The Tragedy Behind The Death of Former Billionaire V.G. Siddhartha, India’s Coffee King

As young man, V.G. Siddhartha struggled to find the right path for himself. Perhaps the armed forces? No, no—a failed entrance exam to India’s National Defense Academy put the kibosh on that idea. What about community activism? “I was impressed by the philosophies of Karl Marx,” Siddhartha recalled a few years ago, “and really thought I would become a communist leader.”

After graduating from St. Aloysius College in southern India, he struck out into the provinces, eager to put Marx’s maxims to work raising the fortunes of the poor. This proved as impractical as military service. The countryside was rife with corruption and nepotism, impeding any progressive agenda. “India was so poor that there was no scope to become a Robin Hood,” Siddhartha said. “That’s when I realized that rather than being a wealth distributor, I should become a wealth creator.”

He did just that, founding India’s largest coffee-shop chain, Coffee Day Enterprises, a $572 million-in-sales business (with more than 10,000 employees) that persuaded a country raised on tea to consume something else entirely. It made him a wealthy man, one of the richest in India and, for a brief moment after Coffee Day’s 2015 IPO, a billionaire. Siddhartha came to represent everything India dreamed of becoming: a modern nation where entrepreneurs could brew new ideas, changing their lives and the circumstances of everyone connected to them as a result. That’s a radical notion for a nation constricted by millennia-old rigidity around class, structure and expectations. Siddhartha was fully aware of this. “If I was born 20 years earlier, I would have surely failed,” he said in 2011.

In death, Siddhartha, whose body was found Wednesday morning in the Netravati River in an apparent suicide, will likely also come to represent grimmer realities: the limits of the Indian economic miracle, the constraints of creating a business within a developing market, and the alleged harassment by government officials, which would have been not unlike the corruption that disgusted him in the first place.

Siddhartha was reared on coffee, his father’s family longtime plantation owners in. He resisted following tradition, though, and after college, in 1983, he took two busses from the countryside to Bombay, where he talked his way into a meeting with one of the country’s biggest stock-brokerage businesses. (He’d read about investing in a magazine and found it interesting.) To be more precise, Siddhartha charmed the secretary of the firm’s chief executive, Mahendra Kampani, and with the secretary’s help, showed up at Kampani’s office one day.

“The first thing was, I felt intimidated by the two elevators [at the Bombay office]. I had never taken an elevator in my life. So I climbed up the six floors,”  Siddhartha later described that first day. From there, he reached Kampani’s inner sanctum. “He asked me who I was. I told him that I had come all the way from Bangalore, and I wanted to work for him. … I had never seen an office as large as his. … He said he would take me in, but he had no idea who I was.”

Quickly Siddhartha proved to be a natural. “If I started with $1,000, I made a $3,000 by the end of the day’s trade,” he said. By his own estimate, it took him only a year and a half to learn the brokerage game and build up enough wealth to launch his own book back in Bangalore. He started funneling profits into coffee plantations, amassing 2,500 acres by 1992.

Around then, the Indian government pared back regulations on coffee growers. Before, they had been forced to sell to a national clearinghouse for 35 cents a pound, less than half what the beans could fetch overseas. As the rules fell away, prices for coffee began to rise. They hit $2.20 a pound in 1994 when a freeze in Brazil decimated that country’s crop. Siddhartha picked up the slack, fulfilling orders for 4,000 tons. The unexpected boom paved the way for another idea: a string of coffee houses, modeled on a similar idea he’d seen in Singapore. In 1994, Coffee Day Enterprises opened its first 20 stores. Siddhartha was “constantly thinking and creating, never happy to rest on his success,” says Nandan Nilekani, a friend and former CEO of Infosys Technologies, an Indian technology-consulting business.

Since Siddhartha owned coffee farms, he could cut away many of the middlemen who added expenses to his rivals; he even milled timber from his properties and turned it into furniture for his restaurants. Coffee Day really took off once he added computers with internet access to his locations, creating some of India’s first cyber cafes.

What Siddhartha loved more than coffee was working, and he celebrated New Year’s Eve 2009 in a Coffee Day, taking notes on how to improve service—and going behind the counter to see firsthand how customers treated his employees. “I was simply amazed how indifferent people are to those who serve. Three rich women came, ordered their drinks, did not once look at me, and settled the check, did not care to tip me, but worse, did not say a ‘thank you’ before leaving for someplace else where revelry awaited them,” he said. “It shocked me because it was New Year’s Eve. I thought people would be nice to others because they themselves were in such a joyous state of mind.”

His industriousness was getting noticed. The following year, a group of investors, including famed KKR, put $200 million in Coffee Day for a 34% stake. Revenue was then around $200 million, and sales nearly doubled within four years, the point when Siddhartha took his company public. His caffeinated kingdom extended across India, to 1,513 cafes in 219 cities. But to keep expanding, Siddhartha grew addicted to something that would, apparently, weigh heavily on his mind at the end of his life: debt financing. Coffee Day’s total liabilities blossomed from $189 million in 2011 to $758 million last year.

Earlier in 2019, Siddhartha began searching for a way to answer demands from his growing mountain of creditors. He tried, futilely, to talk Coca-Cola into buying a stake in Coffee Day and explored other asset sales, desperate to widen his cash stream. In a more mature economy, he might have secured different sorts of funding from the beginning—presumably the private equity investors he attracted in 2010 pushed him to load up on debt—or had the opportunity to borrow at less onerous rates. We’ll never know what would have happened had that been the case. But on July 29, Siddhartha switched his phone off, instructed his driver to take him to the Ullal Bridge over the Netravati River, got out of the car and was never seen alive again.

Purportedly, Siddhartha left behind a note, outlining the grief that drove him to his tragic end. He highlighted harassment from a tax official, prompting outcries from Indian politicians that the government has not done enough to boost entrepreneurs like Siddhartha and tamp down on corruption. Siddhartha also mentioned needing to borrow a large sum from a friend to stay afloat and, of course, mounting pressure from lenders. “My intention was never to cheat or mislead anyone, I have failed as an entrepreneur,” the letter reads. “This is my sincere submission, I hope someday you will understand, forgive and pardon me.”

The missive’s authenticity has not been verified. But its ending is certainly very Siddhartha, a cool-minded tabulation and twin insistences: that he hoped his assets would outweigh his liabilities and that, in the end, his family and business “can repay everyone.”

At Forbes, I cover the world’s wealthiest capitalists, as well as other entrepreneurs. For ForbesLife and Forbes’ lifestyle pages, I write about life’s greatest indulgences, including the finest chefs, food and booze

 

Source: The Tragedy Behind The Death of Former Billionaire V.G. Siddhartha, India’s Coffee King

OxyContin’s Sackler Family Will Get Millions From A Ski Resort Operator’s Sale

Vail Resorts, a publicly traded operator of ski resorts, announced on Monday it would acquire Peak Resorts for $11 per share, all cash, which is more than double its $5.10 per share closing price, one day prior to the announcement. Peak Resorts operates 17 ski resorts, mostly in the Northeast and Midwest, including Alpine Valley in Ohio and Hunter Mountain in upstate New York.

One major beneficiary of the acquisition: the Sacklers, the family behind Purdue Pharma, the manufacturer of pain drug OxyContin. According to Peak Resorts’ latest annual proxy from October 2018, its largest shareholder is CAP 1 LLC, a company wholly owned by Sackler brothers Richard and Jonathan.

The Sacklers’ nearly 40% ownership stake, which includes preferred stock and stock warrants, is worth about  $87 million based on the transaction. Some of the shares are owned by the charitable Sackler Foundation. The Sacklers became investors in Peak Resorts as early as August 2015.

Richard is the former chairman and president of Purdue Pharma. His brother, Jonathan, is a former board member. Nearly every state has filed lawsuits against Purdue Pharma and its owners, including eight Sackler family members, alleging the company caused a nationwide public health crisis around opioid addiction and opioid overdose deaths. One lawsuit alleges that Purdue Pharma had brought in more than $35 billion in revenues since 1995.

The Sacklers, worth an estimated $13 billion based largely on the value of Purdue Pharma, built their fortune primarily through sales of OxyContin, a highly addictive painkiller that has been called by the medical establishment one of the root causes for the nationwide opioid addiction epidemic.

Purdue Pharma owns the patent for OxyContin, and is the only manufacturer of the drug. According to Symphony Health Solutions, a healthcare and pharmaceutical data analytics company, roughly 80% of Purdue Pharma’s sales come from OxyContin. Due to the widespread rise in use of prescription and nonprescription opioids, the U.S. Department of Health and Human Services declared the opioid crisis a public health emergency in 2017.

The family used to be known for being generous benefactors of museums and universities worldwide, but their moniker has lost its luster. The Metropolitan Museum of Art in New York City announced in May it would turn down money from the Sackler family, though it will still carry the family name in the Sackler Wing. In July, the Louvre Museum in Paris reportedly removed the Sackler name from its Sackler Wing of Oriental Antiquities.

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Angel Au-Yeung has been a reporter on staff at Forbes Magazine since 2017. She covers the world’s wealthiest entrepreneurs and tracks how they use their money and power.

Source: OxyContin’s Sackler Family Will Get Millions From A Ski Resort Operator’s Sale

Mature Entrepreneurs Know When To Be A Hedgehog And When To Be Fox – Chris Myers

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There are few things I love more than a lively academic debate, especially when I have experience on both sides of the argument.

One such debate that rages in certain circles is that of the fox vs. the hedgehog. The comparison is based on a fragment of an ancient poem written by the Greek poet Archilochus.

He wrote, “the fox knows many things, but the hedgehog knows one big thing.”

Unfortunately, since the manuscript was incomplete, there wasn’t much in terms of context to guide readers towards the ultimate meaning of this statement.

It wasn’t until political theorist, and philosopher Isaiah Berlin came across the passage that it reentered popular discourse.

In his appropriately-named 1953 book, “The Hedgehog and the Fox,” Berlin argued that hedgehogs are defined by their adherence to a single overarching idea, whereas foxes tend to draw on many diverse and occasionally only tangentially-connected concepts to form their opinions.

This concept was further simplified by author Jim Collins in his 2001 classic “Good To Great,” where he argues that the discipline and focus of the hedgehog mentality is key to success.

Others, such as psychologist Phil Tetlock believe that the skills of foxes (such as comfort with nuance and contradictions) result in a superior ability to accurately forecast the future and thus, are superior to the skills associated with hedgehogs.

The debate struck a deeply personal chord for me since I can safely say that I’ve been both a fox and a hedgehog at different points in my career. My experience and eventual transition from one to the other has left me with a distinctly different impression: to be a great leader, you must be both a fox and a hedgehog.

Throwing rocks

My co-founder and I often reminisce about our days as analysts, long before becoming entrepreneurs with a focus on operations. One of the things that we’ve both regretted is the fact that in the past we were what we call “rock throwers.”

Since we were outside consultants and analysts, it was incredibly easy for us to sit on the sidelines and act as though we had all the answers. We knew our stuff, to be sure, but we were narrow in our focus. We often scoffed at CEOs of the companies we worked with, drawing on diverse experiences and data points, and laughing to ourselves when confronted with their supreme confidence and bluster.

In short, we were foxes. It was easy for us to see what couldn’t be done, embracing realism to such an extent that every move that was taken by the leaders we covered seemed foolhardy.

Sure, we had facts, theory, and supporting data on our side, but we were boring. We could see so many potential pitfalls with any plan that inaction was often the most prudent course of action.

It was only after we began running our own company that this mentality started to change.

Embracing the big idea

The shift was felt almost immediately once we became entrepreneurs. No longer sitting on the sidelines, we had to make decisions. Suddenly, conversations shifted from why things couldn’t be done to how they could be.

We had turned into hedgehogs overnight. We had a single grand ambition: to revolutionize small business in America. It was a bold idea and one that required the steadfast optimism and can-do attitude that only an entrepreneur can muster.

We believed that any obstacle we encountered could be overcome, no matter how painful. All that was required was a steadfast commitment to our goal and confidence in our decisions.

Our sudden shift from fox to hedgehog mentality was jarring, and soon we found ourselves falling into the same traps that ensnare so many would-be disruptors. Challenges that we thought we could push through became insurmountable, and we saw ourselves doubling down on lackluster strategies merely because they were ours.

To be frank, we were on the path to failure. In an instant, all of the insecurities and second-guessing associated with the fox mentality came flooding back in, and we were ready to call it a day.

Then, a lesson from the ancient past returned and changed everything.

A lesson from the past

I’ve made no secret that I’m a fan of the humanities. I believe that contemporary business lessons can be gleaned from the stories of our past, and therefore tend to gravitate toward ancient texts rather than modern business books.

My epiphany came when I was reading Herodotus’ The Histories and his depiction of Xerxes’ invasion of Greece.

It’s a long and detailed story, but I’ll do my best to summarize the essential elements that led to my realization.

When the Persian King Xerxes, known as the King of Kings, decided to avenge his father’s defeat at Marathon by invading Greece, his uncle and advisor Artabanus was staunchly opposed.

Artabanus was a fox, focusing on everything that could go wrong and the prices that would have to be paid: stretched supplies, weakened morale, challenges associated with crossing long distances.

Xerxes, on the other hand, was a hedgehog, believing so thoroughly in his godhood and the mission at hand that he could not conceive of defeat.

Ultimately, Xerxes pushed forward with the invasion, only to be hampered by both Leonidas’ group of 300 Spartan warriors at the battle of Thermopylae and eventually defeated by Themistocles and the Greeks at the naval battle of Salamis.

So Xerxes abandoned much of his army and went back home in defeat. The overconfident hedgehog was defeated. But this did not mean that Artabanus was the clear ideological winner. Despite being right about his warnings, he was still largely forgotten by history. Sure, under his direction the Persians might not have been defeated, but they still wouldn’t have won.

The great tragedy of Xerxes and Artabanus is that they were both wrong. One was the quintessential hedgehog, while the other was a steadfast fox. Apart, both offered a path to failure. Together, however, they could have succeeded.

That’s when it dawned on me. To become a successful leader, I had to become both a fox and a hedgehog.

A First-rate intelligence

It was F. Scott Fitzgerald who remarked “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”

The fox vs. hedgehog debate is pointless. Instead, leaders must strive to embody the best of both philosophies and hold the opposing ideas in mind at the same time.

This combined philosophy saved our company. We were able to change our perspectives and strike a delicate balance between our unrelenting optimism and the nuanced approach that we perfected in our earlier careers.

This ultimately helped us to say no to specific opportunities and strategies while still possessing the ability to make big, bold bets. It may seem like a subtle shift, but it enabled us to abandon under-performing lines of business, pivot to more profitable lines of business, and ultimately survive nearly ten years on.

So, to answer the question posed in this headline, no, you don’t have to choose between being a fox or a hedgehog. The key to success is to embody the best of both.

 

 

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