6 Insights from Kunal Shah
On Gujju enterpreneurs, low-trust societies and other amusing ideas
Hello there,
It’s time to go deep into some insights: from topics as varied as human nature, insight-mining, Indian quirks, trust, and startups.
For this, we shall turn to none other than one of the shrewdest operators in the world of startups.
No points for guessing who this person is (because it’s literally in the title): Mr. Kunal Shah, the man who sold Freecharge and is now building the ever-interesting and enigmatic company that is CRED.
He did an episode with Shane Parrish some months ago and it’s a pity that I checked out that conversation after such a long delay, despite receiving a few nudges. But I’m glad I finally got down to it. It was dense.
The first rule of this newsletter is: “Never ask a bro to invest 2.5 hours on a podcast”. Sticking to this tried and true doctrine, I decided to give it a listen and leave you with a short, rich summary of some of the best ideas that got discussed.
We’ve done the same with some other super-smart guys too. So here are 6 eye-opening ideas from KS for you to mull over whenever you hit the toilet seat:
The Gujju mindset: It seems like there are more Gujju-run businesses than Gujjus in the world. It’s fascinating. Most Indian giants are helmed by one, and it’s just mind-boggling how easy they make it look. What is it about these guys that makes them own the world like no one else? (And I mean no offense to the Marwaris who seem to be equally competent. I offer my deepest respect to all Agarwals and Aggarwals out there).
Well, there are a bunch of interesting things going on here. First, there’s very little shame that these guys feel when their businesses fail. Shame is what stops most of us from taking the leap and putting our reputations on the line, but that’s not the case for many of these folks. Additionally, they love supporting a bro with low-interest capital and even a job if their business goes kaput so they can save for a while…before going all-in again. There are countless stories of Gujjus making it really big and then going back to zero…only to make it big once again. That’s the Subtle Gujarati Art Of Not Giving a F**k.
Value of time: Indians don’t really understand the value of their time. Most people don’t know their own hourly rate (do you?). This leads us to haggle or waste time on the tiny things that we should ideally ignore. That’s why you see millionaires haggling over a few thousand rupees without realizing that their 30 mins of negotiating to death cost them much, much more. Since we try to optimize the rupee value everywhere (and do not care about time invested), it also means that we are much more open to products that blast endless ads in our faces instead of just paying a fee. No wonder 9 out of the 30 mins of a TV show episode is ads- a number that’d be considered pukeworthy elsewhere. (But I’d like to add here that this shouldn’t be interpreted as an inherent flaw in the character of Indians- it has a lot to do with our history and circumstances. And things will hopefully change over time)
The concentration of trust: Why do some Indian enterprises like Tata, Birla, and Mahindra end up selling everything, from salt to software and tractors to trousers? Shah reckons that in low-trust societies, any brand that manages to win the customers’ trust is able to piggyback on that to sell more and more things. That’s also probably why we watch movies done by the sons and daughters of Bollywood stars we trust- even though they turn out to be the crappiest things one could possibly produce. In that sense, the Pareto principle seems to operate at extreme levels in Asian countries. There’s also some data on how societies with high ethnic diversity have lower levels of trust- so you can comprehend how hard it must be in a country with 1700 languages.
Delta 4: Shah is onto something interesting with his Delta 4 idea. It’s simple. Consider any service, like booking a cab for example. If your experience of doing it the conventional way is 3/10 (because of the difficulty of roaming around looking for a taxi) and doing it via a new app like Uber makes it 8/10 (because of how easy and convenient it is), you have raised the CX by >4 points. When any new product creates such a paradigm shift, customer behavior shifts radically. Over time, the behavioral shift becomes irreversible, which is why many of us aren’t going back to local trains even if Ola/Uber drivers are interviewing us before accepting our rides. Secondly, the experience is so different and superior that we can’t stop telling our friends about it: at dinner parties, at the office, and in the middle of our flirtatious Insta DMs. That’s how Delta 4 businesses achieve contagion, thanks to their Unique Bragworthy Proposition (another cool term to throw around).
Insight mining: It’s rare to find successful people who aren’t insightful. The very reason they achieved anything is that they deal in the currency of insights, which they could exploit to create winning outcomes in life. But vanishingly few people make it a habit to pursue insights because truth-seeking is a difficult, time-consuming, and energy-intensive process. An interesting way to go about this is to collect the dots before connecting the dots: gathering insights from a wide range of topics and building a strong foundation of mental models so you can slowly begin connecting them and mapping them to real-life scenarios. I agree wholeheartedly with this, and an excellent book that I’d recommend on the value of multi-disciplinary learning is Range by David Epstein. That is part of the reason why this newsletter covers such a wide array of topics. The other idea is to learn about the origin stories of all products and ideas: which implies that reading history is always very relevant.
Core Human Motivations: One fascinating data point shared by KS was that the gross margins on living room products in India are 3x that of bedroom products. But nobody really thought of it that way, as products are categorized by their type and not where they’ll be placed. So what’s the human insight behind this? Simple. In status-driven societies, we care more about showing off and how others will perceive our houses than our own experience (which is prioritized in individualistic countries like the US). That is also why we go to ridiculous lengths and spend way more than we can afford on weddings- because they’re a means of signaling. That’s why you have very few SaaS companies that make millions of dollars of revenue from Indian businesses but many wedding photographers who are able to make that kind of money!
That’s it, folks. There are so many more things that KS touched upon- from the story of how CRED started to observations on envy, comparisons, personal identity, and long-term decision-making. It’s just too much to pack within a 5-minute article, but if you did find this valuable, you can tune into the conversation here.
As always, keep learning. And keep hunting for insights. This newsletter will always assist you in that pursuit. If you’re not on the subscriber list, what the hell are you waiting for?