Monday, March 16, 2015

Mission Financial Literacy: Journey as Destination


IIFL’s freewheeling experiments in financial literacy at the grassroots have only reinforced an elementary need: that before we seek to explore the inherent possibilities of this fertile space, we must strive to explode the myths and misconceptions that constrict them.


- See more at: http://www.flame.org.in/KnowledgeCenter/MissionFinancialLiteracyJourneyasDestination.aspx#sthash.sVWOpbrW.dpuf





Thanks to the arid, bureaucratic mechanisms of conventional NGO bodies, proletariat activists and CSR practitioners across the globe, social responsibility, knowingly and unknowingly, has come to harbor several blatant assumptions about the larger cause of end-beneficiaries (often generically slotted as ‘target groups’ or ‘deprived’ communities) Conveniently overlooked in the process is the plain fact that their deprivation is only circumstantial and in no way indicative of the instinctive and intellectual capacities inherent within the community. Contrary to popular perception, the supply-side forces, in the mad rush to emancipate the downtrodden, are themselves found deprived when it comes to even reading the minds of the audience, leave alone identifying its needs,. In peddling their jargon-heavy black and white prescriptions on financial prudence and general well being, they are knowingly and unknowingly oblivious of the expressions of playful amusement and suppressed yawns that the so-called ‘deprived’ reserve for the seemingly ‘privileged’ - - stemming more from doubt than disbelief.



Continuing our offbeat experiments in the realm of financial literacy initiatives across India, (Read: Kaleidoscope of Possibilities), IIFL has always sought to make the financial literacy landscape as inclusive as possible – holding workshops and interactive sessions for stakeholders across spheres – school children, collegians, professionals, entrepreneurs, housewives, slum children, people on daily wages, cleanliness workers, plumbers, electricians, turners, fitters, contractors, cooks and blue-collar and white-collar staff of entities across spheres including municipal corporations, hospitals and clinics, hotels and resorts, traders and merchants, service providers and middlemen – both from manufacturing and service sectors. And we have constantly tailored our programs in the light of the actual experience consciously shunning the disappointment of a few failed programs. Even in the failed space, the sheer contentment of having walked the extra mile is way more than the dejection of the last leg turbulence, often the outcome of pre-conceived notions of the local organizers about the needs and sensibilities of the ‘target audience’ as also the fear of losing control of their prized bastions.




IIFL has always adopted a freewheeling approach to financial inclusion. Inclusion to us is more inclusive than what the word typically implies. (Read: The essence of Inclusion) From theatre intervention programs and role play enactments to film and music appreciation sessions, from fun examinations, contests and e-books (Read: Honey, I didn’t shrink our Money) to participative thought sessions on stress management, articulation and communication skills, language appreciation capsules and basic tech literacy - there’s simply no limit to innovation in the presentation formats. In fact, there’s no format in the first place. After the curtain raiser exercise to build better inroads into their minds, they become more receptive (if not always convinced) about the larger cause of financial literacy as an integral life skill. In line with the respective needs and sensibilities of the given audience, we then proceed to touch upon simple tenets and technicalities of financial planning and independence.

It is then that they are better inclined to appreciate the fact:

That compound interest is not merely a chapter from the Mathematics text book, it’s a miraculous life-changing tool, best exploited as early as possible in life
That insurance is not investment, and the promise of a few money-back policies can prove misleading
That fixed and floating rate installment decisions call for greater deliberation than what’s prescribed by market forces
That inflation can play real havoc with the most promising of investments especially bank FDs
That Equity and Debt have their pros and cons but are integral investment components
That stock market is not a gambling haven and mutual funds merit a closer look
That investment of time and effort in mock trading and fundamental analysis can pave the way for steady wealth creation
That year-end tax planning can easily prove counterproductive if not minutely evaluated for the real benefit
That needs are different from wants and value is different from price
That shopping on a full stomach helps you escape the burden of reckless purchases
That the fine print is often overlooked in the hypnotic charm of alluring ads
That the need to distinguish between good debt and bad debt is elementary to a loan decision
That plastic money could be used to one’s advantage with some prudence and discipline




As always, members of the audience, across all age groups, often surprise you with occasional quips and counter questions that help you learn more than you seek to teach. The more you interact with them, the more you marvel at the depth of their instinctive knowledge, fertile imagination and the zeal to become willful change agents. We are more than sure some of them will become change architects of global credence in good time. Here’re only a few of the lingering echoes:

One bright school girl from Devarjan, a tiny hamlet near Latur in Maharashtra, had a simple argument “Why doesn’t the government simply print more notes to eradicate poverty?” All effort to elucidate the consequent vicious chain of increased spends, demand-supply gaps and soaring prices didn’t seem to impress her. We wished to hold a special session exclusively for her post the session. Unfortunately, the unbelievably wooden and pompous school authorities seemed hardly bothered which was really sad.

A differently abled adolescent, who had accompanied his mother to one session held in conjunction with Don Bosco Technical Institute Kurla, proved a much better listener than most of the other ‘normal’ participants. His sheer effort to get involved, often urging others to be attentive, was truly a moving experience.

Chinmay Bidarkar, standard VIII student of Sri Ravi Shankar school, Latur impressed one and all with his mathematical genius, solving compound interest problems with effortless authority and yet strikingly unassuming in his replies. Clearly a great Indian mathematician in the making!

Ujjwala from Kanakawli and Deepak from Jharkhand, astoundingly mature for their age of 16 and 18 years, proactively articulated the value of money in their own words.

Pranjal Garg of Kendriya Vidyalaya, Rishikesh, Amit Kumar Singh of Port Blair Kendriya Vidyalaya, Anjali A R, Naveen T, K Venugopal and A Santosh of Kendriya Vidyalaya Adoor were among the sterling scorers in the Fin-Lites exam held in schools all over India.

Ms. Varsha Dixit, a key official of the Thane Municipal Corporation showed exceptional vision and extended all help in organizing offbeat financial literacy and communication skill workshops for the corporation staff. Similar sessions have been planned for the Safai Kaamgars on stress management and financial literacy.

Sharada, Anagha, Geeta, Savita and Varsha, all enthusiastic lady entrepreneurs, actively participated in an innovative role play enactment during a Don Bosco session at Borivali, realistically simulating a loan proposal meeting with a bank official and summarizing the learning for the benefit of the audience.

Mr. Pradeep Lotlikar, a former senior staffer of the All India Radio, is now actively pursuing a money management session for the employees of All India Radio, Goa. He attended our workshop at an agricultural college in Goa and was impressed with the freewheeling nature of the program.

Mr. Chandrasekhar Burande, noted architect and citizen activist, took the lead in successfully organizing IIFL workshops in the schools and colleges of Latur, Devarjan and Udgir.

Ms. Sonali Kulkarni, Principal, Sri Sri Ravi Shankar School Latur and Mr. Amarr Prabhu, Principal, Don Bosco Technical Institute, Kurla – both young and dynamic achievers have raised the bar for their noble profession with their untiring and selfless devotion to the larger cause of their institutions.

Ravi, serving staff member from Goa’s Tourism Development Resort in Miramar; Raju, Vada pav vendor from Varangaon near Jalgaon; Giri, auto rickshaw driver from Pon Nagar, Pondicherry; Rai, an ever-smiling steward from a hotel in Shillong’s Polo Ground area; Joshiji, a PSU employee from Rishikesh; Nishigandha, a health and hygiene activist from Thane’s Manorama Nagar; Dinesh, a clerk from Alangar, Mudbidri in Karnataka, Sandeep, a local vendor from Belgaum in Maharashtra, Alex, a transport business agent from Pune - all showed exceptional leadership qualities in assembling their respective communities in real quick time for short sessions on financial literacy.



Kalwa Pipeline case study

But the most satisfying of all initiatives till date was the theatrical intervention exercise we did with the children of Kalwa Pipe Line, a discarded slum pocket of Kalwa, Thane’s neighboring suburb. Their slum is adjoining a pipeline and hence the name. Ironically enough, proximity to the pipeline has done little to solve their recurring water scarcity problems which continue unabated. But their inventive reconciliation with reality and their ingenuity to work around it amidst the despondency and disappointment is a wonder story beyond words.



Meet the Kalwa Pipeline champions of change: Asif, aged 11, is one of the most vocal and vociferous social activists we have ever met. A pocket-sized dynamo, he is a born leader when it comes to enforcing discipline and urging his peers to stay focused during the financial literacy sessions for ‘jyada se jyada fayda’ (maximum gains) as he succinctly puts it. Arif, Asif’s elder brother aged 20 works as a scavenger and runs errands for money but has now taken the lead in explaining the value of money to the community. Chandni, a child laborer, a promising girl of 16, now provides coaching to little children in dance and music, Sonali, 17, explains the virtues of small savings to ignorant adults and Afreen, 18, has taken upon herself to teach English to her folks beginning with the Fin-lites workbook. And last but not the least, thanks to Santoshi, a housemaid of over 35, who got all these kids together at her matchbox place for the financial literacy sessions as also the slum theatre experiment. The kids, who obviously had no prior experience of public speaking, went on to deliver a hard hitting satire called “Jhagde pe jhagda” (squabble upon squabble) in the vast auditorium of Thane Municipal Corporation following rigorous practice in a short span of time. Today, almost all of their long standing problems yet remain unanswered but the new-found vigor from the slum theatre and financial literacy experiment has made them even more determined to fight all odds with greater resolve. Of all things, they are now extra vigilant about saving money for productive purposes like quality food and essential household utilities and constantly check their fascination for things they don’t need but long for, thanks to tempting TV ads and peer pressure.



At IIFL, our financial literacy mission believes in silver linings, not silver bullets…precisely why every trial is no less a triumph and every departure from convention beckons an arrival in the form of sunrise possibilities.

- See more at: http://www.flame.org.in/KnowledgeCenter/MissionFinancialLiteracyJourneyasDestination.aspx#sthash.sVWOpbrW.dpuf

Wednesday, March 04, 2015

Berkshire’s Golden jubilee: Buffett’s 24-carat Jubilation

IIFL | Mumbai | March 04, 2015 08:40 IST
Amidst the aggressive media speculation on Berkshire’s widely publicized ‘Jain Vs Abel’ succession story, IIFL seeks to deconstruct Buffett’s golden anniversary letter which is replete with invaluable life and work lessons for investors, entrepreneurs and business leaders…just about anyone willing to suspend judgment in order to savor the timeless beauty of Buffett’s golden words.

Courtesy: http://www.indiainfoline.com/article/news-top-story/berkshire%E2%80%99s-golden-jubilee-buffett%E2%80%99s-24-carat-jubilation-115030300292_1.html#sthash.GlGpQbfW.dpuf





If you feel that the best home for a grand congregation of humor, pathos, passion, romance, suspense, intrigue, irony and inspiration is a classic film script or a best seller novel, think again! Any Warren Buffett communiqué gives you all of it along with a generous sprinkling of 24-carat life lessons.

His Golden anniversary letter to Berkshire shareholders is even more special probably given the hint of an imminent good bye. But trust Buffett and his confidant, consultant and comrade Charlie Munger to rejoice the future possibilities devoid of any narcissist sermons and egoistic riders that often unknowingly creep into a communication of this genre.

In a restrained yet rousing message, Buffett recounts Berkshire’s eventful past, revisits its glorious present and foresees its probable future with no trace of either wanton pride or embroidered prejudice. He begins the address with a candid recall - of his 1964 error of judgment when he impulsively rejected Berkshire Hathway chief Seabury Seaton’s purchase offer of 225,000 shares @ $11.375 per share, in what was a good 50 per cent higher than the cost of Buffett’s original purchase of Berkshire shares. This would have the best of his famous ‘cigar butt’ picks but he thought against it because Seaton’s offer was ‘eighth of a point less’ than his expectation of $11.50. Instead, he bought the Berkshire stock even more aggressively.

Seaton and Buffett both paid a heavy price, he informs us, for their ‘childish behavior’ (fretting and fuming over a eight of a point) – Seaton lost his job and Buffett was left with the ownership of a monumental textile headache – with a dramatically diminished net worth, zero cash and a fast approaching dead-end in the New England textile business. Buffett’s Berkshire-stricken fate was far from over though. He soon purchased a healthy insurance business out of Berkshire proceeds instead of his own Buffett Partnership Limited reserves, a decision that he regrets to this day and which needlessly locked up a lucrative insurance business in the claustrophobic cellar of a dead textile venture that was painfully co-owned with 36 per cent of the erstwhile Berkshire’s legacy shareholders. If this was not enough, Buffett acquired another dying fabric maker called Waumbec Mills in 1975 for its perceived synergies with Berkshire. Waumbec Mills breathed its last in due course but the acquired Berkshire miseries continued till 1985 (barring two years of decent operations and zero taxes only due to huge loss set-offs) until Buffett decided that enough is enough.

After this truthful submission, rare in any sphere of life, more so in the world of business and industry, Warren Buffett has the grace to laugh over it with a joke – “The northern textile industry is finally extinct. You need no longer panic if you hear that I’ve been spotted wandering around New England.”
That Warren Buffet of today is known for all the incredibly right reasons and that he needs no introduction automatically put his early failures in perspective. But sharing them in toto is Buffett’s way of inspiring all aspirants and wannabes spread across the globe to keep the flame of tenacious enterprise ablaze at all cost. We can’t think of a more enduring package of motivational literature. Unlike the preachy sermons of many a business achiever (carefully edited in hindsight to reveal the glory and conceal the gory), Buffett’s words pierce the heart and the head in the right measure and potency.

In the pages that follow this formative account, Buffett narrates the phenomenal Berkshire story in inimitable style, never devoid of winsome wit, never bereft of wholesome wisdom. He tells us how his friend, philosopher, guide Charlie Munger, a practicing lawyer and passionate architect, showed him the downside of his cigar butt theory for acquisitions of higher stakes and scales, how Charlie’s architectural blueprint designed the Berkshire of today that shifted the company’s operating tenet - from buying fair businesses at wonderful prices to buying wonderful businesses at fair prices, how Buffett learnt from experience and observation how most CEOs are oblivious of the obvious cardinal rule that ‘the intrinsic value of the shares you give in an acquisition must not be greater than the intrinsic value of the business you receive.’, how investment bankers, accountants, consultants, lawyers and financial advisors lure you with acquisition-specific premium-to-market prices and attractive p/e multiples, how CEOs and their ever-obliging stooges have supernatural visions of ‘synergies’ even when they don’t exist, how imposing, media-savvy CEOs, enormously helped by imaginative accounting techniques, drive a golem-like conglomerate expansion spree of fundamentally weak bottom-fish mergers: designed to lure but destined to fail, how Berkshire’s structural advantages have kept it in good stead over the years: as a corporation with the ability and agility to move from sector to sector exactly in line with the prospects and value props of each and without the burden of huge incidental costs, taxes, vested interests and legacy biases.

More importantly, he highlights the fact how Berkshire has incisively exploited the stock market route to buy sizeable stock chunks of great businesses that prove more rewarding than outright business buyouts and have in fact funded some of Berkshire’s large acquisitions. Rather than scout for the limited opportunities of a single industry, Berkshire explores limited opportunities across sectors, consciously overlooking several better bets in the process. For business owners desirous of sale, Berkshire offers a simulated home, he says, of retained culture and (most) people but with a new blueprint for growth. In the context of such sellers, Berkshire virtually has no competition, Buffett contends.

Under the head ‘The Next 50 Years at Berkshire’, Buffett strongly recommends a fresh Berkshire stock purchase only if the investor is willing to hold it for at last five years. And he’s not in favor of using borrowed money for the purchase to safeguard against any steep fall that may not justify the leverage option. He advises all companies of ensuring - at all times - substantial and reliable earning streams, huge liquid assets and no significant immediate cash needs.

He foresees limited scope in percentage terms for long-term Berkshire gains from here on especially when compared to the progress report of the preceding 50 years. He estimates a time frame of a decade or two when the Berkshire directors would face a reinvestment dead-end of sorts and would have to choose between or both of the two routes of distributing excess earnings: dividend payouts and share repurchase.

In the conclusive paragraphs, Buffett clearly spells out the defining characteristics of the future Berkshire CEO. The CEO would:

Be relatively young to enable a long run at office
Be Rational, calm and decisive
Possess character, a broader understanding of business and good insights into human behavior
Know his limits
Prevent business decay by fighting off arrogance, bureaucracy and complacency
Spring forth from within


Buffett also informs us that a choice has already been made without revealing the name. If one were to assume that the chosen one is a certain 63-year old Orissa-born re-insurance wizard, only requirement no. 1 doesn’t quite fit in, which rules more in favor of an ‘energetic’ Greg Abel. Whoever assumes the coveted post, we are sure, will make Buffett and Munger proud, given the strong DNA flowing in his veins more than the demonstrated competence in the given vertical. But Buffet’s letter has so much more to offer than merely help to draw speculative inferences about his likely successor.

In strongly defending Berkshire’s offbeat monolithic structure, (and ruling out the possibility of any voluntary spinoffs) Buffett clearly spells out its indisputable benefits – avoidance of duplication of costs owing from separate operations, nominal management costs in the form of a single board of directors and handy tax credits emanating from a remarkable web of subsidiaries.

Particularly noteworthy for mega corporates back home is the anti-bureaucracy people constitution at Berkshire. As a collective of large companies as opposed to a giant conglomerate, Berkshire headquarters are completely free of committees. Budgets are not an arid mandatory exercise, only a critical internal evaluation tool. And no legal office here, nor human relations, public relations, investor relations, strategy or acquisitions that are often ‘taken-for-granted’ in most companies, only a super active audit function. Wish several Berkshire-like entities evolve in India in the time to come. ‘Make in India’ will gain traction and momentum at one go.

Priceless Buffett quotes interspersed in the letter:
“When we differ, Charlie usually ends the conversation by saying: “Warren, think it over and you’ll agree with me because you’re smart and I’m right.”

“Post mortems of acquisitions, in which reality is honestly compared to the original projections, are rare in American boardrooms. They should instead be standard practice.”

“If horses had controlled investment decisions, there would have been no auto industry.”

“In truth, “equity” is a dirty word for many private-equity buyers; what they love is debt. And, because debt is currently so inexpensive, these buyers can frequently pay top dollar. Later, the business will be resold, often to another leveraged buyer. In effect, the business becomes a piece of merchandise.”

“Mental “flexibility” of this sort (here, Buffet is pin pointing the brazen contrast in the typical banker’s pre and post acquisition advice) by the banking fraternity has prompted the saying that fees too often lead to transactions rather than transactions leading to fees.”

“Charlie told me long ago to never underestimate the man who overestimates himself.”

“Never forget that 2+2 will always equal 4. And when someone tells you how old-fashioned that math is --- zip up your wallet, take a vacation and come back in a few years to buy stocks at cheap prices.”

“Cash is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent.”

“And if you can’t predict what tomorrow will bring, you must be prepared for whatever it does.”

“We will never play financial Russian roulette with the funds you’ve entrusted to us, even if the metaphorical gun has 100 chambers and only one bullet.”

“If our noneconomic values were to be lost, much of Berkshire’s economic value would collapse as well.”
- See more at: http://www.indiainfoline.com/article/news-top-story/berkshire%E2%80%99s-golden-jubilee-buffett%E2%80%99s-24-carat-jubilation-115030300292_1.html#sthash.GlGpQbfW.dpuf