Satyam Shivam Sundaram – is a mantra that is very popular in the Hindu philosophy. It is often translated as “Truth is God and God is Beautiful” – where Satyam is translated as Truth, Shivam as God and Sundaram as Beautiful. Unfortunately this translation exposes our prejudiced view of “God”. We want – desperately really – God to be beautiful and have that air of piety and holiness and something “divine” as we define it. But is God only beautiful?
And that’s where my interpretation of this mantra differs. Shivam in Hindu pantheon is the embodiment of all that is not-beautiful with the world. In fact, Shiv is supposed to have drank the poison of the world so world could be free. He holds in him the poison and the seeds of destruction.
So to me Satyam Shivam Sundaram means – Truth is both beautiful and non-beautiful! Satyam is a synonym of “God” primarily and inherently, so there is no reason to bring in any additional word for God.
This gives some insight into what is going on in the more mundane Satyam – the software services company from India. It is easy and very fashionable for all to bring out the evil of the fallen and eulogize the one who is up and growing. It is because for us, God is beautiful and Satan is Ugly. Both are incomplete. Both the creations of our prejudiced and narrow minds.
Satyam is similar – both good and bad. The main issue in the downfall of Satyam is not the question of malafide intention of Ramalinga Raju, the owner. Yes, that is an issue for surely he siphoned the profits out to invest elsewhere. But I cannot agree that it was because he wanted to profit from it completely. It was probably because he wanted to get better returns for the company’s money itself.
The problem in the world has been the error in estimating when the upward curve of the markets will turn downwards. Or simply put – Timing the Market. In absence of the crystal ball, most people who invest or gamble take risks – using whatever ways they know to “manage” them. And everytime they “manage” the risk – they actually end up ADDING to the previous risk profile. For the moment, however, the risk has been “managed” but it is not eliminated. What if the assumptions made while creating the risk management strategy itself go wrong?
There is very little difference between investing and gambling. And the difference is how you invest. Most people love the technical analysis methodology. They go with the momentum. And for that they make their own assumptions as to when and how the momentum will be fueled and how it will go down. That is the gambling way to invest.
Warren Buffett has shown the other way of investing. No matter what the momentum is, he will only invest in companies that make sense! Those who will inherently make money and are cheaper at a certain time given those valuations. The momentum then matters little. Pricing, then, are just triggers to buy given your understanding of its business. Of course, that has its inherent assumptions as well, but those are NOT about how billions of other gamblers would behave, but how the ONE entity company is working. That is a game that can be played better.
Raju erred here. He was into momentum investing. And then came a time when the downward spiral took away his investments and now, he was left without his capital – which incidentally was the profit of his biggest success as a businessman. I am not arguing for him, but what I am pointing to is a challenge we all have. I have seen over the last 10 years, specially in the last 5 years, people trading stocks instead of investing. Housewives and ordinary people were into day trading and betting with the market. When the momentum was upwards every one made money and felt like a Buffett beater. But now when the spiral turns downwards, fortunes are lost!! Somehow these traders were made into Gurus and Gods of investing. They weren’t.
And this was despite the fact that only in India would you find zero Long Term capital gains tax on stocks – meaning if you hold your stock for 1 year and then sell, you pay no tax! And despite that, people were trading.
In that sense, Raju was just the sum total of every ordinary individual – every housewife who invested without any thought at the fundamentals. These very same ladies would spend hours on making decision on which shoe to buy, but not even 1/20th the time in buying into a company! Raju, made the same error of patience.
Also, momentum adds confidence .. actually cockiness. So, a person who puts his money in momentum trading is also afflicted with that cockiness. That can lead to mistakes and bigger ones that a person who would invest based on fundamentals. One who invests on fundamentals is often more humble. Narayan Murthy is a perfect example of that.
But destructive as Satyam Inc’s downfall is due to the gambling style investing of Raju, it is good to remember Krishna in Gita where he says “Amongst all deceitful activity, Arjun, I am gambling”. Satyam is therefore, however maligned, is still the Truth.