Thursday, July 22, 2010

Acharya Jagadis Chandra Bose: The father of systematic experimentation in India

Thanks to the gift we got from Prof. Dipan Ghosh during our visit at IIT Bombay (alma mater of me & my wife) I got an opportunity to see the special issue of Physics News published in October 2009 on the 150th anniversary of Sir. J. C. Bose. It was fascinating to read about the man who, as The New Cambridge History of India says,” invented national science for India as laboratory science.”

In 1895 JCB gave his first public demonstration in Calcutta of electromagnetic waves, using them to ring a bell remotely and to explode some gunpowder. In 1896 the Daily Chronicle of England reported: “The inventor (JCB) has transmitted signals to a distance of nearly a mile and herein lies the first and obvious and exceedingly valuable application of this new theoretical marvel”. It would be two more years (1897) before the first successful demonstration of Marconi in Salsbury Plain in England. JCB had used semi-conducting crystal as a detector for radio waves. Sir Neville Mott, Nobel Laureate in 1977 for his own contribution to solid-state electronics remarked that, “J.C. Bose was at least 60 years ahead of his time” and “In fact, he had anticipated the existence of P-type and N-type semiconductors.” What do I find unique in JCB story? Let me articulate 3 things:

1. Fighting spirit: When JCB returned to Calcutta after completing BA from Cambridge in 1885, he had a recommendation letter from Viceroy Lord Ripon. Principal of Presidency College didn’t like this and JCB was given a position but at a salary one third the salary of sahib teacher. JCB continued to teach and yet didn’t accept any salary for three years until the Principal relented. JCB received all his arrear salary as a teacher in the senior grade with retrospective effect from the date of his joining the college.

2. Pursuing one’s passion: On his thirty sixth birthday in 1894, JCB took the now famous vow of devoting his life in the pursuit of scientific research. He converted a small enclosure adjoining a bathroom in the college into a laboratory. His productivity as a researcher zoomed during the following year. In May 1895 he read a paper before the Asiatic Society of Bengal; by October 1895 he was able to dispatch to the Royal Society another paper, while three short articles would appear in The Electrician in December 1895. Impressed by his work Royal Society offered him a special Parliamentary grant for his research. JCB would later say, “That day the closed gate opened and for five years this progress was uninterrupted”.

3. Role of instruments and laboratory: JCB developed extremely sophisticated instruments in his lab like resonant recorder, high magnification crescograph, photosynthetic recoder etc. The resonant recorder could automatically record velocity of excitatory impulse with an interval down to 1/1000th of a second.

Here is how JCB described his own method of research: “The first condition is imaginative faculty, for the true laboratory is one’s own mind where every experiment has first to be visualized in all details and where behind all illusions one catches glimpses of truth. Aimless experimentation without clear vision is futile… The researcher has next to compare his thoughts with facts to be discovered by following surer paths of demonstration. Unrestrained imagination inevitably leads to widest speculation which is subversive of intellectual sanity. Thus, methods of introspection and experimentation must equally balance, one supplementing the other. Two other conditions for successful prosecution of research are the facilities of a well equipped laboratory and the invention and construction of new equipments of extreme delicacy and precision.”

Source: Physics News, Bulletin of Indian Physics Association, Sir J. C. Bose 150th Anniversary issue, October 2009,

The work of Jagadis Chandra Bose: 100 years of mm-wave research by D. T. Emerson (1998)

Monday, July 19, 2010

1930: The year when Benjamin Graham re-discovered “Margin of safety”

1930 was the year when the Great Depression was in its infancy and Warren Buffett was born. It was also the year when Warren’s guru Benjamin Graham was at his career’s mid-point and he would re-discover the principle of “Margin of safety (MoS)”. MoS would become one of the core principles of Graham’s investment style known as value-investing. It would be published in the book Security Analysis in 1934. MoS, I believe, is also one of the core principles of systematic innovation. Question is – How did Graham forget the principle in the first place? And how did he re-discover it? Let’s see it in brief in this article.

By 1930 Graham was 36 years old and had been in Wall Street for 16 years. He had experienced what it means to lose big-time twice. The first loss was in 1903 when Graham lost his father. Graham was 8 years old and his father 35. For the next several years Graham saw practically all the assets including furniture and jewelry disappearing from home, some of it to the pawn shops. The second loss was during the market panic of 1907 when his mother’s margin account was wiped out and her bank closed down. Things began to change slowly for Graham when he entered Columbia on an Alumni scholarship.

During the great bull market of 1920s Graham saw considerable reversal of fortunes. In the middle of 1929, Graham’s fund was sitting on a two and a half million dollars capital – put in long terms investments and short term hedging & arbitrage operations. By the end of 1929, in spite of the September crash of Dow Jones, Graham’s fund had lost only 20 percent compared to a much larger loss of Dow Jones. In a few circles, Graham was being referred to as “financial genius”.

In January of 1930 Graham visited Sr. Petersburg, Florida for holidays along with his family. He met a man named Mr. John Dix who was ninety three years old. Mr. Dix’s father had founded the John Dix Uniform Company of Long Branch, New Jersey. Dix asked Graham all about his business, how many clients he had, how much money I owed to banks and brokers and innumerable other questions. Graham answered them politely but with smug self-confidence. Suddenly Dix said with greatest earnestness, “Mr. Graham, I want you to do something of the greatest importance to yourself. Get on the train to New York tomorrow; go to your office, sell out your securities; pay off your debts, and return their capital to your partners. I wouldn’t be able to sleep one moment at night if I were in your position in these times, and you shouldn’t be able to sleep either. I am much older than you, with lots of more experience, you’d better take my advice”. Graham felt the old man couldn’t possibly understand his business and thought Dix’s ideas were preposterous. Of course, Dix was 100 percent right, Graham 100 percent wrong.

Graham would remember Dix in June when the Dow Jones would reach the abysmally low level of 42 from the April level of 279. Graham’s loss in 1930 was 50 percent, in 1931 it was 16 percent and in 1932 only 3 percent. Graham suffered but perhaps far lesser than others. Surprising part is - Graham doesn’t blame himself for the failure to protect himself against the disaster. What is it that Graham regrets?

In 1928 Grahams had moved into a duplex apartment with terrace on the 18th and 19th floor of a thirty storied building at the heart of New York City. It had ten rooms and a rent of $11,000 per year and the lease was to run ten years. Considering Graham’s gains of $600,000 before taxes for the closing year, the expenditure appeared modest even by highly conservative methods. He was proved wrong and pretty soon Grahams moved out of the apartment. What was Graham’s learning?

The true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions. Graham would remember Mr. Dix and the New York apartment experience for the rest of his life.

Source: Benjamin Graham: The memoirs of the Dean of Wall Street, McGraw-Hill, 1996

Related articles:

Margin of safety: My most favorite insight of 2009

Edison’s folly and understanding the exposure to negative Black Swan

Wednesday, July 14, 2010

Laxmanrao Kirloskar: A pioneer of Indian machine-tools industry

In 1907 Henry Ford was busy designing his 9th car model to be named Model T coming after the 8 models – A, B, C, F, K, N, R and S. Around the same time another gentleman named Laxmanrao Kirloskar in Belgaum, India was getting ready to launch his 2nd product – iron plough. Ford was creating a history in the world while Laxmanrao was doing the same in India. Why? Because until then no Indian had started a machine-tools product development business in India. How did Laxmanrao, a J J School of Art dropout, go about pioneering a machine tools industry in India? Let’s explore in this article.

Laxmanrao was born in 1869 (same year as Gandhi) and was fond of two things: mechanical objects and painting. Against his father’s wish and with financial support from his eldest brother Ramuanna, Laxmanrao joined J J School of Art in Bombay in 1885. Unfortunately, he had to quit after 2 years as he was found to be partially color-blind. He gave up painting but continued to study mechanical drawing at the institute. This skill came handy and lead him to a position of Assistant Teacher of Mechanical Drawing at Victoria Jubilee Technical Institute (VJTI) on a salary of Rs. 45 per month.

At VJTI Laxmanrao developed a habit of reading American Machinist, Scientific American and Foundry. He worked at the institute’s workshop and learnt to install, operate, repair, dismantle and reassemble various machines. He took pride in in describing himself as a 'ghisadi' - a blacksmith. He also started accepting jobs for installing and repairing machines. Soon he was called Prof. Kirloskar and Principal Mr. Phythian appointed him to teach ‘Steam’ – perhaps the equivalent to ICT of today. Sometime in early 1890s Laxmanrao started bicycle dealership – he would buy bicycles in Bombay and send them to his brother Ramuanna in Belgaum where he would sell them. For a cycle of Rs. 700 to 1000 Ramuanna would also charge Rs. 15 for teaching how to ride.

A turning point came in 1897 when Laxmanrao was passed over for promotion at VJTI in favor of an Anglo-Indian. Laxmanrao quit VJTI and joined his brother at the cycle shop in Belgaum. Soon the duo discovered another luxury item of interest to the rich in and around the town – Windmill. Soon they acquired a dealership from Samson Windmill of USA and went on a vigorous sales drive. They sold so many windmills in a year that Samson folks gave one free to the brothers. Like any luxury good, they soon ran out of customers.

In 1901 he was contracted by the king of a small princely state of Aundh to construct an assembly hall. However, within no time the king died and bitter disputes followed for succession. Laxmanrao’s work came to a grinding halt and his investments locked up. He had to return back to Belgaum. This setback got Laxmanrao thinking for what he could do for a steady income. And he thought of making his own products that would appeal to mass market - that of farmers.

The brothers had continued to subscribe to the three American magazines and Ramuanna used to meticulously file and index them. They also received mail-order catalogues from the USA. In one of the catalogues, an illustration of a fodder-cutter caught Laxmanrao’s eyes. The description said that the cutter would chop fodder into fine bits, including stems and roots which cattle normally reject. He ordered one and tested it. Finding that it worked well, Laxmanrao decided to copy it.

He built a small hut as an extension to his shop, bought a few tools and fixtures and started to make fodder-cutters, buying the castings for them from Bombay. He advertised in the newspapers in the local language. In 1901 this was the first Kirloskar product. As sales picked up, Laxmanrao bought an engine (2 ½ HP), a small lathe, a drilling machine and a small emery grinder, all of which he installed in the hut.

Like Henry Ford, Laxmanrao would also pioneer establishment of an industrial township in India called Kirloskarwadi in 1910 (although on a much smaller scale). Kirloskar Brothers would remain a leading industrial house in India throughout most of the 20th century. However, it would take India another hundred years to launch its own “model-T” called Nano that would catch world’s attention. And it would be done, not by Kirloskars but by Tatas.

Source: Cactus & Roses: An autobiography by Shantanu L. Kirloskar (Laxmanrao’s son).

Monday, July 12, 2010

Space tourism: A peek into Sir Richard Branson’s mind & method

Prof. Jagdish Sheth of Emory University delivered a great speech in 2005 in a jam-packed auditorium at Sasken, my ex-employer. He talked about various tectonic shifts that are happening around us. Someone asked Prof. Sheth during the Q&A, “What do you think of space tourism?” Everybody laughed. Sheth answered, “I wouldn’t laugh. Richard Branson has entered the game. He is not a fool.” I didn’t know much about space tourism and Richard Branson at that time. But a question came to my mind, “Is Richard Branson really serious about this? Or is he one of those crazy rich guys who don’t know what to do with their money?” Recently I came across Richard’s book Business stripped bare in which he has narrated the process that went behind his investments in space tourism and formation of his venture Virgin Galactic. How did Richard go about investigating and investing in space tourism? Let’s explore in this article.

After the recommendation of Margaret Thatcher, Gorbachev invited Richard for a meeting at Yalta on the Black Sea. A few days later Richard was given a VIP tour of Star City at Baikonur in Kazakhstan. This was the secret world where Sputnik satellite, the Vostok, Voshkod and Soyuz manned missions were designed. This was where Yuri Gagarin blasted off in space in April 1961. Richard was offered once-in-a-lifetime opportunity - To be the first space tourist in the world. Price tag? Over $30 million. Richard declined. Dennis Tito, an engineer at Jet Propulsion Laboratory, became the first civilian to go into space in 2001. Another half a dozen have followed suite since then with a cumulative ticket price of $200 million.

During the Kazakhastan visit curiosity bug bit Richard. Can the price tag be lowered significantly? Since then he had been keeping tabs on anything and everything to do with going into the space. In 2002, Furton one of the leading space consultancies predicted that from 2011 there will be 2000 tourist astronauts a year. And as the costs come down by 2021 there will be 15000 a year and revenue potential will be $700 million a year. Richard felt that Furton study is pessimistic. He set a target price of $100,000 for a space tour.

The tipping point came with the announcement of Ansari X Prize by space entrepreneur Peter Diamandis 1996. The X Prize set a simple challenge: carry 3 people 100km above the Earth’s surface, twice within two weeks. The contest had 29 entrants but only three serious contenders. Of these, only one managed to get serious funding – SpaceShipOne or simply SS1. SS1 was backed by Microsoft co-founder Paul Allen.

SS1 was started by Burt Rutan, the designer of Voyager, the largest all composite aeroplane ever built. It was made from glass, graphite and aramid and bonded with epoxies and resins. SS1 design extremely fault-tolerant and very green. Exactly how green? Well, a flight into the space and back would release less CO2 than equivalent of a person flying from London to New York and back. Contrast this with NASA’s Space Shuttle which has the same environmental output of the population of New York over the average weekend!

On 17 December 2003 SS1 broke through the sound barrier during its first manned test flight. On 21 June 2004, Mike Melvill flew SS1 above 100km altitude. This was space. After space flights on 29th Sept and 4th Oct 2004, SS1 won the Ansari X Prize. By then $100 million had been spent on the program. On 27 July 2005 Virgin Galactic and Burt announced a partnership where Burt’s company would undertake all the R&D and certification of the spacecraft and Virgin would do the marketing.

Wikipedia says - Richard unveiled the rocket plane on Monday 7th December 2009. SS2 was presented to the world in the Mojave desert, in California. The vehicle will undergo testing over the next 18 months before being allowed to take ticketed individuals on short-hop trips just above the atmosphere. It is expected to carry six passengers with a total sub-orbital flight of 3.5 hours. The weightlessness will last approximately 6 minutes during which time passengers will be able to release themselves from their seats and float around the cabin! Price tag? $200K with a $20K deposit.

Are you game?

Saturday, July 3, 2010

The myth of innovation DNA

My business is based on an assumption that it is possible for any organization to become more innovative – irrespective of its size, sector, culture and leadership. Hence, when I read a senior leader say, “Either you have an innovation culture or you don’t” – I realize it is time to introspect my business assumption. Could my assumption be wrong? Moreover, when the remark comes from Justin Rattner, CTO of Intel, you know you can’t take it very lightly. Is innovation really a DNA which either you have it or you don’t? Let’s explore this question in this article.

To understand the context better, let’s see what question Justin was asked in an interview last Tuesday and what he said. Economic Times asked Justin, “How seriously does Intel take innovation?” Justin said, “Intel spent $5.7 billion on R&D in the downturn year 2009 – approximately the same amount as the year before. However, R&D investment is not sufficient for a successful innovation practice. That latter depends upon developing a set of cultural norms that welcome and reward innovation. In other words, the company must display an intellectual curiosity that challenges its employees to find a better way to do each and every function of the company. Innovation can’t be selectively applied. It is either part of your corporate culture, like it is at Intel, or it’s not”.

I like what Justin is saying about the importance of innovation being a cross-functional process. You can’t say that we have a great research department, we spend a lot of money on R&D and hence we are bound to be very innovative. Perhaps you have a weak marketing or perhaps your R&D and marketing don’t talk to each other. However, it is the claim in the last line that makes me jittery. Here Justin says, “Innovation is either part of your corporate culture or it isn’t”. Is innovation culture really a “binary thing” – on or off?

Andy Grove was asked in an interview in 2007 to explain what “Creosote Conundrum” meant for Intel. Creosote bush is a desert plant found in Arizona. Its characteristic is that it drips poisonous resins around it so that no new plant can survive and all the water comes to the creosote bush. The analogy was applied to Intel to indicate that all the R&D money & management attention flows into microprocessor business and it acts like a creosote bush. Hence no other new business opportunity survives under it. However Andy is not convinced of the analogy and says, “I have a vague nagging doubt whether creosote bush is a good analogy to what was happening there anyway. What if no other plant (other than microprocessor ideas) was coming out? Did Intel have a good enough innovation culture – whatever that means? Too many unproven and unsubstantiated assumptions” Perhaps Justin knows something about Intel that Andy Grove didn’t.

It is easier to look at a company that has published how its innovation practices evolved over a century – 3M. It took 3M more than a decade to understand the importance of quality assurance. It took another 20 years before someone assessed the rate of success for its new product introduction and established a one man innovation department. Later it learnt how to develop innovation platforms and technical career paths.

Perhaps Justin has discovered a switch that turns your innovation culture from off to on. Until we find more about it, I will stick to a simple innovation dashboard, an ecosystem view and a method of innovation that has evolved from Edison to Lafley over the last 130 years.