In the past one century, Drug lords in the Latin America; Italian mafia in the USA; war lords of the Africa and Arab world; Russian oligarchs; Japanese Zaibatsu; Australian media moguls etc. have perhaps been as popular with the media and entertainment industry as the intelligence agencies like CIA, KGB, Mossad and MI6. It is widely acknowledged that they did exert influence over political establishments, judiciary and financial systems in their respective jurisdictions; and many a times even beyond that.
In the post global financial crisis era, some entrepreneurs have emerged as the center of power. Historically, the large entrepreneurs have been influencing policy making, but their domain of influence was mostly limited to the policies relating to trade and finance. Geopolitics, for example, was usually not on their agenda. However, it seems to be the case, no longer. The corporate czars are now widely believed to be influencing politics, geopolitics, trade and finance, with impunity. The media and entertainment industry is obviously enamored with these new lords of the universe.
The struggle between the traditional houses of power and the emerging power centers is visible in many countries. The authoritarian regimes like China, Syria and Iran etc. have acted strictly and materially restricted the sphere of influence of the merging czars. European communities are also trying to check the growing influence of social media and other technology enabled business with pervasive influence over society and politics. Other jurisdictions like India are also trying hard to restrict the area of influence of global social media and ecommerce majors.
The acquisition of social media platform Twitter by the maverick entrepreneur Elon Musk should be seen in this context, in my view.
A significant transition in the power structure is also visible in India. I am highlighting this since I find it important from my investment strategy viewpoint.
Large business families have always enjoyed significant socio-political power in India. The families like Tata, Birla, Bajaj, Modi, Shriram, Sahu Jain, Bangur, Poddar, Singhania, Goenka, Wadia, Kilachand, Dalmia, Lal Bhai, Sarabhai, Murugappa, Thapar, Kirloskars were powerful, had political influence and made significant social contributions in the area of education, health and religion. Patriarchs from many of these families took part in the freedom struggle. However, their domain of political influence post-independence was mostly limited to the policies concerning trade and finance.
These powerful businessmen have never been known as the key drivers of consumption patterns, financial markets, foreign relations and geopolitics.
Of course the financial markets were not much developed when they reigned. The development of Indian equity markets started in true sense with FERA dilution of MNCs. It was incidentally the same time when the legendary Dhirubhai Ambani entered the public equity space. For more than one decade after the FERA dilution and Reliance IPO, the equity market was mostly dominated by MNCs like HUL, Nestle, ITC, Castrol, ACC, Cadbury, Reckitt Colman (now Benckiser) etc. Abolition of Capital Controls and permission for foreign portfolio investors to invest in the secondary market in 1991 started the journey of Indian capital markets in true sense.
Late 1990s was the era of professionally managed technology companies and private banks. For the next two decades, these businesses dominated the markets. These businesses were not particularly known for exerting any political influence or influencing the markets. The businesses, and not the person behind the business, dominated the narrative. For almost two decades, the Indian markets did not like the so-called oligarchs. Most of the post-independence oligarchs (many factions of Birla clan, Modi, Singhania, Dlamia, Sahu Jain, Lalbhai, Kilachand, Sarabhai etc.) had already diminished materially post 1991 liberalization. The remaining ones like Tata, factions of Birla, Bajaj, and emerging ones like Ambani, etc mostly underperformed the MNCs, technology and private banks.
But what has been happening since the past five years is something very new to the Indian markets. It is not the businesses, but the oligarchs who are driving the Indian markets. It does not matter what these Oligarchs do. They may be in the business of commodities (coal, copper, aluminum, steel, carbon, oil, gas etc.); technology, automobile, power, retail, financial services, food processing, textile, retailing or e-commerce etc. The market is being driven by the person behind the business, not the business itself. Valuations are being placed on the persons (Oligarchs) rather than the business. The argument is that “this person” can turn dust into gold, so paying silver for the dust is not a bad deal.
I am confused by the transformation in the market. This is something very new for me. I am not sure how this will end. Whether the dust will turn into gold; or silver will turn into dust – we would only know in hindsight. Nonetheless, I am sticking to my old methods for now – focusing on businesses and ignoring the personalities.
No comments:
Post a Comment