I’m Guy Kawasaki, and this is Remarkable People. Today’s guest is Nikhil Kamath, the co-founder of India’s largest stock brokerage, Zerodha.

For what it’s worth, he’s in his early thirties and a billionaire based on his stake in the company. 

His “made for movies” story is that he dropped out of high school to play chess, worked at a call center answering support questions, started a stock brokerage, and became a billionaire. Kind of a Queen’s Gambit meets Slumdog Millionaire meets Charles Schwab.

But the actual storyline is not as Bollywood as you might think. The real value of this episode is his insights regarding:

  • The value of removing barriers as a reason to start a company
  • Methods of monetization in an industry where almost every service is free
  • The advantages of not raising venture capital
  • Using sentiment and psychology to make investment decisions 
  • The pitfalls of cryptocurrency
  • The good and bad of a calm demeanor

Listen to remarkable Nikhil Kamath on Remarkable People:

I will be live streaming on April 7th at 10 am PT, watch then or catch the replay.

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AI transcript of Guy Kawasaki’s Remarkable People podcast with Nikhil Kamath: Chess Champion turned Billionaire Entrepreneur.

This is an automated transcript. It is sometimes incomplete and inaccurate because of the limitations of transcription services. However, we wanted to provide it for people who have hearing issues or prefer to read the interview.

Guy Kawasaki: [00:00:00] I’m Guy Kawasaki. And this is Remarkable People. Today’s remarkable guest is Nikhil Kamath. Nikhil is a co-founder of India’s largest stock brokerage firm.  If this sort of thing impresses you, he is in his thirties and therefore, one of India’s youngest, billionaires. His made for movie story is that he dropped out of high school to play chess, worked at a call center, answering support questions, started a stock brokerage, and became a billionaire kind of a Queen’s Gambit meets Slumdog Millionaire meets Charles Schwab, but the actual storyline is not as Bollywood as you might think.

[00:00:41] The real value of this episode is his insights regarding. The value of removing barriers for people, methods of monetization in an industry where almost every service is free, the advantages of not raising venture capital, using sentiment and psychology to make investment decisions, the pitfalls of cryptocurrency.

[00:01:01] And the advantages and disadvantages of a calm, demeanor. This episode Remarkable People is brought to you by reMarkable the paper tablet company. Yes, you’ve got that right. Remarkable is sponsored by reMarkable. I have version two in my hot little hands and it’s so good. A very impressive upgrade. Here’s how I use it.

[00:01:24] One taking notes while I’m interviewing podcast guests, to taking notes while being brief about speaking gigs, three drafting the structure of keynote speeches for storing manuals. For the gizmos that I buy five roughing out drawings for things like surfboards, surfboards, sheds, and office layouts six, wrapping my head around complex ideas with diagrams and flow charts.

[00:01:48] This is a remarkably well-thought-out product. It doesn’t try to be all things to all people, but it takes notes better than anything. I’ve used. Check out the recent reviews of the latest version. I’m Guy Kawasaki, and this is Remarkable People. And now here’s the remarkable Nikhil Kamath.

[00:02:11] Do you think that dropping out of school and playing chess really had any causative relationship with your success?

[00:02:18] Nikhil Kamath: [00:02:18] It’s an easy narrative to sell and people will pick up on that and sell it. It might’ve had a small effect, but I don’t think a really large effect. No.

[00:02:30] Guy Kawasaki: [00:02:30] So you wouldn’t advise kids to drop out and play chess in order to become a billionaire.

[00:02:34] That’s

[00:02:35] Nikhil Kamath: [00:02:35] absolutely not. Especially in the startup universe. So few companies get lucky and they’re in the right place at the right time. So it would definitely not be their generic advice. No. I

[00:02:47] Guy Kawasaki: [00:02:47] am actually more interested in if your experience working in the call center for a dollar a day, had any causative

[00:02:55] Nikhil Kamath: [00:02:55] relationship, not as bad as a dollar a day, more like maybe five to $10 a day back.

[00:03:02] The fact that you can’t control the outcome in a call center when you’re a cog in a really large wheel, I think leaves you feeling. Uh, a little bit helpless and dependent on so many external factors and that definitely instigates you do, you know, want to take more control over what you’re doing. So that definitely played a part.

[00:03:23] Yeah.

[00:03:25] Guy Kawasaki: [00:03:25] For most Americans, if we have any appreciation of what happens in a call center, it’s because of the movie Slumdog Millionaire. Most of us, when we call. I don’t know, Quicken tech support. We’re talking to somebody in Bangalore and Mumbai and we have no idea. So is it just rows and rows of people with headsets and you just pick up the phone and they start, this is how you print a check on QuickBooks.

[00:03:47] Nikhil Kamath: [00:03:47] Yeah. It’s like the place where I worked was called 24 by Seven customer. I think I saw them grow from about a hundred, a couple of hundred people to many thousand people. So there would be three floors in a really large building. With maybe 3,000 people on the phone all the time.

[00:04:09] Guy Kawasaki: [00:04:09] Wow. So that is a factory.

[00:04:12] Wow. So you started right after the financial crisis. So with hindsight, do you think that bad times create good companies?

[00:04:21] Nikhil Kamath: [00:04:21] I think bad times create less competition. The fact that we started right after the financial crisis. I think there was very little capital going around very little innovation in the industry by virtue of what had just happened.

[00:04:37] And we kind of got lucky to be doing something new. We were at the right time at the right place. And I think that helped significantly. If we were to try and replicate what we did back then today, it would be a lot harder because FinTech is the flavor of the season right now across the world. And there is a lot of money and innovation chasing it.

[00:04:59] Guy Kawasaki: [00:04:59] The name means zero barriers. I think, let me verify that because you never know. So what barriers were you seeking to remove

[00:05:11] Nikhil Kamath: [00:05:11] specifically? Well, we were trading before becoming a broker back in the day. The incumbent brokers have then charged as much as half a percent of the total turnover of a transaction.

[00:05:27] In brokerage fees, it made it very hard for a retail investor trader to remain profitable because of all these leakages in the form of fee. So I think that’s the barrier we faced as traders and that we try to address as brokers. So that’s what we were talking about at the very beginning, the cost and transparency element of it all was the barrier of the day.

[00:05:56] Guy Kawasaki: [00:05:56] And does the creation of data reflect that it’s fundamentally better to be the casino than to be the best

[00:06:04] Nikhil Kamath: [00:06:04] gambler? I guess there is something to be said for both. Some of the best gamblers in the world have done very well and some casinos have also done well. I think two ways to look at the problem.

[00:06:17] But being a gambler is accelerating. Being a casino is a bit more stable. So I think depending on what you’re looking for, a different, more, that might suit you more.

[00:06:30] Guy Kawasaki: [00:06:30] Well, one story I read was that your brother was burned out as a trader. So then he wanted to go to the other side and be the casino. Is that a true story?

[00:06:39] Nikhil Kamath: [00:06:39] I think that is partly true.

[00:06:41] Guy Kawasaki: [00:06:41] You make it coming and going, right. It doesn’t really matter.

[00:06:46] Nikhil Kamath: [00:06:46] Yeah but I think it makes much lesser while you bet on something. If it works out, it really pays off. But while you’re on the other side, you make small amounts of money many times, but there is a library pretty at hand.

[00:06:59] At some point, if somebody with a lot of leverage burns out to goes into debt, or there is a technical class, both have their pluses and minuses. I really don’t think you can compare one with the other.

[00:07:14] Guy Kawasaki: [00:07:14] But you certainly would not be worth a billion dollars as a trader. I mean, I guess Warren buffet is, but that’s less likely, right?

[00:07:23] Your trades are essentially free, but people pay for options, futures, and intraday trades. And is that because those things are harder to execute? Is it because there’s price inelasticity. Because people are willing to pay for that or is it because that’s the only three things is Lyft charge people for, since trading is free,

[00:07:44] Nikhil Kamath: [00:07:44] the way the markets are structured in India.

[00:07:48] Uh, a lot of the volume, the speculation actually comes from the derivative, the future Shannon intraday traders. So they form a large percentage of our overall clientele and they do pay a fee. They pay about 20 rupees per transaction. So about one-third of a dollar, vaguely is how much they would pay to buy ourselves.

[00:08:12] Any equity, but we don’t limit them with quantity. You could buy a million dollars worth of shares X, and you will only pay that one-third of a dollar as a fee. So that is revenue.

[00:08:38] Guy Kawasaki: [00:08:38] So the free moniker. It’s really to be because you have to do that, right? Because there are so many places you can quote, trade for free, but really the intraday. So you want intraday trading, you want 33 cents per transmit.

[00:08:54] Nikhil Kamath: [00:08:54] That’s right. So the intraday traders are essentially 70% of our volume and they do pay that fee, uh, that fee relative to the incumbents.

[00:09:05] When we started is extremely cheap. It’s 90% cheaper than anyone else charged. When we began, the reason we have left equity investing as free is because India is a very large country, right? We have about a hundred and, uh, about, you know, 130 growth people. And a very small proportion of India actually has financial exposure, something in the range of 2% favorable taxation really helps long-term investors in India.

[00:09:35] They pay a much lower level of tax and capital gain. If they have held the equity for over 12 months. So in a way, in order to integrate marriage, that we have kept the equity investing part free, and we hope more people will be long-term traders and allocate a certain portion of their asset base. And the equity markets.

[00:09:58] Guy Kawasaki: [00:09:58] Do you view that as a social responsibility because it doesn’t help you to have long-term infrequent

[00:10:05] Nikhil Kamath: [00:10:05] trades? I feel that if the ecosystem in the country grows if a lot more people start allocating money to equity markets, I think it helps them diversify their portfolios, which right now in India, we are to real estate bully and heavy in many ways, a lot of us leave money in a bank account, which is barely beating inflation.

[00:10:30] So eight affords people and other asset classes to diversify into. But B if the ecosystem grows larger, I’m sure. You know, uh, they will start treating, they will start doing other things where we do charge a fee. Sorry.

[00:10:47] Guy Kawasaki: [00:10:47] Is that your ringtone? Yeah, it’s the default plan. A growing interest in the asset class will create people who will then dip into options, futures, and intraday trades.

[00:11:02] That’s the thinking.

[00:11:04] Nikhil Kamath: [00:11:04] I mean, the more people invest. I think the speculate speculators also increased. I think that’s a very natural correlation. People use it for hedging. A lot of people have equity portfolios. They want to buy insurance on it. They would come to buy a put option, a lot more savvy investors will come into the market and use the database we actually charge.

[00:11:28] Guy Kawasaki: [00:11:28] How would you define your, your competitive advantage? Vis-a-vis the other brokers in India.

[00:11:35] Nikhil Kamath: [00:11:35] I would say the ecosystem of products that we offer. I think that is the USB today. We have a lot of great technology around. How would you, how you would analyze your portfolio, how you might back test execution of the user interface.

[00:11:51] Those are the reasons that people come to us today is that sustainable do sustainably the best, maybe not, but we endeavor to, you know, kind of like change as quickly as we can and put new stuff out there faster than the next one.

[00:12:08] Guy Kawasaki: [00:12:08] Okay. Do you have fractional shares?

[00:12:09] Nikhil Kamath: [00:12:09] No, we don’t. We don’t

[00:12:12] Guy Kawasaki: [00:12:12] Obviously that’s the big deal with Robin Hood.

[00:12:14] So why don’t you have fractional share?

[00:12:16] Nikhil Kamath: [00:12:16] It’s a regulatory thing. The Indian government, the regulator in India does not allow it.

[00:12:22] Guy Kawasaki: [00:12:22] Are you lobbying for that change or?

[00:12:25] Nikhil Kamath: [00:12:25] No, also, I think you have many high-value shares in America. Like you have before the split or alphabet many companies, are creating thousands of dollars.

[00:12:37] That is not the case in India. Here typically stocks tend to, you know, split the companies, do it on themselves much earlier to keep stock prices in that range where people can still buy a shed.

[00:12:50] Guy Kawasaki: [00:12:50] My kids have Robin Hood accounts and my interpretation of why they have that is because. They may not be able to afford one share of Tesla, but now they think they’re a Tesla shareholder because they own a fractional part of Tesla might be deceiving themselves.

[00:13:08] But that’s the attraction. A lot of people when I told them, I’m talking to you, said, Oh yeah, that’s the Robin Hood of India, but that’s not at all true. Is it in the fractional sense?

[00:13:18] Nikhil Kamath: [00:13:18]  It isn’t, it’s actually not true in any sense, because. How a broker monetizes in America is very different from how one does it in India.

[00:13:29] Like Robin Hood makes a huge portion of their revenue from things like selling order flow and all of that is not allowed in India. So a broker is essentially a hop between a client and the exchange, all the order matching in India happens at the exchange level. So completely different revenue model, completely a different set of rules in compliance.

[00:13:56] So we’re very unlike them. Also, I think we started maybe a good five, six years before them. So very little similarity between us and them.

[00:14:06] Guy Kawasaki: [00:14:06] In these 10 years of having this company, and you already said you have to keep coming out with innovative products. What have you learned about keeping a startup innovative,

[00:14:16] Nikhil Kamath: [00:14:16] all credit to the team?

[00:14:17] We have a great team, which is constantly thinking of new stuff to put out there. The fact that we were traders, to begin with, helps cause we kind of to understand what the market might need. Also, the fact that we don’t have external investors and we don’t really have. Too many levels of hierarchy keep us a bit more nimble and agile than somebody who has to answer to an entire boardroom and external investors before they can make a decision.

[00:14:49] Guy Kawasaki: [00:14:49] But isn’t it ironic that the company fosters investing. Doesn’t take any outside investment.

[00:14:58] Nikhil Kamath: [00:14:58] Yeah. I don’t know how to look at that. I think the reason we exist and I think the reason we did we have done well over the last decade is the fact that we’ve not looked upon ourselves as a corporation, but we’ve looked upon ourselves as traders, creating a platform for fellow traders.

[00:15:19] It’s a community of sorts. And with external investment, I think we would have become a corporation we’ve never really done any marketing or advertising. We’ve never put out an ad and we rely on word of mouth and people to like the product and talk about it. So I think we approach it less from the corporate lens and more from the community lens and having an external investor might take away from that.

[00:15:47] Guy Kawasaki: [00:15:47] Would you ever take an external investor?

[00:15:49] Nikhil Kamath: [00:15:49] Not that we have thought of it, not in the near future and probably unlikely.

[00:15:55] Guy Kawasaki: [00:15:55] Well, if you don’t need capital, why, why have the headache, right? Yeah. Do you think that investing is understanding what a company is doing, what the market is doing, or what people’s sentiment about the company is?

[00:16:13] Nikhil Kamath: [00:16:13] It is important to understand what the company is doing, what the fundamentals of the company are, but what moves price at the end of the day of sentiment? Very hard to read because there are so many participants and any random set. If you were to gauge sentiment in a, it might not replicate to the entirety of the company.

[00:16:36] Sentiment is one of the hardest things to read. Because there are so many factors that play geopolitical flag factors, which central bank is printing how much money, what a commodity is doing. So no one person can actually place a bet with any great degree of certainty about sentiment, but it is a sentiment that moves private at the end of the day.

[00:17:00] Guy Kawasaki: [00:17:00] And what are the chief forms of evidence that you measure to determine sentiment?

[00:17:08] Nikhil Kamath: [00:17:08] We look at things like, uh, money flow, I think more than anything, the amount of foreign capital coming into the country and who that capital belongs to makes a huge difference. Because often you can gauge the appetite of an investor, even though he makes a small investment, he’s likely to scale it up.

[00:17:27] If it is a certain kind of investor. So guy, a large part of our rally recently. Over the last, three or four months has been driven by foreign inflows. You guys in America printing a lot of money. And I think that is finding seeping its way into emerging economies across the world. When that tap goes off.

[00:17:51] It’s a very hard thing to call, but if it does go off, I think the repercussions will be felt here and we would correct very quickly. So it would be prudent to Sable watching what America does with their money. The central banks in particular are a good way to gauge sentiment going forward in India as well.

[00:18:14] Guy Kawasaki: [00:18:14] Well, I can understand that to gauge geopolitical sentiment, but how do you pick which equity-based on the sentiment that doesn’t help you pick, which stock in India too?

[00:18:25] Nikhil Kamath: [00:18:25] Yeah, I think it makes, so if you stick to the large-cap companies in any geography, not just in India, but across the world, a better investor or a better trader, it becomes more about picking when to buy stock.

[00:18:39] Then what stock to buy. Because these large-cap companies are pretty much always moving, you know, in the group, say if the benchmark is going up, every company in the, in the index is going up, some might be going up a little bit more. Some might be going up a little bit less, but typically to pick market direction is probably more important to pick which particular company will do better.

[00:19:03] Guy Kawasaki: [00:19:03] Do you think a good trader is a good student of psychology and behavioral economics or a quant

[00:19:11] Nikhil Kamath: [00:19:11] psychology is probably the biggest, biggest metric in figuring out who is a better trader and who isn’t. I’m a big fan of psychology. And I think being able, nobody can really read people or read market sentiment accurately, but I think psychology helps you understand why people thought.

[00:19:31] In the manner that they thought historically. And in a lot of cases, these patterns tend to be cyclical, but I think psychology is the one biggest differentiator in what makes a good trader versus a bad grader.

[00:19:45] Guy Kawasaki: [00:19:45] So what would be sitting in India? What is your psychological assessment of the American market right now?

[00:19:52] Nikhil Kamath: [00:19:52] Wow. I think that’s a tough one to call, I would say, uh, See, I think the question goes even beyond America. I think you guys are printing so much money right now, but nobody is questioning that because we all have been taught and we’ve been bred and grown-up when thinking that the dollar is essentially the currency, the world will always denominate assets in.

[00:20:19] The real question will arise when somebody really challenges that I don’t think it will be in an India. Maybe it’s a combination of Russia, China, Iran, and a bunch of countries. We certainly start to trade in something which is not dollar-denominated, but it’s a very tough thing to call. But as long as the world is buying American debt and we’re kind of banking on their dollar to store assets across the world.

[00:20:46] I think it will continue to retain the predominant position it has in the last year.

[00:21:05] Guy Kawasaki: [00:21:05] When you look at America, do you say, well, the sentiment there is that we have vaccines. The pandemic is coming under control. People haven’t traveled. They haven’t spent, they haven’t visited. So there’s going to be an explosive economy. And so the sentiment is a very positive time to invest in America. Or am I like smoking drugs?

[00:21:36] I’m imagining this I’m wishful

[00:21:38] Nikhil Kamath: [00:21:38] thinking. We understand things are expensive, right? Companies are expensive compared to historical averages. Uh, the multiples they are trading in in many cases are ridiculous, to say the least, but nobody knows when that will stop. Just because something is ridiculous. He lives today does not mean it will continue to remain ridiculous for the next 10 years.

[00:22:00] And nobody wants to really miss the boat entirely. Nobody can afford to sit out on a longer-term 10-year trend trending market. So I think people are buying it thinking, okay, I know things are expensive today. I’ll get on this bus and be on it for a couple of years and exit before the crash actually happens or a correction really happens.

[00:22:23] But I think we all across the world understand that asset classes are inflated right now. Everything from cryptocurrencies, the stock prices to. Real estate to most asset classes are fairly inflated relative to historical player presence today.

[00:22:40] Guy Kawasaki: [00:22:40] But, but no one has the courage to short, right. Or very few people have the courage to show.

[00:22:47] Nikhil Kamath: [00:22:47] A lot of people have been shorting, but they’ve been getting burnt out for a long, long time. Now. Someone’s smart. Uh, I can’t remember who his name is now, but an American said prizes can remain irrational longer than you can remain solvent. So a lot of people have become insolvent by shorting and kind of schlepping through the entirety of the rally that we have just witnessed over there.

[00:23:11] Last 12 months, typically in my experience markets, correct. When the skepticism goes away right now, we have too many skeptics around who have seen that markets are too expensive. We need to get to the point where nine out of 10 people are like, the markets went up 10% this month. They will go up 10% the next month.

[00:23:32] And the month after that, when there is a certain degree of hubris in the market and people get a little bit. Uh, cocky in a way that’s when markets typically correct and surprise people.

[00:23:45] Guy Kawasaki: [00:23:45] So basically you’re saying when people start believing their own bullshit, that’s when it’s going to correct. Do you think we’re close to that?

[00:23:54] Nikhil Kamath: [00:23:54] I think we are. I don’t know how close we are, but I think we close to that. If you

[00:23:59] Guy Kawasaki: [00:23:59] were to make an analysis about a specific company, that their product sucks, the sector sucks, but the sentiment is still positive. Would you still invest or do you say the fundamentals are bad? I should stay out of this.

[00:24:14] Nikhil Kamath: [00:24:14] I wouldn’t, but a lot of people would, I’m a little bit conservative as a fund manager or as an investor.

[00:24:23] I try to look at the glass half empty most of the time. So I probably wouldn’t, while things are expensive, I would buy what is least expensive, but a lot of investors chase momentum, and they don’t have a choice, but to get on to companies.

[00:24:39] Guy Kawasaki: [00:24:39] So do you think a good investment is about buying right or selling, right?

[00:24:44] Nikhil Kamath: [00:24:44] It’s about both. You need to buy right. And sell, right? Because at the end of the day, it’s also cyclical that there are. Uh, up cycles and down cycles. It matters when you buy and when you sell, I don’t think you have to get it perfect. But if you steer away from buying, when things are too expensive, I think your net net fine.

[00:25:04] Do you like volatility? Yeah. I love

[00:25:07] Guy Kawasaki: [00:25:07] volatility. Why, why do you like

[00:25:08] Nikhil Kamath: [00:25:08] volatility? I run a long shot find which kind of feeds of volatility, but outside of that, I think even as trader volatility, Allows so many more opportunities to make money in short timeframes because people become irrational when there is volatility and, you know, people will drive up the price of something either too low or too high, and you get more opportunities in the market.

[00:25:34] Guy Kawasaki: [00:25:34] So do you care if you make money because the market is going down? Well, it, it was just a transaction money’s money.

[00:25:44] Nikhil Kamath: [00:25:44] Yeah. Yeah. It doesn’t matter. It feels the same. If I were to short something and make money for a river to buy something. It’s the same thing.

[00:25:52] Guy Kawasaki: [00:25:52] Same thing. Yeah. So then what’s your feeling about cryptocurrencies?

[00:25:55] Cause that’s talk about volatility.

[00:25:58] Nikhil Kamath: [00:25:58] I think there are too volatile to be, you know, even have that word currency attached to them. I think they should be called something else, but somebody has to remove currency from the name. I’m not a big fan personally. I know the dollar is in backed by anything and you guys window of the gold standard in the seventies.

[00:26:17] And all of that, what we forget is there is a government backing the dollar. There is government backing, different currencies across the world. Cryptos don’t seem to have absolutely anything behind them. And that makes me a bit wary. I also feel that they take power away from the government and the government’s ability to regulate across the world.

[00:26:41] At the end of the day, you know, we are a world ruled by politicians and governments, and I don’t think they will allow for this power to be taken away from them for too long, without reacting.

[00:26:54] Guy Kawasaki: [00:26:54] But don’t you think that some of the cryptocurrency evangelists, if you will. They’re saying that that’s the advantage of a cryptocurrency that there’s no government involvement and somehow all governments are evil and they’re out to screw you.

[00:27:08] So having a currency supported by people, mining things is somehow

[00:27:13] Nikhil Kamath: [00:27:13] better. Okay. Let me look at it from another lens. Each time somebody is mining a cryptocurrency or Bitcoin, for example, they are expending tremendous amounts of energy and carbon emissions onto the world. To net net create something which is a token, which is actually nothing it’s terrible for the environment.

[00:27:36] I don’t think it is as traceable as hard physical currency, because at the end of the day, it moves from one bank account to another and who the person is because the bank has done some kind of diligence about the Guyopening an account and stuff like that. I feel with cryptocurrency one really bad, terrible event, like a catastrophe of salts, which could be funded by cryptocurrency will have a very big detrimental reaction in the price of cryptocurrency.

[00:28:08] That is true for most of the world, but countries, some countries in Africa where inflation is like 500%. They can’t keep their money in the currency for them. Maybe cryptocurrency makes sense. Personally, what I tell my clients and what I would rather consider doing is getting a wallet, maybe in neutral, safe geography somewhere, and storing physical gold.

[00:28:31] I think that’s a better hedge against the government than cryptocurrencies in my point of view.

[00:28:38] Guy Kawasaki: [00:28:38] I have to say, I’m a little surprised because I thought Nikila like this leading-edge FinTech kind of guy. He’s going to be this great crypto currency expert. And he’s going to tell me about the great benefits.

[00:28:50] And here you are telling me it’s not, that’s my interpretation of what you just told me. I’ve seen interviews with you where you talk about. Going back to the very original question that chess has rules, but within the rules, there’s creativity, and investing has rules, but within the rules, there’s creativity.

[00:29:13] So have you figured out what the rules of entrepreneurship are?

[00:29:17] Nikhil Kamath: [00:29:17] This will sound very counterintuitive, but often what entrepreneurs do is they fixate on one company, their holding company or their operating company, and they spend. All their time and effort in making that a success without diversifying taking money out and, you know, kind of securing their lives, immaterial of how great a company and how big the idea is.

[00:29:43] It’s very important for an entrepreneur to have that secondary round, take out some capital allocated to some other thing and diversify and a little bit because that brings a level of mental stability. But you’re not dependent on this one thing where that, in turn, makes you a better entrepreneur. Often people would think to focus on that one company and put all your eggs in that basket is a great idea, but maybe time has shown me otherwise.

[00:30:12] Having some level of diversification is good in everything, not just in entrepreneurship, in relationships, in everything. A little bit of that is good,

[00:30:23] Guy Kawasaki: [00:30:23] but. You could make the argument that if your company offered equity and you took money off the table, you could diversify, but you’re not doing that

[00:30:34] Nikhil Kamath: [00:30:34] since we are privately held.

[00:30:35] I can still take some of the profits and diversify. I don’t need to necessarily sell equity. I think that works for us.

[00:30:43] Guy Kawasaki: [00:30:43] So that’s the rules for the entrepreneur, but what about managing the company? Have you learned some rules about managing this company and fostering innovation and keeping the wheel going?

[00:30:55] Nikhil Kamath: [00:30:55] Well, one, I feel like the old school method of having targets and reprimanding people when they don’t achieve it, I don’t think that works anymore. I don’t think the manager or the mentor-mentee relation really works. I think people like employees. In today’s day need to feel like stakeholders. The more people the promoter of a company can give equity to and breed a sense of loyalty, not to the promoter, but to the company.

[00:31:24] And the idea of the company takes companies a long way.

[00:31:28] Guy Kawasaki: [00:31:28] So do employees of your company have options and in the United States, the way it works is there’s a one-year cliff. There’s four-year vesting. Is that similar to

[00:31:39] Nikhil Kamath: [00:31:39] India? It is similar in India.

[00:31:43] Guy Kawasaki: [00:31:43] And what is your capital gains rate in India?

[00:31:46] Nikhil Kamath: [00:31:46] Long-term cap will gain is about 10% with surcharge and everything else that comes up to about 12 long-term definitions in the Indian government’s book is over 12 months.

[00:31:58] Short term is about 15%.

[00:32:02] Guy Kawasaki: [00:32:02] So for that two and a half percent benefit. If you exercise the option, you have to come up with the money, right? So then you’re at risk. Why would anybody exercise the option just to,

[00:32:15] Nikhil Kamath: [00:32:15] so the employee stock option route kind of changes, depending on what structure you are, it’s different for a private limited company.

[00:32:23] It’s different for a public limited company for partnerships, even though the long-term capital gain rate might be 10%. It’s an extremely complex system. For example, if a company has to pay people out, the dividend distribution tax is really high. It’s like three or four times what the LTG rate is. So it’s a very hard thing to kind of explain in a short para, but the headline rate, which external investors coming into India should look at is 10%.

[00:32:58] Guy Kawasaki: [00:32:58] That sounds good to me because it’s much higher in the United States. The next question is brought to you by our sponsor, the remarkable tablets company, unlike an iPad or many other tablets, the remarkable tablet enables you to focus because it has a single purpose taking notes, no email, no social media, none of the distractions of a typical tablet.

[00:33:24] Completely aside, just, I’m interested in you as a person. How and when, and what circumstances do you do your best and deepest thinking?

[00:33:34] Nikhil Kamath: [00:33:34] I don’t have very many abilities, but the one thing I do reasonably well is remain seen in panic scenarios. I think when things get chaotic, I do fairly. Okay. So I think that I consider being a strength of mine.

[00:33:53] And I think that is very important to traders across the world because there is kilos all the time, every now and then something ridiculous will happen in the market with no justification whatsoever. Personally, if you were to ask me about what time of the day or what I am doing well, I do the best thinking maybe while I’m going for a run in the gym while I’m working out or just before I go to bed, I think I do less thinking when I’m sitting in front of my computer than I do, I’m sitting away from

[00:34:32] Guy Kawasaki: [00:34:32] Julie. The last question I have interviewed. About 70 people for this podcast and Steve Wozniak, Jane Goodall, Margaret Atwood. And I will tell you right now you are the calmest person I have ever interviewed. If I were to write a dictionary and the entry is stoic, I would say see Nikhil. Is that in your DNA? Are you like, are you doing yoga 24 hours a day? I mean, it wouldn’t make you so calm.

[00:35:00] Nikhil Kamath: [00:35:00] A lot of people see that Guy and it’s obvious. I think I am fairly stoic. I’ll tell you the good and the bad of it. So the calmness and stoicism in a way is very good for a professional environment, uh, where there is a lot of volatility.

[00:35:19] But you take that over to your personal life and people hate that, then, you know, you’re not, you’re never really happy or never very sad. People think you’re emotionally dead in a relationship and it does not work. I think I have to figure it out. I forgot, figured out a way to kind of turn it off and become all the time.

[00:35:38] I need to now learn a way to turn it on as well.

[00:35:42] Guy Kawasaki: [00:35:42] There is no better way to end this podcast.

[00:35:47] The definition of a stoic is someone cooking and do her hardship and pain without displaying their emotions or complaining. My impression of Nikhil is he is truly stoic. I hope you learned about the value of removing barriers, the advantages of not raising venture capital, using an analysis of sentiment and psychology to make investment decisions.

[00:36:09] The pitfalls of cryptocurrency and the good and the bad of a calm demeanor. My name is Guy Kawasaki. This is the Remarkable People Podcast. My thanks to Jeff Sieh and Peg Fitzpatrick who stoically endure working on this podcast with me until the next episode, Mahalo and Aloha.

[00:36:37] This is Remarkable People.