire and become VCs. The entrepreneur don’t do jobs. They create jobs. They retire to become VCs.

What almost no one knows is that the IITians run funds control a lot of the voting shares in these companies. The IITian investors are critical to valuation of these companies. Investment banks, hedge funds, mutual funds, regular banks, middle eastern funds, Japanese funds are filled to the brim with IITians. Three bad examples in an iit alumni meet – and that companies stock dips.

A related question is why don’t Indians lead European cos. This is again for the reasons mentioned above. Their valuation is not based on Indian numbers or IITian investors. They may be family or govt owned.

And well – they fail because they are not meritocracy driven. They are mostly on vacation.

Brain drain

Better than Brain in the drain

Why Corporate USA wins on meritocracy ?

Iconic Japanese, British and German brands are dead. Cadbury was acquired by Kellog which was acquired by Heinz. Sony is a leader in nothing. Philips makes low end electronics. Ericsson no longer makes mobile phones. And Nokia is rarely seen. The new brands are all American – Apple, Windows, Office365, Android, Google, Amazon, Netflix, FedEx, Nvidia, Qualcomm, Facebook, WhatsApp.

And many of these brands are owned by promoterless, professionally managed, board run companies. And led by IITians. It so happens that the IITs come from India and so they are Indians. There are some non-IITian CEOs who went to IIM or Manipal type Indian universities but they are more an exception. IITians are the rule.

Newsweek has some complicated theories to explain why this is so. I find them too convoluted. In fact it is a junk analysis.

Start with nature of the employers. There is no owner or family. Therefore there is no dynasty rule. Professionals rise to the top.

Second these companies are about valuation. Profits come later. Amazon lost money for 19 years. It is about market share of eyeballs. Profits may come from sources other than the consumer. Google search continues to be free. The real business is selling eyeballs to advertisers. Search is incidental. Consumer nos, not consumer revenue is important. These numbers come from emerging markets – India being the largest.

They don’t come from China. Because most of these new economy brands are not allowed to operate in China. Therefore it doesn’t make sense to hire a Chinese CEO. This is rarely understood as being the key reason for the absence of Chinese CEOs

I have had the privilege of knowing most of the IITian CEOs for decades. Most from before they became CEOs. For example Raj Subramaniam of FedEx is my batchmate and classmate from IIT. Others like Rajat Gupta have been guides and philosophers. Through them, I have got to know the company founders. The reason that the IITians make sense to the founders is because they are NOT a threat to founders. The job type IITians don’t usually set up competing companies. They retire and become VCs. The entrepreneur don’t do jobs. They create jobs. They retire to become VCs.

What almost no one knows is that the IITians run funds control a lot of the voting shares in these companies. The IITian investors are critical to valuation of these companies. Investment banks, hedge funds, mutual funds, regular banks, middle eastern funds, Japanese funds are filled to the brim with IITians. Three bad examples in an iit alumni meet – and that companies stock dips.

A related question is why don’t Indians lead European cos. This is again for the reasons mentioned above. Their valuation is not based on Indian numbers or IITian investors. They may be family or govt owned.

And well – they fail because they are not meritocracy driven. They are mostly on vacation.