Weekend Reads: Adapting to India

There’s a place in Mumbai called Dhobi Ghat. It’s a nearly 2.5-acre open-air laundry that offers a site for compelling photos, a glimpse of the old Bombay, and an opportunity to place your understanding of India on a shaky foundation.

“Guidebooks will tell you this place is essential to Mumbai,” my colleague Vidhu Shekhar, CFA, told me. “And maybe that used to be true, but people have washing machines now.”

A fast-growing country will change more quickly than the guidebooks that describe it. But tourists are likely to visit places they have heard about from people like themselves. What is true for mutual funds, content, or consumer products is true for tourist destinations: Usage is driven by distribution.

So my invitation to you this weekend is straightforward: Try to understand the landmass of India and forget about the country for a moment.

A Cacophony of Civilizations

Language comes in a number of flavors here. India has nearly 900, and many of their words are not translatable into English. Apart from piquing our interest, the cultural diversity this produces is breathtaking.

And think about this: At least five of these languages — Hindi, Bengali, Telugu, Marathi, and Tamil — have 50-million native speakers in India alone. There are 22 languages enumerated in the Indian constitution, and the majority of Indians have a mother tongue other than Hindi.

The territorial history of India over the last 5,000 years serves as a metaphor of the breadth of life experience on the subcontinent. (And there are scientists who think civilization in India is much older than described.)

The appropriate comparison for the region’s historically volatile borders and varied linguistic backgrounds is Europe. It wouldn’t be a waste of time to look at the global history of political borders as well.

A caution: The last Weekend Reads I wrote warned about assuming maps are fact. And it’s worth noting that even the territories described therein are opinions.

Truth Is Relative

I once gave an intern a seemingly trivial assignment: Find India’s unemployment rate.

The challenge of this is straightforward. You can create a number, but what concept of employment do you measure? Some global measures explicitly disclaim that their intent is to measure a specific, well-educated urban segment of the population, which is possible.

But there is a risk of focusing too much on “people like us” when looking at India. Neelkanth Mishra notes that as many as 90% of Indian workers are employed in the informal sector. How does one define employment in that area which appears to be thriving in spite of itself?

So be wary of any data that doesn’t disclose both its sample size and sampling method. Arguably, some data issues are a residual of the intrinsic difficulty of measuring India, but some appear more intentional. Saurabh Mukherjea, CFA, offered what he calls “palliatives” for this analytical problem in a recent note.

Execution Is Possible (If You Know the Market)

The immense success of McDonald’s in India shows it’s possible for global brands to adapt here, but it is far from the norm. A 2007 study noted that firms historically have more luck entering China than India.

Part of the problem is it seems easier to operate a global enterprise in India than it really is. English is widely spoken here, and the country is a massive cultural exporter. But the breadth of adaptation Amazon undertook to compete here is telling. And McDonald’s success aside, those companies recently exiting the market include Twitter, AstraZeneca, Telenor, and DreamWorks.

What’s true of global businesses is also true of global investment managers. A who’s who of firms have tried and failed to expand here: Fidelity, JPMorgan, Goldman Sachs, and Nomura. The list goes on, with protecting profitability given as the reason.

Yet the investment community thrives in its own way. I was at a packed gathering of the Indian Association of Investment Professionals to hear Howard Marks, CFA. By my count there are 25 mutual fund complexes managing upwards of a billion dollars. You wouldn’t recognize many of them if you were eyeing the market from afar.

Further Reading on India

• A.T. Kearney and Google are very bullish about the rise of e-commerce. (Google–A.T. Kearney Study)
• The BBC was recently banned from further reporting in one of India’s national parks. (Times of India)
• Index funds are of interest here, too. Good luck beating a large-cap average. (Ambit Capital)
• Access to sound nutrition is improving, but not enough for children to reach full weight. (Scroll.in)
• Delhi will soon have drinkable tap water. (Indian Express)

Why It’s Important to Pay Attention to Words

• “Weaponized Narrative Is the New Battlespace.” (Defense One)
• Would the election results have been different if Donald Trump and Hillary Clinton had swapped genders? (New York University)
• “When Technology Became Language: The Origins of the Linguistic Conception of Computer Programming, 1950–1960” (Technology and Culture)
• Though it is rarely practiced, binary thinking is useful in the right context. (ScholarWorks@UMass Amherst)

Mind the Gap

• The SEC is cracking down on the 72% of S&P 500 companies reporting non-GAAP earnings numbers. (MarketWatch)
• Which is something CFA Institute is concerned about. (CFA Institute)
• “Are Cash Flows Better Stock Return Predictors Than Profits?” Yes. (CFA Institute Financial Analysts Journal^®)
• Any number constructed by management is likely to be constructed for management. (The New York Times)
• Blockchain will do to banks what the internet did to media. (Harvard Business Review)

Market Matters

• Cocoa prices hit new lows. Be careful of what’s in your chocolate bar. (CNBC, Enterprising Investor)
• Markets are well aware of the risk of currency redenomination in the eurozone. (Financial Times Alphaville)
• The US Federal Reserve comments on the different ways of calculating unemployment. (The FRED Blog)
• A look at trade tariffs globally. (The New York Times)

FYI

• A view of asset markets as banks. (Philosophical Economics)
• A brief history of Wi-Fi. (Ars Technica)
• A bull market in politics? (Axios)
• What your core actually is. (Vitals)
• The poor in Bangladesh might be better off than the poor in the United States. (The Atlantic)

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockphoto.com/Ellica_S