I have a window seat in the bus from Mysore to Madikeri and we have
stopped for a moment on the outskirts of Mysore. I look out of the window at the shell of a
now-abandoned industrial shed – a two-storied structure running along the
length of the road for some distance. I
can see right in, for some of the glass panels in the windows are missing, the
result no doubt of assiduous miscreant action, and the resultant view is of an
empty, forlorn structure. By the gate in
front, there is no security guard, only an equally forlorn temple with stained,
patchy marble on its walls, the red paint on the 3 little domes on top now
peeling off, yet suggestive: Hanuman once resided within. Weeds abound and, amidst the unkempt front
patch of green, there is no signboard of a company or indeed any sign of
occupation. Yet, I know this shed well as,
in the 1990s, I often passed it by on my way to Coorg and in the mind’s eye I
see the signboard in its simple font just behind the wall by the side of the
gate.
Make no mistake, this relic in the industrial bin deserves much more,
for it serves up a timeless lesson we must never forget.
For, a quarter of a century ago, in the economic euphoria of 1991-1992,
this industrial shed represented all that could go wrong with the
liberalisation initiated by Dr. Manmohan Singh, providing us with a window into
gluttonous excess and the insatiable desire of human nature to gamble. Indeed, - no exaggeration - this now-defunct
industrial shed was the symbol of an India that had never been seen before and
that,since those years, has been seen in episodic bursts.
I had just got a job after my MBA in 1991. Being a careful sort and loathe to take risks
that I couldn’t understand, I put my savings – that were, at best, meagre –
into bank deposits, while everyone around me enthusiastically participated in
the stock market to get a piece of the fireside sale of a lifetime – an
opened-up India that seemed to be going very cheap. The stock market saw a stratospheric rise
over a few months in 1991 and early ‘92 and every conversation centred around
the companies that were, to use a cliché, the flavours of the moment. I felt left out, almost incompetent, and
decidedly ill-equipped, despite an education in corporate finance.
Harshad Mehta was the icon then, of course, and we all now know just how
much of a rogue he was, manipulating the public sector banks (that, led by SBI,
were happy to be manipulated, many of the managers swimming with the tide and
putting up their own money too) to finance his stock purchases, buying stocks
in full public view to lift them up and then dumping them for profit, only to
move on to bigger prey. His favourite theme
was ‘replacement value’; he’d pick a company and fantasise (often in
interviews, so that the gullible were lured to their siren song) on just what
it would cost you to build this company from scratch – much more than the
current stock price, needless to add.
Hence, he’d assert, buy the stock today. ACC, for instance, was a favourite of
his. But no company exemplified his
egregiousness, perhaps even daring, than an anaemic, plebeian enterprise on the
outskirts of Mysore called Karnataka Ball Bearings, run by promoters who could,
at best, be described as ‘dodgy’. It had
defaulted on bank loans and was on the verge of going bust (though there was
little doubt that the promoters, in true-blue Indian promoter style, would
emerge unscathed from the debris).
As I stared at that now-hollow building, I recalled the many stories Mehta
had spun around this company: on its replacement value, on the land it held, on
the prospects of future business growth (for ball bearings, for Pete’s sake!) and so on, all of which was spun out of thin
air, in a slick exhibition of contrived fiction. Across the country, speculators ranging from dhobis
to doctors (to dieticians, donors, drivers, directors, dancers – desis, in
general) began to punt on this seemingly bejewelled enterprise, thronging the
offices of their brokers who traded (in those days) on the stock exchanges in
the big cities. No one knew anything
about this company, many possibly did not even know what it purported to
produce, some had not heard of the stock market until a week ago, yet ignorance ruled. They
bought because Harshad did, and that entitlement was both thrilling and
liberating. The resultant boom in this
company’s stock price only reinforced their resolve to put in more money in a
fatal display of what is now known to be the Confirmation Bias, even as Mehta
made it known that he was buying more every day.
He was India’s first stock scamster, a Johnny-cum-lately with a desire
to be rich in double-quick time, for whom means – any means, particularly those
involving chicanery – justified the ends.
He was, equally, India’s stock market bull, and his visage, one must
admit, did resemble the bovine, as cartoonists were quick to capture (one
wonders if they missed out on the casino action and got their revenge in
print).
Ivan Boesky, a repulsive corporate raider in the US after whom Gordon
Gekko, the character in the film “Wall Street” is modelled, once said (to students at UC Berkeley) in the
1980s, “Greed is all right, by the way.
I want you to know that I think greed is healthy. You can be greedy and still feel good about
yourself.” And Mehta, with his smooth snake-oil salesman demeanour,
massaged logic, colourful suits and masterful art of pretence, was the
representation of this unleashed, sanctioned-by-society greed; he had the
entire system in his pocket, meeting the heads of industry and government and,
in some cases, managing their money. The
stories around him – a luxury apartment and a Lexus, for instance – enhanced
his stature and, to a still-socialist India, straining at the leash of the
Mahatma’s need-vs-greed legacy, The Big Bull provided the sanction they needed.
When the music finally stopped, as it always does, the mayhem began. Sucheta
Dalal first wrote of the scam and boom turned to bust. The price of Karnataka Ball Bearings
collapsed in a heap, leaving speculators aghast. As
Warren Buffett once said, "Only when the tide goes out, do you discover who's been swimming naked." Suddenly, Mr.
Invincible, the man-who-could-do-no-wrong was the Target and his downfall only
hastened the demise of the company housed in that building by the
Mysore-Madikeri road.
While both are now a forgotten asterisk in the episodic recounting of turbulent
post-liberalisation economic history, a quarter of a century later there is
another stock market boom and the ‘this-time-it’s-different’ story resounds in
the hall of delusion.
…and it was in 1996, when I first read The Warren Buffett Way by Robert
Hagstrom Jr that I first understood the principles of investing. As the bus drives past, I finally see a small
signboard in a corner. “Trespassers,” it
says, “will be prosecuted.”
I’d imagine this building is a heritage that Mysore, the Heritage City,
does not want. Yet, perhaps, by the
gate, the honest story of this enterprise must be written – much as Ashoka
wrote his edicts – with the post script that I first read in Bhisham Sahni’s
immortal novel, Tamas: those who forget history are condemned to repeat
it.
