Ramesh Chandra is a famous businessman who used to be a billionaire. He built himself from ground up. He owned a Private Ltd. company and loved betting in real estate industry. With profitable ventures of 1980s, he laid the foundation stone for a well-known real estate company Unitech. He was worth over 11 billion USD at his peak in 2007.
As the crash of 2008 unfolded, Unitech’s prominence dropped to an all-time low and real estate industry in India came to a drastic halt. It cost Ramesh Chandra nearly 90% of his net worth. This basically marked the end of Ramesh Chandra.
During the same times, another businessman had a different experience.
Vijay Mallya is a lucky inheritor of vast amount of wealth. His father Vittal Mallya was a very prudent investor. He diversified his ventures and very quietly built a big empire acquiring companies. Contrastingly enough, such times have come for Vijay Mallya that he himself has admitted to have become the poster boy of willful defaulters in India. For now, what we are interested in is not the doom of his now-out-of-business Kingfisher Airlines, but the status of his company in the times of financial crisis of 2008.
As 2008 crash was sinking the world into never seen before debt crisis, Mallya managed to get about INR 900 cr. loan from IDBI bank. His company was in financial crisis at the time of receiving this new loan, but he was lucky enough to have got such a huge loan from a state-run bank.
Polar opposite stories of the time of 2008 crisis- Ramesh Chandra lost almost his entire net worth, while Mallya caught the tools to revive his company via 900 cr. loan.
But fast forward some years, their stories have unfolded nearly the same. Ramesh Chandra and Vijay Mallya both are grappling with law only that Mallya has gone into a secret exile.
Though, their timings were different, but both stories send an important message, if getting rich is difficult, then staying rich is incomparably more difficult.
Talk about rich and lucky in the same sentence, and there will rise many bashers to criticize you. They don’t want anybody to tell them that probably they didn’t do it all themselves.
But the truth is, nothing grand or poor is going to stay the same for long, mainly because economy operates in cycles. It might make some rich from rags in a day and others vice-versa. There are thousand ways to get rich. Recall Sandeep Singh becoming overnight millionaire by winning a 30.5 million USD lottery after his break-up. But there are few ways to stay rich.
Fear, Diversification and Investment- Key to Staying Rich
If you are one of those riches who don’t do much after getting rich, buy shiny new things and keep using the same old tactics in the market, you are vulnerable to recurrent economic cycles. It is bound to bring you down one day.
Let me tell you a story, an uncle of mine was an investor. He had this old school notion that real estate market and gold never go down. I wouldn’t say a thing about gold, but real estate market made many investors dig their heads in the sand after 2008 crisis. He had 8 cars, 5 companies, 4 houses in good times. By 2012, he was 18 cr. in debt, land gone, car gone, one company left and the house he is living in is mortgaged.
The story of being rich doesn’t end with owning cars, lands and other assets. Massive unplanned debts won’t help you for long. It may increase your net worth on paper, but it might be the most toxic thing for your money? In this story, all others things except real estate, are making your money sit idle, in depreciating assets nonetheless. Real assets are those which keep earning for you. A bitcoin stock which was worth INR 5k once is worth INR 75k now.
I would like to give two key learning to those who want to stay rich:
1st Advice: Assume that ‘Tomorrow won’t be like Yesterday’. Instill a healthy fear.
The seeds to your destruction lie in your money. It may convert you into an over spender gob of money or has the ability to make you rich for your three generations.
Never think that just because you did things a certain way in the past and you became rich, you have to do things in that manner only. Don’t let yourself become complacent. Fear can be an antidote. Remember the world around you is changing. You have to keep reinventing yourself- with new approaches, new knowledge and new experiences.
Some start-ups which started in India worked only for 2-4 years, while only some have survived for decades. The reason being, they assumed that tomorrow can be different than yesterday and they prepared themselves for it. You can’t assume that past successes will translate to tomorrow.
2nd Advice: Diversify your Investment.
Billionaires fall from their gold thrones for many reasons and one of the main reasons being that they fail to diversify their holdings. Keep Investing in the growing assets. And keep diversifying. Diversification is a good hedge against these economic cycles.
GE reinvented itself, from being a light bulb company to a dishwasher company to bank to wind turbine. IBM reinvented when it treaded from all hardware to service domain.
They could have concluded that since in past, they were right, they should continue in the same manner. They didn’t. The results are that they have remained at the top for decades.
Coke, Kingfisher and Gillete, all failed to diversity their holdings and as a resultant, they have ceased to breathe their gold-scented air. All are dealing with attacks on their brands.
It’s a true saying that, until you find gold, keep digging. I say, even when you strike gold, keep digging for new ones.
