The Man Who Said, Why Not?

Published: July 7, 2014 - 13:04 Updated: July 7, 2014 - 13:35

When history will be written, the rise of Dhirubhai Ambani will be one of its more memorable chapters

Mohan Guruswamy Delhi 

“You see things; and you say, ‘Why?’ But I dream things that never were; and I say, ‘Why not?’ — George Bernard Shaw in ‘Back to Methuselah’ (1921)

Speaking at the Reliance Industries Limited(RIL) AGM on June 18, Mukesh Ambani said that in just 37 years, Reliance had become a world-class company. It has so far invested `240,000 crore in its businesses and is poised to invest a further `180,000 crore in the next three-year cycle. RIL is poised to enter the Fortune 50 after being in the Fortune 100 for years. The story of how it reached these levels that made it India’s biggest single company, its single biggest exporter and its single biggest taxpayer is a remarkable story in itself. It is also a commentary on how India manages itself and deals with wealth creation.

Given our recent political and intellectual tradition, the image of a greedy, exploitative, manipulative and somehow undeserving capitalist is etched in our minds and hence in our national discourse. In most cases, this is a distortion of the truth. In the US, they spoke of them derogatively as the ‘robber barons.’ Those who speak of capitalists in these terms are confused about the role of capitalism in building an economy. They still don’t realise that the socialist paradigm has failed all over the world.
They also fail to make a distinction between ‘market’ entrepreneurs and ‘political’ entrepreneurs.

A true market entrepreneur endeavours to succeed by selling a better, newer or cheaper product or service. Like Steve Jobs or, closer home,  like Kersanbhai Patel who introduced Nirma, a low-cost detergent that ended the Levers’ dominance of this market and slashed its bottom line. Or R Mohan of Transelektra, who introduced the Good Knight mosquito repellent mat in India. At an earlier time, Jamsetji Tata contemplated the ubiquitous steel sheet roofing, and Ardeshir Godrej the mass-produced steel almirah. Or Dhirubhai Ambani who put durable and colourful polyester blended fabrics within the reach of most Indians for the first time. In 1975, a World Bank technical team visited RIL’s factory at Naroda and was of the opinion that it was the most efficient textile unit in the world.

On the other hand, we have the ‘political’ entrepreneur who thrives by influencing government by legislation and regulation to help his business or by getting the state to subsidise or reallocate acquired property. Given the political system that prevailed in India after independence and even before that, when the State acquired huge powers of allocation and became the principal driver of the economy by constantly jibbing policy, in this atmosphere most of the post-independence entrepreneurs in India were political entrepreneurs. Influencing government became their main business and it largely continues. Ambani became good at this too.

So much so that of the top 50 companies, I can only see the Tatas as having occasionally shown the spark of market entrepreneurship with their pick-up trucks line in 1988, and their botched Nano project. An entrepreneur’s main goal is to succeed by getting rich. He or she will do whatever it takes to achieve this goal. What kind of entrepreneurs they become depends on the system they operate in. Blaming them for how they did it is to miss the point, and also not understand the role the accumulation of wealth plays in expanding the market and the economy.

When the history of our recent times will be written, the inexorable rise of Dhirajilal Hirachand Ambani (1932-2002), better known as Dhirubhai Ambani, will be one of its more memorable chapters. Because, more than the rags-to-riches quality of the Ambani saga, it is a true chronicle of the struggle to transform India from being a laboratory for Laski-inspired social experimentation into an economic powerhouse set to take its rightful place in the global political economy. I first heard of Ambani in the late 1960s when my friend, Martin Henry, the Managing Director of Madura Coats, the Indian subsidiary of the Scottish multinational, — Coats Paton’s, then a textile major, predicted to me that Reliance would soon be the leader of the textile industry because it made the best fabrics at costs that were unthinkable for companies saddled with a huge legacy of costs and managerial deadweight. This was at a time when the marquee names of our textile business were the now long-forgotten ones of DCM, Calico, Binny’s, Madura, Tata Textiles and Bombay Dyeing. Vimal was the Toyota of the Indian textile business!

At that time, to be a Bombay Dyeing model was an endorsement of good looks that set many a beauty on the road to stardom. Or, in the case of Maneka Gandhi, to a fairytale marriage. Nusli Wadia was generally considered a business titan and his company’s advertising lionised him in Bombay’s marketing and advertising community. So, while Ambani focused on making the best textiles and offering the consumer the best value for hard-earned money, Wadia tried to make good with high-class advertising. Dhirubhai Ambani’s Vimal was then nowhere on the billboard horizon, but by the early 1980s it was the brightest corporate star in the firmament and the stock market danced to the beat of the Reliance drummer.

What happened in the textile business happened all over. Of the top 10 industrial houses in India in the early 1980s, only Tata and Aditya Birla now survive on that list. The new generation of Indian companies, many inspired by Reliance, blazed a new trail with great economies of scale and by escaping the shackles of the licence-permit Raj that, while making most existing corporations profitable, did so at the cost of productivity, quality and availability. Remember Bajaj scooters and the Hindustan Ambassador?

But Ambani found ways to beat the system. From a well-documented series of articles by S. Gurumurthy in The Indian Express, we learnt as to how Reliance imported a PFY plant with twice the capacity than declared for customs and licenced capacity. The Bombay Dyeing and Indian Express partnership went to town with this transgression when the real transgression was how the old firms manipulated the system to limit the capacity of business rivals to systematically milk the citizen consumer. When I once asked Ambani about this, he just said: “The Government always says NO, and I say WHY NOT?”

The public responded by buying more Vimal textiles and buying more Reliance shares. That seems so long ago. Do we remember how Bajaj made the same scooter for decades and made a fortune in the process? Do we remember how the lobbyists in New Delhi worked more to thwart additional capacity and competition as if it was the national enemy?

This was the system Ambani took on and exposed as mere hollow hypocrisy, which is why few took the exposés of Arun Shourie and Gurumurthy seriously. The public apparently had a superior perception of what the truth actually was compared to those professing to be concerned with the truth.

The Narasimha Rao years saw the advent of industrial de-licensing and the scrapping of the Directorate General of Technical Development of India (DGTD) which freed Reliance to grow many times over. By the time the Vajpayee government came to office, Reliance’s annual profit exceeded Bombay Dyeing’s turnover. After all, there are limits to what good advertising can do for you! But this saga did not end here. With LK Advani as Home Minister, the old Wadia lobby around him got busy again. I remember the tussle between South Block and North Block on raiding Reliance and Dhirubhai Ambani. The Prime Minister did not want the raid. The Home Minister was insistent. The PM even called up the Director of the CBI to back off, but the Home Minister prevailed. Ambani was raided. Expectedly, nothing came of it. The Reliance growth saga continued. Even Shourie was forced to comment that what India needed was a hundred Dhirubhai Ambanis.

There is no other story in India comparable with Ambani’s. The only close parallel internationally would be the saga of Konusuke Matsushita who built the greatest consumer electronics business the world has known, made brands like National, Pioneer and JVC household names the world over. Matsushita emerged from the debris of post-war Japan and was driven by an ambition to make Japan great once again. Nothing was allowed to stand in his way. He either took over the competition or ran them to
the ground.

So much so the US today does not have a single manufacturer of consumer electronics and only a token presence in domestic appliances.

When Matsushita died, Presidents and Prime Ministers vied to be at his funeral, which was broadcast live to the world. Likewise, when Ambani died, every political leader and captain of industry stood in a queue like ordinary people to pay homage to him at Seawind on Bombay’s Cuffe Parade. Advani cut short his visit to Gujarat and also stood in that line. Dhirubhai Ambani would have chuckled over that and said, “Why not?”

When history will be written, the rise of Dhirubhai Ambani will be one of its more memorable chapters
Mohan Guruswamy Delhi 

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This story is from print issue of HardNews