The first time I heard the term "Scalability" from Rakesh Jhunjhunwala 10 years ago in an interview, he mentioned it in many of his interviews. He explained it beautifully with this simple analogy (1/n) ๐
Based on this the key factors that create wealth by applying the concept/ mental model "scalability":
1. Size of the market/ addressable external opportunity.
If we look at history, the big wealth creation happens in a few sectors.
Technology.
Financials.
Healthcare. (2/n)
1. Size of the market/ addressable external opportunity.
If we look at history, the big wealth creation happens in a few sectors.
Technology.
Financials.
Healthcare. (2/n)
Discretionary consumption.
Why?
Because the size of the market is huge.
2. The most important factor is "management", as RJ said:
Ability to scale up the business in bigger market size.
Vision & risk appetite and
The system/ process needed to scale up the business (3/n)
Why?
Because the size of the market is huge.
2. The most important factor is "management", as RJ said:
Ability to scale up the business in bigger market size.
Vision & risk appetite and
The system/ process needed to scale up the business (3/n)
Without the "management" factor, the big size of the addressable market can't create๐ฐ
We can see so many 30-40 years old Tech, health care, financials companies are still small in size, the main reason is management.
Btw, I forgot to mention the "Integrity" of management (4/n)
We can see so many 30-40 years old Tech, health care, financials companies are still small in size, the main reason is management.
Btw, I forgot to mention the "Integrity" of management (4/n)
Here RJ mentioned "systems & processes needed to scale up the business".
These systems/ processes lead to creating the "sustainable competitive advantage" if the systems/ process aren't creating moats continuously, long term wealth can't be generated (5/n)
These systems/ processes lead to creating the "sustainable competitive advantage" if the systems/ process aren't creating moats continuously, long term wealth can't be generated (5/n)
So, three factors are important:
1. Size of the market.
2. Management.
3. Building a sustainable moat.
There are so many cases that proved this "pattern" worked everywhere, not only in India ๐ฎ๐ณ
(6/n)
1. Size of the market.
2. Management.
3. Building a sustainable moat.
There are so many cases that proved this "pattern" worked everywhere, not only in India ๐ฎ๐ณ
(6/n)
However, I would like to mention the 3 cases in the Indian context:
1. Titan.
2. Bajaj Finance.
3. TCS.
First, look at Titan: Size of the jewellery market in the early 2000s + management (Bhaskar Bhat and team) + building a sustainable moat continuously (7/n)
1. Titan.
2. Bajaj Finance.
3. TCS.
First, look at Titan: Size of the jewellery market in the early 2000s + management (Bhaskar Bhat and team) + building a sustainable moat continuously (7/n)
Investing in brands, designs, trust factor, supply chain, cost-effectiveness etc.,
Second: Bajaj Finance.
Size of the market ( still it is big) + management ( Sanjiv Bajaj & team) + building sustainable moats (investment in technology and human resources ) (8/n)
Second: Bajaj Finance.
Size of the market ( still it is big) + management ( Sanjiv Bajaj & team) + building sustainable moats (investment in technology and human resources ) (8/n)
Finally: TCS.
The size of the market and is still growing in different ways + management (FC Kohli, Ramadorai & N Chandrasekaran) + building moats by investing in Technology, brand, HR.
These 3 factors are very essential, even you can look at the leading companies in US (9/n)
The size of the market and is still growing in different ways + management (FC Kohli, Ramadorai & N Chandrasekaran) + building moats by investing in Technology, brand, HR.
These 3 factors are very essential, even you can look at the leading companies in US (9/n)
This "pattern" created enormous wealth.
End (10/n)
The stock names mentioned here are only for academic purpose, not a recommendation to buy/sell.
Thank you @soicfinance because of your tweet I shared some of my observations on the concept of "scalability"
#EQTlearnings
End (10/n)
The stock names mentioned here are only for academic purpose, not a recommendation to buy/sell.
Thank you @soicfinance because of your tweet I shared some of my observations on the concept of "scalability"
#EQTlearnings
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