Podcast Interview – Transcript

Karan Singal, alumnus from PGP 2008,have started a podcast with the aim of bringing the views of alumni closer to recent graduates.He has interviewed IIMB Alumnus Shubhankar Nayak, PGP 2007.

Karan Singal graduated from IIM in 2008 from PGP curriculum. He is based out of London and has worked in McKinsey prior to joining Nomura. His main roles include being Business Manager for EMEA Structured Products and Head of Client Strategy for all Sales.

Here is the podcast transcript.

Highlights: 

• In the eye of the storm during the financial crisis, working in ABS markets at Lehman
• Enjoying planning and the method to this discipline
• Respecting India’s diversity and using it as a strength going forward
• Connecting with China to promote India’s cause at a global level

Hello and welcome. Today I have a very special guest. His name is Shubhankar Nayar. We have a very intertwined history – we work in the same company  and we have known each other since 2006 when I went to college. He is a senior of mine and he graduated from IIM Bangalore in 2007. Currently he is working in Asset Backed Securities team within Nomura. Without further ado, let me welcome Shubhankar

SN: Hi Karan

KS: Let’s start with your journey since graduation. Do you want to tell us how did it go after graduation.

SN: In a professional sense or generally?

KS: Let’s start with professional first.

SN: In professional sense, I had worked for a year before graduating from IIM but that was in a different field in Information Technology (IT). So, for me finance itself was quite new which I moved into after IIM. So the journey from 2007 when I moved here [in London] was a big upheaval year in financial markets. So the day I joined at Lehman in London, we had all the issues around mortgage crisis in the US, its impact on the European businesses. There was a constant change everywhere, constant meetings all around the floor when I started. It was a transitional space leading up to the Lehman bankruptcy. It was an extremely busy 15 months where I saw quite a bit of how a corporate of our company works in a really stressed environment. For me, it was a compact action-packed start to my professional career.

KS: It was like baptism by fire, could not have asked for more

SN: Yeah. I remember my first project when I joined initially as a research analyst was understanding the bankruptcy from the point of view of Asset Backed Securities in a UK lender called Northern Rock which went under. One of my first tasks was to understand their ABS business and work out the implications for investors. So yeah, it was baptism by fire. In hindsight, it was useful because the learning curve was very steep. From Day 1 you couldn’t be a free-rider in the business like easing into the first month of your role. In the first year, the learning curve was very sharp in terms of both product and meeting a lot of different people from different backgrounds e.g. different parts of real estate business at Lehman. So that phase was quite important in terms of grounding / laying a strong foundation.

KS: Can you pick one or two moments which you can remember that were pivotal

SN: We used to have this morning meeting on Mondays. At Lehman, in 2007 the ABS/MBS was 30-40% of Fixed Income revenues, which is huge. During the morning meeting we had 150 people [a lot] in the room who used to attend. We had this conference table and all the Managing Directors (MDs) used to sit around that table and people used to be just entering or standing just outside the doors to listen in. In my first meeting, there were close to 150 people and that meeting leading up to the Lehman bankruptcy the number had reduced to 35 people. That change for me, not using the word surreal, but was unprecedented in terms of change of personnel – people being asked to go and I used to find that meeting really impactful. I didn’t realise a business can also work like that. We are not talking about a start-up here but about one of the biggest bank at the time. From Lehman, there are a lot of individual moments but I always remember that meeting vividly and how it changed from day 1 to 15 months into the role.

KS: It also feels like you are fighting a war and somebody is getting shot every week and you look around and there is only one-quarter of you left. 

SN: Even three days before the bankruptcy, which was filed on a Sunday. The Friday we left work at Canary Wharf office expecting to come back to work on Monday. It wasn’t a done deal that bankruptcy would happen on Sunday. Best case scenario was a private investment bank will ultimately bail you out, the worst case scenario was that the government/Fed would bail you out. There was no third worst case scenario that was thought as realistic but the events in those 48 hours from Friday to Sunday evening obviously transpired quite fast.

KS: So, you were not actively monitoring your Bloomberg as you were expecting an outcome between the two.

SN: Yeah, we were expecting that the government bail-out would happen but on the Sunday afternoon it [bankruptcy] was real.

KS: I remember that there were a lot of images in the newspapers with bankers holding all their belongings in a card box and going out of the office. On Monday morning that was like a mourning of a bank.

SN: I haven’t seen anything like that. We were 1 year into our professional lives and I saw a lot of powerful people, who are well off. The graduate batch across the world was about 70-80 people. We were not shocked as we were doing this only for a year. But yes, I have seen a lot of people who lost their whole livelihood, a lot of senior people who lost their future livelihood. Lot of sad, angry and shocked faces. What we experienced was ‘too fast too soon’. For us, it was ‘what to focus on immediately?’ There was also the visa situation with a lot of us, so we had to find something in the next 2-3 months or you would be sent back to India. That became the only thing on our mind. Otherwise the shock element was a bit lesser for us as we hadn’t seen the highs before the crisis. Nonetheless, it was quite early in our professional career and quite a dynamic situation to be in (to say the least). 

KS: What has been the journey since then?

SN: Professional you would think in the last 10 years. There have been a lot of upheavals – not just in my professional but markets as a whole. For me, the key 3 moments were 

a) 2008 crisis was the obvious one, 

b) 2012 which was four later than the crisis and I had a change of role, moving from Research side to Trading side. In the same group / product but moving into a risk taking role which had its own way of working/thinking. That personally for me was a big change 

c) 2016 when we had a restructuring of the team when we got bit more responsibility. Almost became an entrepreneurship kind of business even within a corporate setup

These 3 were the big moments in my career. One thing that I have learnt is that change is something that has been constant, which every 3 months makes you realise whether it is markets or your product, that is part of excitement in financial markets. It has been difficult at times to see the long-term as in some sense we have been fighting fires every year and we need to have that shorter-term, medium-term and longer-term thinking

KS: There is a lot to unpack in this one. I have 3 questions. 

a) The first one is about the expectation that the Fed or the government would bail out Lehman. There is a concept called the famous Greenspan put, maybe you can help expand that on why markets thought that Lehman was not going to go under despite financially weak balance sheet

b) Touch upon the 2012 transition – where there is a required change of mindset, from taken care of to saying I have to create P&L / risk management for myself. I am master of my own destiny going forward

c) More about sudden change e.g. going from being a MD to without a job – a very sharp gradient of change. So what should people think especially long-term at the back of your mind to cope with such a thing

SN: 

The Lehman thing brought about that classic – whether it is public/private ownership, the definition of ‘systematic’ risk, what is the definition of too big to fail. We have seen enough literature / movies around that theme. The bankruptcy itself at that time was interesting i.e. the world in 2007 had not seen that level of interlinkage and connections between what a bank does and its impact globally was totally different from any other crisis before it. You see all the big crisis in the last 100 years – the dotcom bubble, the 1997 Asian crisis, the oil gulf crisis in the 1980s, the much before that the Great Depression. There was a lit bit of regional element to all of them. In contrast, the world in 2007 had become so big and interconnected that people didn’t even know what they were connected to. A small company in China has a linkage, which it might not know, to an office in the West, of a bank – that change is not very directly connected but indirectly through credit and lending e.g. what used to be called as Weapons of Mass Destruction (derivative markets like CDOs). Nobody knew the extend of how this will all unravel. So in that sense, it is difficult in hindsight to blame anyone. Obviously there is politics and ego between the Fed and the Treasury and Lehman back then, plus the role of other private banks around. But ultimately, it was an unknown. Nobody knew the application of systematic risk and how this might pan out. There was a side to defend on why a private entity should be allowed to fail. Sometimes you have to acknowledge that if a corporation is not working [properly], it should be allowed to fail. Whilst there are other times when the systematic risk nature of things also come into the picture. A call was taken – every entity before Lehman was bailed out in some sense and every entity after Lehman was bailed out in some sense. It was the only one which was allowed to fail and there were repercussions around it. Now whether hundred years down the line we know it is right or not, only history will judge. But it is difficult to say that the crisis was triggered by that pivotal moment. I don’t think it is fair to say that ‘had Lehman would have been bailed out, the world be a happier or better place to live in’. 

KS: Systematic risk became such a big thing at the time and the risk models, in the banks especially, did not cope with situations where linkages [between entities] which were not so apparent actually materialised. The examples where you let even some medium-sized enterprises to fail, you don’t know what is going to happen. Maybe post this event, you can say that some of the regulations can be justified trying to either make the linkages apparent or add sufficient buffer that if something fails, it doesn’t lead to the collapse of the financial system.

SN: The concept of Credit generally depends on trust. If someone doesn’t trust a particular entity or a bank, that is tough market. In some sense, you want to send a message that any private entity can’t just do what it wants and hope to get bailed out. But at the same time when you have systematic risk and people lost trust in Credit or in the banking system, that can further reinforce the cycle of negative spiral [of credit creation]. 

KS: Even now we are living in a Central Banks’ created and supported financial ecosystem. We don’t know where this is leading up to but it feels a little bit safer especially for sell-side firms. 

Let’s go to the second one, the big change from Research to Trading. What did it feel like – how did you need to evolve your thinking?

SN: It was a big change, despite the fact that I had come from Research role. I have always been fairly academic, even from campus background, looking into data and trying to find some relationships, interesting thoughts. We were in a bank where the ideas were creating revenues or P&L. I always had that in my mind but when you have to take the risk yourself there is a difference to it because at the end of every day you are judged objectively – it is a numerical judgement whether you contributed positively or negatively. That is something in the previous role I didn’t necessarily have. So it was a big change, you know where your appraisal happens every day. The skill that was beneficial was that I have always been able to close myself as assign as I leave the office every day. Even though you have days when you lose money [in the financial markets] and things like that, I don’t take it to home after work and I can shut out quite easily. That has always helped me maintain and contain the level of stress. That was my initial worry when I moved into Trading – am I just adding stress element into my life for the sake of responsibility. I think because of some sense of getting judged on a daily basis, you need to create some short-term goals for yourself in addition to longer-term goals. You have a target for the whole year and the next few years, but the number 1 goal is the target for the day in which you are trying to achieve something.

KS: How did you manage to compartmentalise the activities during the day i.e. activities during the trading day are not impacted by the actions from the last day.

SN: The good thing in our markets is, especially in my product area, that you can’t do much after 6pm. Here we don’t do FX where something that happens at 8pm can have an impact on what you do

[next day]

. So, in a way it wouldn’t matter. Even if was tracking news on my phone, I would not be able to do anything before next morning. So there was no point in keeping yourself too open or stressed after 6pm. Usually what we do is, in the morning half an hour or hour, you look at the events that happened overnight and you have your thoughts create a view on how those events impact your [trading] positions and strategy for that day and make the changes accordingly in conjunction with targets for that day. If instead there was a situation in which at 8pm I could react to an event, things would have been different. But in our markets, I hope in our products/markets that is not the case. So that is how I would switch off because there was no role in being switched on. In Markets as compared to Banking [IBD], you hours are defined by the markets’ hours of operation. You can do work after market hours and we do projects which are non-market related as well. But from the trading side of things we are bound by the market hours. Generally, I have enjoyed he bigger responsibility aspect of it the most out of this transition. The initial months were spent getting used to it but generally the requirement to generate the revenue directly is something that suited me. 

KS: I think you have answered my third question on planning, which was about planning. Coming in fresh every morning and creating a plan – it gives you those short term milestones for the day/week and also keep the longer term milestones intact in the background. It is more like playing Test cricket – you plan for the session and see what happens. 

You briefly touched upon it but let’s explore the concept of skill vs. luck. You have seen a lot of change, sometimes in bucket-loads, sometimes more organically. As a trader you are subject to a lot of information and you also take a lot of bets. So what is your view on how much success is attributed to skill vs. luck.

SN: It is difficult to define luck itself. There are moments in your life when you think you got lucky from your perspective. But no single person has the bigger picture of what’s happening, so sometimes you feel lucky that this thing was given to me and not someone else. But you don’t know the whole situation behind the scenes on why it was you. To me in the long run, I don’t necessarily believe in luck per-se but in skills – whichever skills could be – whether it is hard work or communications or howsoever you define your personal skill-set. In the long run those skills are the ones that will matter more. If you have the skills you will make your luck in the long run. I don’t generally believe in the concepts of luck.

KS: One of the definitions I heard about luck which resonates with me is “when opportunity meets preparation”. There can also be dumb luck, like in Forrest Gump movie, you get lucky at every corner but more often than not you need to prepare for the right situations. When an opportunity comes your way, you swing hard and make a home run. 

SN: Sometimes you feel you got lucky because that is your own perspective. You feel you didn’t deserve it, so you feel lucky. Not feeling deserving is what you imagine from your own perspective but not necessarily from a full view of everything around you, i.e. all the options that you could have picked from that were there on the table. So yeah you can convince yourself that you got lucky but you can’t rely on that to move forward.

KS: Let’s talk a little bit about your life before IIM. How was that – where did you grow up and events leading up to IIM.

SN: A the time of my birth, my father used to work in ONGC where the job involved few transfers into different locations. So in the first 6-7 years, I was born in Gujarat and lived in Assam for a few years and then finally settled in Bombay at the age of 7. Grew up primarily in Bombay, but as a student I was always, as mentioned in the skills topic, doing hard work and persevering. Having that inbuilt desire [to succeed] and not giving up. These things have been my strengths at times leading up to the IIM.

KS: Any influencers along your journey towards IIM – anyone in your circle or anyone who might have written a book that inspired you?

SN: My theory about influencing is that you can always draw some influence or inspiration from people around you. Nobody is perfect and they will have their own flaws and strengths but everyone has some strength in them which you can be influenced from. When I was growing up, I used to draw inspiration from a range of people whether it was my teachers or parents, friends and it has primarily been people I know. I have somehow never been able to get inspiration or feel connected to by reading books or watching interviews. There are personalities who I admire for the work they have done in their own way. For example, like a lot of Indian cricket fans, I admire Sachin Tendulkar and I have followed his career from the late 1980s to the end. In a more distant way, there is an influence. That influence is not so close as I don’t know the person.

KS: Well, his [Sachin’s] home is less than 100 metres away [we were close to Baker Street], so if you wanted to meet him..Laughs..

SN: I think some people who do find personality inspiring but for me it has always been people I know who have some parts of their lives deeply inspiring.

KS: You mentioned your teachers and friends who have motivated you along the journey. Any critics?

SN: There are critics. You probably learn from the critics who are well intentioned, there are always well wishers who are generally close to you and can tell you where your flaws are and that is something which I have never been shy of listening to. I might have or have not made changes but from listening perspective, very open to hearing what they have to say. As long as it is constructive criticism it is good to listen to, rest of the things I have tended to filter out.

KS: In terms of leading up to IIM.. how did this idea of going to IIM materialise.

SN: You mentioned about luck, maybe that was a bit about luck. I never planned that I wanted to go to IIM. I guess the education system in the way it looked, as per design, at the time had a very defined path to it. I decided to apply for engineering, not necessarily with a lot of thinking that I will like it as such. I just applied because that was supposed to the main profession for the students who were more aligned to science.

KS: It felt like something that was harder to achieve, probably was worth achieving

SN: Yes, it did feel a bit like that, there were a lot of stereotypes back then in the late 90s. I applied for engineering because my grades apparently suggested that I would be a good fit there. I didn’t enjoy engineering at all – especially the academic side of it. Post engineering I worked for a few months at a software firm, which unsurprisingly I didn’t enjoy as much either. For me the management path was like a reset button in your life that an MBA gives including a broader perspective to figure out what you want to do in your professional life. Even that wasn’t easy, I didn’t get through my first attempt. Personally that phase between the first attempt and the second attempt was a critical phase in my life – when I didn’t clear the first time it raised a lot of questions because I was doing quite well in the lead up to CAT in the mock exams etc. I got through some of the other institutes but I didn’t want to go there and in a way ended up giving up one year to attempt the second time. It was slightly difficult as I was doing something else but preparing for CAT without the certainty that it will go through. In that one year I was in Bangalore initially and then in Mangalore with Infosys back then. Those initial things including learning about myself in a new city, while preparing for these exams, was quite personal. The one year period did add a lot of perspective to me in my life.

KS: Where do you draw that inspiration from? Your back is to the wall, your first attempt at something you wanted didn’t materialise. Your are in a new city, you are not even in Bangalore where you have access to more resources to prepare for CAT and you are in a job which is semi-demanding but not inspiring. Where do you draw the inspiration from such a setup?

SN: It goes back to the question of skills and strengths. For me it has always been working hard and having a passion that rightly or wrongly you set yourself to a goal. The goal may be right or wrong but it is your goal. You just want to give your best attempt to reach it. My inspiration is totally inside me, given my strengths are to work hard and not give up. Obviously, beyond a point with every goal you move on. It is not like you are meant to achieve every goal. In this instance it felt there is something unfinished here and that led me to that inspiration. It wasn’t even my dream to become a Trader, I didn’t have a career in mind before doing a MBA. So it wasn’t really a long-term vision to reach here but more like I have set myself this goal to clear CAT and I want to achieve it.

KS: This question is more fair to you – how do you think about planning? You talked about short-term and long-term goals, also about a goal once set one has to keep focus that it is ‘my goal’ and not someone else’s inspiration and third is backing yourself to achieve that goal in-spite of all the distractions around you. Help us through that frame of mind required in planning for your goals.

SN: Planning – you have to almost break it down into smaller targets. Some times they can be milestones, sometimes they can be different points of time to achieve something. In case the time dimension is not involved – then they can be based on some objective places you need to reach towards. The goal initially might seem massive but you have to break it down and tackle those sub-goals – for example, similar to a Test match, you have break it down into sessions. Plan for the next session and try and survive the next five overs to start with. For me personally, half the battle has been to divide the goals into smaller targets and achievable targets which are manageable.

KS: ..and if you are struggling to achieve a goal or sub-goal?

SN: You have to know yourself on why you are struggling. When I mentioned initially about engineering – I did software engineering. I didn’t enjoy doing coding or doing the engineering aspect the way it was taught. It didn’t come naturally to me the way academics had come in the past. Things that I got taught in school – maths, science – I always enjoyed them. Here in engineering I found something that I didn’t enjoy, not necessarily in terms of marks but just not mastering it. Then I said to myself maybe I need to work harder on this – maybe I am not working hard enough to enjoy software engineering. I gave my full shot at it – the end goal was that I realised that it is not for me. Then that is what your conclusion is that not every goal is meant to be for you. At some stage you need to be smart in saying ‘this is not the thing for me’ You need the courage to tell yourself that it is not for you and change your goal. There is no inhibition in calling what you traditionally call as failure. It is not even the right word – it requires some skill to accept a change of path in some sense. 

KS: There is something very subtle between giving up a goal altogether vs. determining that this goal is not for me and substituting it with another goal.

SN: Look, you don’t even have to set goals. I find it easier to set goals in life but I also know a lot of successful people who don’t even set goals. They are natural and live their life by what feels natural. From my own experience, I have always tended to set some goals and never felt wrong about accepting something that I didn’t enjoy. That mindset came a bit later – in the initial years given the educational system, it was slightly one-dimensional. You are told that the only path is academic success. Once that changed as I grew up, I realised that nobody else can set your goals but only you yourself. You need to find your own interests and take it from there. Everybody has some interests; whether you can make a career out of that is a different question. There is nothing better than making a career out of your interests.

KS: You mentioned cricket. I guess you are still fond of cricket. Any recent fond memories you would like to share?

SN: The last one was obviously the 2011 World Cup that India won. Anytime India wins a test match away from home, which is very rare, is a fond memory. The South African series right now – in both the Tests we thought we had an opportunity to win but that didn’t materialise. They were all close in some sense but totally difficult conditions away from home. The big memory – the World Cup – it has been 6 years. That obviously for someone following cricket since 1988/89, felt like a pinnacle of your passion. You almost feel like you are playing there…Laughs.. Iwas in Mumbai at that time and I went outside Wankhade stadium to catch a glimpse of the players but it was a crazy night. From a cricketing sense, it was a very special memory. We can almost have a separate discussion on cricket, all the way from 80s/90s to current.

KS: Let’s switch focus on to India as a country. Where do you think India is in its journey right now and what should be the role of people who are graduating from universities who are business leaders for the next generation.

SN: In the big perspective, we are still a very young country. Whilst it is 70 years since independence, it is only 30 years that we have started taking big strides. We are in that transition state where we are going from Potential to Maturity in the next 20-30 years. The steps we take in this transition will determine where we end up during maturity stage. It is an extremely exciting time to be, including being involved in that transition. Obviously there is a little bit of bias here but I am very optimistic in India. We all know the issues that need to be resolved, they are not problems/show-stoppers in the classic sense. The challenges we face are predominantly because of the sheer size and diversity of the nation which no other country has. The diversity of interests across religion, casts, languages. There are so many differences which we will have to combine and make our way through. In that sense it is a very exciting time and I am optimistic that we [India] will have a much more mature role to play in the global context 10-20 years down the line. 

As per the role of the business leader – it is to recognise this potential..including the demographic dividend. We need to channelise the youth in a productive way because it is very easy to go the wrong way with the youth especially when you are not utilised in a productive sense. The government and businesses need to provide avenues where the youth can feel part of this transition to maturity. If you don’t feel part of the change and you have no control over what is happening in your day-to-day lives then it is easy for the youth to lose motivation and go astray. That is a big challenge on how you utilise this 600-700 million youth population of India during this transition. 

KS: Some of the things you mentioned are really powerful and a bit of thought provoking for me. If as business leaders we have to help facilitate that – our trainings in IIM need to think about it more consciously. We are taught about frameworks, about valuations and analysis. But if we have to get India from potential to maturity and the path to that goes through a) understanding and respecting the diversity and b) inspiring the youth. These people have no clue about the jargon / frameworks and inspiring them [the youth] to be part of the India story requires a very different mindset compared to what the educational institutes have been dishing out traditionally, atleast when we were graduating. It is not strictly leading from the front [top-down instructions] nor leading from behind [giving them free rein and supporting from the back], you have to find a balance where you are giving people direction but also let me grow as part of India’s story. Do you want to expand on that.

SN: Think about our curriculum, it is Masters in Business Administration. It is not easy to teach MBA in an academic context, it is only when you are in real-life situations, real business that you learn to apply them in the context. The theories are useful but I think it needs to be supplemented with more real-life situations. One of the things when I was at my 10-year re-union at the campus, one of the suggestions somebody made was that alumni who are working in different companies giving a real-life case study of situations they have seen in their company. Ofcourse the usual confidentiality applies and it is easier said than done but where it can be done in corporate/non-corporate setting, it needs to be included as part of the curriculum. We need to make people feel involved and empowered. It is almost as my ten years at work, the best thing I have enjoyed especially since 2016, is the entrepreneurship element of it. Yes I am working in a corporate setup where there are hierarchies and there are certain processes/protocols you need to follow but tat the same time when you look at your own business, there is a lot of empowerment to the individual on what he wants to do. In the same sense, the youth needs to be involved in businesses and feel they can do what they want to do and the whole start-up thing in India is a testament to that change. I know a lot of people who have been in a corporate setup but have left that for a change and going to do their own start-up business in some shape or form. It doesn’t matter if you succeed or fail but what you are attempting there is something that is very close to you and you feel that you are the head of that project. We probably need to find the right ecosystem for all these different ways of working and put them together. There is a little of bit, with the diversity element, that things somehow work despite all the craziness. When you look from outside, things seem unstructured and happening very haphazardly but there is some structure which is emanating. It will need time during this transition; we are not yet there in terms of maturity in our journey.

KS: Let’s talk about another aspect, which is Foreign Policy. Historically, whenever India looked outwards it was always about Pakistan and that relationship. In the last 5 years, the narrative has changed to China and how should India cope with China next door. China is an emerging superpower which means it has a lot of weight and clout, not just in its own backyard in Asia but with all the major nations in the world (US, Europe, Australia, Japan). Its businesses and government can have a much higher level of engagement with other nations compared to India. How should India think about its relationship with China because historically the narrative inside India has always reverted to the post 1962 war.

SN: To me foreign policy in the 21st century has to be about economic cooperation and development. I you look at US and China who are the current superpowers, the two countries are so interlinked through commerce, trade, economics – that to me is the best foreign policy. If two countries are dependent on each other for the livelihood of their people, there can be a more diplomatic policy. Even though you may be fighting on strategic interests here and there but deep down you know that in a normal rational world where the country heads care about their own people that dependency is there. The same thing India should apply to thinking about China. China has been on its own journey and it has been a phenomenal journey. We don’t need to compare against China, it is a totally different country with its own background and interests. The foreign policy w.r.t. China has to be to do more business with them, more two-way business and make the 2 countries economically inter-dependent so they don’t go into periods of sustained conflict. Obviously there are conflicts e.g. recent land disputes but that is a product of human nature. Territorial land disputes have gone on forever in human history and will go on forever in the future.

KS: What are the few industries or sectors where India can increase dependence of China on itself?

SN: In the traditional sense, China has always been considered as a manufacturing superpower which India aspires towards. That is something we can learn from them. We also have whether it is services industry or technology we have our own strengths whether it is eCommerce or Internet. We can try and sell those services to China – it is easier said that done but that is one thing we can look to export. 

KS: There is funny phenomena here. Although India took a lead in services and especially in Business Process Outsourcing (BPO) processing paperwork for Western demographies or even call centre kind of work. India took a lead but if you look at the more high-end of services, China is currently ahead of us. WeChat [substitute for WhatsApp] in China is also used for digital payments whereas PayTM and Bhim apps in India are just beginning to come up. China has its own technology ecosystem, there is a different WhatsApp [WeChat], there is a different search engine [Baidu]. So I genuinely find that Indians individual learn some of these technologies faster than Chinese because there is less language barrier but we are not good at assimilating them and propagating them at scale. That is something that needs to change to create an advantage where China can start becoming dependent on India. 

SN: You must have seen the news about Japan, which is investing in India because they need to go outside their home market to invest. India has many avenues where a country like Japan can invest in. When a country invests in you, it is typically an investment that works for both sides. We can co-operate with China on these investments as well. At some level, there is a lack of trust at a diplomatic level probably. That can change and should change. Generally my thoughts on foreign policy and diplomacy is that we will always have territorial and strategic skirmishes in every part of the world but you make yourself economically interdependent that you can’t go to war.

KS: Singapore has done that remarkably. It has taken the Chinese industry and given it an outlet into the world through Singapore. India can easily replicate a lot of that. India can become a place for debt issuance for Chinese. I don’t know what are the changes in laws required or the impact on foreign reserves for India but we have to start somewhere.

SN: That is where the ease of doing business index or the recent changes to make things workable come into picture from regulatory/tax reasons. There were positive small steps taken and more of them need to be taken faster to make India more approachable for foreign investors – whether they invest indirectly or directly in the country. We still have the perception that you need local knowledge to be able to operate in India. 

KS: We still need to understand Chinese people. Most of them don’t speak English and they definitely do not speak Hindi. So maybe we should take a first step and start learning their language and culture. The second is, when we meet Chinese people, they have a lot of curiosity which can easily be mistaken for aggression. To overcome the barriers we need to learn their language and their behaviour. The people who are developing India-China relationships should go beyond these two barriers and still filling in other gaps very quickly.

SN: I was in China last year and I had my own perceptions and inhibitions about Chinese people and the country just from what I had read. On the ground I found the people despite language barrier to be extremely warm generally and I found the country simply amazing in terms of the progress they have made. From what I imagined 20 years ago, I found them to be a developed economy. Clearly every country has its own issues and its own journey which China is going through. There are enough avenues economic or socio-cultural which India and China as two of the most ancient civilisations can connect with. China doesn’t have its own religion but Buddhism is followed in China, originated from India. There are ways for people to cooperate and inter-connect – there are forums where delegates from India go to China and from China come to India. Not just symbolic evens, but a true cultural connection can happen. Maybe it has to come from the top initially – there is that mistrust between the two countries at a higher level which inhibits some of this.

KS: I grew up in a business family and whenever someone used to talk about China, they talked it was so hard to trust Chinese manufacturers because they could supply you something which was not as good as the sample shown at the time of the order. Ofcourse, one way to solve it is to have a government of China guarantee but that is not possible beyond a select few high-level of capex related industries. Another way is a more bottom-up approach. In new areas where we have not yet looked at e.g. smart contracts or crypto space because there everybody knows who owns what. It is very hard to do a contract and renege from it. The problem is about cyber security and storing your wallet but the problem is never about the counter-party risk. Maybe it is a combination of both top-down and bottom-up, and I am hopeful that the 21st century will throw a lot of answers which will help us.

Let’s talk more about personal finances. What is your view on how should people manage their personal finances – active vs. passive investing, thinking about house buying – should you delay or buy immediately, investing in international markets vs. in India.

SN: There are always two sides of personal finance – there is investing + earning and there is spending and consumption. Very often we focus on the investment side and try to target some return. I think it is also important to keen an eye on what you want to spend that income on from a utility perspective. If you have certain utility aims that you have in your life, it is important to keep an eye on that aspect as well. Regarding investment itself, it is very difficult to give a generalised view. As you must have seen during our MBA course, we have those portfolio theories e.g. at this age you should do this and some of it makes sense. In some sense, personal finance is very personal to what you wish to achieve. If the aim is just to make money without any view of what to spend it on, then your aim should be maximise investments – you should then think in portfolio theory sense. The way I look at it, I have some macro themes in my mind whether it is investments in equities or bonds or real-estate. Broadly assess where I think this year will be in terms of risk. I don’t have time to do very active investing to do stock picking, so in that sense it is more macro-asset allocation and closer to passive. It is not fully passive because you are thinking about it and changing asset allocation every now and then but it is different from stock picking and also passive investing.

Regarding renting vs. owning, you have to ask yourself whether you are buying real-estate for investing reasons or consumption reasons, the answers are totally different. Investing [in real estate] for financial reasons is very simple, you take a view for say 10 years and compare the income of renting vs. opportunity cost of the capital that you have locked away. Take into account all the transaction costs as well as your expectations of property prices which is obviously a multi-million dollar question. Within that framework, with any country in the world, you can put your thoughts in simple numbers and decide whether you want to rent or own.

KS: You make a great point. It is the proverbial putting the cart before the horse if you don’t realise your personal finance goals in terms of where to spend the money at. It becomes incrementally much easier to put money into those mental accounts so you start achieving these goals. What is particularly interesting about this buying vs. renting is this tail risk of prices going down and there is limited liquidity in the market. How should one think about mitigating some of that risk? 

SN: If you are thinking in terms of liquidity aspect of it – any asset class can have a tail risk whether it is a big-ticket item like property or even stocks. It is the same thing as if I put 90% of my net worth into one company’s stock. Yes, stocks are liquid but the company can go under for multiple reasons whether it is accounting scandal or manufacturing issues or regulatory change. The issue with property is that a big portion of your net worth goes into one asset. The issue is not that asset is a property – the asset could be a stock or a bond, it could be anything, it is just a concentration risk. One way is to not put all of your net worth into one single asset. The benefit of property is you can consume it as opposed to stock or bond, by staying in it. This makes the decision a bit murky when you are staying in a property, then the other aspects of what utility you gain from living in it come into the equation, and makes the decision slightly non-financial. So my general guidance from financial perspective is to not put too much of your net worth into one single specific asset irrespective of whether it is property or stock/bond. Be clear before buying whether you are going in for consumption or investing purpose. The question of renting vs. owning is not the same in every country, there are certain countries there isn’t a big difference in renting vs. owning as a consumer. For example, in Germany, which is one of the developed countries of the world, a big population of the country rents. They just like the flexibility of renting and don’t like the idea of putting down the capital for owning a house. While in other countries owning a house is a dream, it is social-economic symbol. So there is a cultural element to it as well which differentiates people. But in a pure financial sense, renting vs. owning and having a tail risk of property is slightly easier to think of. On my side, I try to diversify as much as possible.

KS: The advice I take away is that don’t make buying a house the only goal because then you start making this concentrated bet. 

SN: If that is goal, then it is fine. But bear in mind, if you are doing something you are getting some utility out of it. Not just because a book or society or culture says that you should do it.

KS: Now we get to some of the interesting aspects. We are living in a world where the amount of information made available to us is much larger compared to what we were used to get in say 2007 or 2008. The amount of things that take away our attention have also increased including screen time. How should one maintain their long-term thinking or as Daniel Kahneman would say System 2 thinking, keeping it fresh and agile in today’s world

SN: I agree there is information overload and there is a whole concept of social media which despite having obvious advantages also has disadvantages. You need to filter it [information], that is where you need to express what your own interests are and within those fields find sources that you deem to be reliable. You need to do some active filtering because otherwise the amount of information that comes into our daily lives now is massive. A lot of times the boundary between facts and opinions get blurred. People put across opinions as facts or change facts and put them across differently. It is quite easy to be lost in that information overload. The way I do it is that in my own lines of interest, I pick a few sources like magazine, newspaper, writer, author, etc. Doesn’t even have to be media, it could be a specific person who you like to speak to and engage with – just follow them. How do you pick that specific source is also very personal. Example, someone might find Financial Times to be a good source but someone else may not find it a good source.

KS: Any specific sources you subscribe to that you want to mention

SN: I have a few – I do read the Economist and Financial Times. Some of the articles I find very interesting. The articles which are opinion based, you take the opinion and you respect other person’s opinion but doesn’t necessarily mean that you need to subscribe to it and feel very strongly about it just because that article says so. I try to look at some of the authors whom I follow. Books I read but it is something which I am trying to read a bit more outside financial topics. You have to create big filters in your life.

KS: If you were to pick one book outside finance, which one would you pick

SN: It is difficult to pick one; the one I am reading right now is Sapiens. I have found it to be extremely interesting – the book talks about how the last 200-300 years of humanity in the context of the last 70,000 – 100,000 years of how we evolved into the current form. It is a mix of opinion as well as fact through scientific studies and the author has presented it in a very interesting and readable format for a subject which is history. History can be made interesting if you write it in the right sense. I have found that interesting to ask myself that the form in which we [humans] are in right now, how did we reach there. He has another book which looks into the future. There is no single book which is favourite, it is a function of the mood

KS: Any song or artist you would like to pick, or a movie

SN: I enjoy movies a lot whether it is Hollywood or Bollywood. I was extremely into the Friday shows in Bombay where you watch a movie irrespective of what the movie is. It has been somewhat inbuilt into me, from a range of action or comedy. There are some movies which are personal to you for reasons you attach them to. Shawshank Redemption is one of them which I personally enjoyed , the aspects of my own personal strengths – perseverance and never giving up. Those aspects I really enjoyed in that movie. There are few such movies – Pursuit of Happyness which was a similar story

KS: What is your definition of success?

SN: That definition changes every year or every 5 year if you ask any person. What I would have said 10 years ago would have been a very different answer but now I feel that you define success in your own terms. It doesn’t have to be objective targets. Ultimately, for me personally success would having a range of experiences in life and say that I tried different things in my profession as well as personal life. I find it more difficult to objectify success as I grew up. 

KS: What is the kindest thing someone has ever done for you?

SN: Without any specific incident or person, family has been a close part of me personally. I don’t express it much but right from childhood parents/family and my wife in the last five years have been over kind to me. It also relates to the initial chat we had on confidence and what your strengths are. For me family is a key part of that strength and they have been kind to me at every stage in the last 30-odd years.

KS: It has been an absolute pleasure interviewing a genius like you. I think we should call it a day. We can easily spend another hour discussing various things.

SN: Same here