And Vijay Says…

The founder of TCS – F.C Kohli – and I were once in an elevator at the Air INDIA building in Mumbai in 1999. It was just the two of us. I was a new trainee and he was the Deputy Chairman. He asked me some question along the lines of “How are you doing son?” and all I can remember is fumbling to answer him and my mind going empty. He smiled, wished me a good day and walked off the elevator and it took me another ten minutes to get my bearings right 🙂

It is not that I was low on confidence generally. Throughout my MBA – just before joining TCS – I used to challenge my professors and could hold my own in fierce debates. I had no difficulties engaging with other TCS leaders that I had met during my training. But when an imposing senior leader greeted me – I didn’t know what to do.

I had a similar fumble a decade later when I made my first ever presentation in front of a CEO – my role being an expert consultant. My boss at the time – John Leffler ( the guy standing with me in the photo above) realised the problem in a second and swiftly intervened and saved the day. Again – I had no issues dealing with the CIO of that company or the assorted VPs in the business till that time. I got a lot of coaching from my boss and other Partners after that incident and I got better.

I have seen this happen first hand when I meet with my junior colleagues – some of them totally freeze. Today morning one of them reached out to me and asked for some tips on how they can do better. I figured it might be helpful to jot down my thoughts here.

1. Know what’s different with senior executives compared to other managers in the hierarchy

They are only human like the rest of us – but they generally have limited time. They generally can zoom in and out of issues – but they might not know the specifics of any given issue like you do. Their job is to make a few highly impactful decisions – not hundreds of less impactful decisions. They are very good at prioritising what they work on – so that they have the time and energy to solve the big problems. When they look impatient – it is usually because they do not share the same context as you do. There is a high chance that they are smart enough to see the problem and the solutions quickly – but you will be doing them a favour if they don’t have to guess and you give them solutions to choose from and can answer their questions.

2. Answer questions directly to win their trust

What do you expect the sales to be this quarter? A great answer is X million dollars plus or minus 5% and waiting for them to ask what will drive the plus or minus. They know a lot of variables are at play and they expect you to abstract it away and give them a net-net answer. A useless – though totally accurate answer – would be “it depends on a lot of factors”. It is totally fine to highlight what could cause a big swing by saying something like “XYZ client might get a new CFO and that could slow down approvals and that could reduce our sales by 40%”.

3. Listen carefully, observe body language and clarify the questions before answering

You don’t need to do most of the talking in most meetings. Listen to understand and take cues from their tone, their facial expression and so on before you answer. Don’t feel compelled to answer quickly if you need thinking time – you can buy time by asking follow on questions, or you can tell them that you need time to find an answer and then give them a commitment on when you will respond and get their concurrence. Thoughtful and high quality answers are what helps the exec. Sometimes they need a good enough answer – if that’s the case, you have to give them an answer and put the minimum caveats in place. Don’t make up an answer – it’s always better to not mislead them.

4. Get to know them and find some common ground

Study their past communications – any speeches, interviews etc . Talk to people who know them more than you do. I have always found it a good practice to get to know their admins and chiefs of staff personally. Once you know a bit about their style and ways of working – you can tailor your conversation much more effectively. This is not always possible – but when it’s possible, not making use of it is inexcusable. Most human beings have something in common with you – those are great conversation starters and help build trust.

5. Appear confident

Remember that on any specific issue you are going to discuss – there is a good chance that you know the details way more than the exec does. In fact the executive expects you to be the expert! So go into the conversation with that confidence. Set the context very briefly and ask if they have different expectations than the one you think. The chance of blanking out your mind is the highest when you start the talk. So it might be a good idea to practice the opening part a few times . A solid start will generally create enough momentum to carry you through successfully

6. Build the relationship naturally

Communication with execs gets a lot easier and more effective once you know them. Don’t think of those meetings as transactions – use them to build a relationship. Such a great relationship with senior leaders is key to your own career success. The key is to let it evolve naturally without forcing it. It’s totally fair game to ask an exec for time to get introduced – most leaders love hearing from their team. You may not get a meeting right away, but there is a high chance you will get it if you stay patient and persistent.

An interesting side effect of me working as a consulting leader in financial services domain is that a lot of interesting fundamental questions get thrown my way from friends and family on how the amazing “never ending” bull market suddenly turned into reverse gear , and if there were things we could have done earlier to ease the pain.

Let me share a few – strictly personal – thoughts.

Role of government

When crisis happens – we only get to see the Fed Reserve in action as the face of the government. Fed only can help with monetary policy and regulation . It can lower interest rates to boost the economy – but it can’t force anyone to spend it in value adding ways. That needs fiscal ( and other) policies to work side by side, which the Fed cannot influence directly . For example – if we needed to invest in infra, we could have done a lot more when money was cheap compared to now. Political division doesn’t let fiscal/education/health etc policy to evolve fast enough to make it timely and provide cushion for future shocks.

Fed itself is caught in a weird dilemma now – their charter is to ensure full employment and stable prices. But the fight for taming inflation unfortunately will need at least temporary unemployment to happen before they can ease off on interest rate hikes . And just when tightening was peaking, they now have to put more money into the banking system to ease some pressure. It’s a very hard place that they are stuck in. They have to choose the lesser evil at every turn!

Role of corporations

When money was cheap – a lot of corporations just used it to buy back shares and pay dividends and so on. Plenty of existing assets changed hands too via M&A. All of those are not bad moves in themselves – but it meant they couldn’t find a way to invest in enough new products/assets/services with a better ROI. In a capitalist economy – economic incentives will drive exactly what these companies did. Are we actually as innovative as we think we are? I hope we are – and I hope the last decade was more an exception than the rule.

Role of financial services institutions and markets

A lot of innovation does happen in FS . Just look at the kind of financial instruments that were invented and sold in the last two decades – they are incredibly complex and sophisticated . But remember – financial services are enablers of the real economy but they are NOT the real economy themselves. The health of the capital markets should be a reflection of the underlying economy – but in reality, it’s flipped the other way around. We measure the health of real economy now by watching how the capital markets function instead! It’s set up backwards !

Cheap money for a decade or more has made risk taking look easy . Remember the “taper tantrums” that the markets threw when Fed tried to say that they want to rein in interest rates just a little over a period of time? Fed had to back off quickly when market got annoyed .

Markets and corporations both have to gain some balance about the fundamentals of real business and stop using stock price as the primary measure of success. Otherwise we will never get out of the high highs and low lows .

Our role as consumers

Our own pension and 401K are all connected to how well the markets perform. We collectively carry a lot of credit card debt, and net worth is largely our primary home for many of us . So we are all vested in having a perpetual bull market and low interest rates, irrespective of the side effects.

We are not all equally well educated on the financial system though – including basic skills in personal budgeting. While we are a sharply divided country ideologically on political lines – we don’t largely involve ourselves in actual politics like standing for elections ourselves or serving in civic bodies etc. If we don’t plan to actively involve ourselves in politics – the next best thing to do is to learn enough to elect the best possible representatives to watch out for us. The best advice I got as a young man was from Dr Kevin who taught me financial management in business school . He told me “All you need to do is to try and live under your means and invest for the long term”. A quarter century later – I can’t think of better advice to give my daughter .

I am glad the Silicon Valley Bank depositors will get their money back . Now the world can take the time to debate and fix the underlying problems .

This was not really a Lehman kind of scenario like a lot of social media posts seem to imply. It’s more of the classic “run” scenario . When there is mass panic and every deposit needs to be yanked out quickly – I doubt any bank can survive that , including the very big ones. That said – there is no excuse at all for SVB not managing their risk competently .

Banking business model – and the regulatory frameworks that need Banks to hold certain amount of highly liquid assets – generally assume a scenario less catastrophic than a full on run .

The primary question now in my mind is on what will change about risk management at banks – and potentially the regulations around it .

The last round of big changes were made because of the 2008 crisis . Those regulations were made when technology was not as advanced as it is today. The kind of run we saw in old movies and read about in college – they had long lines of people waiting at branches to take money out via tellers . Sure in 2008 there were smartphone apps – but not everyone had them . High speed internet was not as widely available . And social media was not yet the thing it is today .

It meant that people needed a bit of time to act because of the inherent inefficiency of banking processes .Now there is very limited friction . If a founder panicked seeing the VC’s email to pull money out of SVB – the instinctive response probably was not to go find the 8-K filing of SVB . The more likely scenario is a quick look at social media groups , Twitter etc and then do a wire transfer on the phone . The run in this case is a lot faster than any time before in history . Maybe we should find another word instead of “run” to refer to this in future !

I know that Banks do evaluate technology risk carefully – and so do regulators . But that’s about systems not crashing , being auditable and not causing trouble to customers and so on . Frictionless transactions have always been a good thing . Managing the risk of advanced tech and social media (which is also about great technology that advanced fast) fuelling a Bank run will be a new risk management muscle to exercise for all parties – but one I am sure they will start thinking about seriously and real quick !