Sunday, December 27, 2009

Can Arthasastra transform Corporate Finance ?

Chankya- one of the foremost Indian Gurus, on the subject of Finance , Money , Management and Politics . Chanakya, had a different perspectives on the subject of Finance , which he demonstrated on his magnum opus –“The Arthasastra “ . It is very interesting to note that India actually became the “Land of Golds”, when his principles of Financial Management used . Deeply rooted on Indian spirituality, they are the original thinking gems on finance , then “so called linguistic and numeric manipulation”, what the modern finance understanding has given to us .

Tell me , what has the western management gurus, and the armies of financial professionals has given to the world ? . To me, it is nothing, but a stream of periodic recessions of capital markets. In which at the end , we seem to be losing our environment , spreading more pollution , exhibiting greed, and bring crisis to the entire humanity . Here is a master of finance, who taught the world, lessons which are eternal principles of finance, and which stayed back of 2300 years , when most finance book would not even stay for the lifetime of that modern financial guru . Let me explain some of Chanakya’s ideas on Finance , which is so contrary to the modern destructive idea of finance.

Basics of Finance from Arthasastra

In the modern finance money is disconnected, there is no wholistic principle of money . I agree money is very important for the success, of individual or an enterprise . However , the present understanding of finance, could only lead to a success, which is short term, and which would be blown out within 1-2 Business cycle with ever periodoc reccession . Let me go back to Chanakya, who is also known as Kautilya , and understand his model of Finance . He says “Artha” is a very important ideal, alongwith Moksha (Liberation) , Dharma (Righteousness) , Kama (Pleasure) and he builds an important connection between all of them . His concept of “Artha” is all inclusive, and not limited to “paper notes” only. So when he says “Artha” , he means good governance , right policy , good actions , self control and number of issues to take care of the interest of the subjects . Unlike modern system of understanding of financial management, whose sole objective is to gain profit, in the cost of everything , Chanakya in Arthasastra, really makes us look beyond profit, and shows that there is a social , environmental and spiritual bottomline apart from the economic bottomline . The modern knowledge of finance will find you in a justified condition , if you gained a better number in your balance sheet and add shareholder value , in the cost of environment where by destroying trees you building real estate, pollute the environment sending green house gasses , develop skyscrapers destroying human habitation , fight war and kill people for the sake of crude oil, take all kinds of activity which is destructive of planet earth in search of economic gain , symbolized by paper notes .

In contrary, “Arthasastra” is sincere to Mother Earth . Unlike modern finance where there is no clear link established on protection of Mother Earth or Planet earth , Arthasastra begins with the statement that it is the science of acquisition and protection of Mother Earth . Remember it makes us realize that earth is our mother , from whom we have all came into existence . And we have no right to destroy our mother , as that it is actually destroying us . It is these deeper understanding of Kautilya, has made him the immensely successful , both in sphere of Governance ,and finance. We can’t iginore the success of this person , who has build the first Indian Empire. and his principles where the foundation of Indian systems of Governance still now . Kautilya principles has also helped the rulers of India, at his time to create the Golden Age of India ( Chandragupta – Ashoka – Samudragupta).

That’s why he gives a very strong statement in Arthasastra, that one who reads this scripture, will not only become successful in this world , but also attain success in other worlds.

A lot of Books and study material, which is available in finance , will be a very hard job, for a new-comer to decode . One of the reason is modern financial gurus, have jargonized the system, and made it closely networked , that only some persons who are aware about the financial lingos can access the system. Before Global Financial Crisis , the people of the world had lesser understanding about the kind of greed, and unrighteousness, and unethical behavior the financial institution such as banks , nbfc does with there subjects . There closely knitted lingos, with financial engineering , builds such products which is made to make any client loose money. One of this financial product everybody is aware about is Credit Card. To use a credit card properly, one needs a lot of training as it is a product, which is so complex, that it could never be understood by common man with average financial knowledge . So many people have burned there fingers. using credit cards. Now , you may say one must avoid these kind of products . However , this financial institution has Branded and made it in such a way, that it becomes a defacto standard for social status.

In the contrary , if you read , Arthasastra, it is focused on the very fundamentals and keeps its objectives straight in target . It is a book of acquisition and protection wealth . One who studies it, in any condition on any situation , can acquire and protect wealth . Nothing can be more simpler and basic , yet so deep and inclusive in its approach . Arthasastra is not a book , it is a library . Yet its simplicity , conciseness , and Kautilyas rationality is stunning . Written nearly 2300 years, before , It could make a lot of financial gurus of modern times in a embarrassing condition , and atleast teach them that the finance could be taught in a basic language and with precise words.

Why should you train yourself in Arthasastra?

Arthasastra also answers this question, that why should one train himself in this scripture and its dealing with the subject of finance . It gives a very rational answer and says “Artha” is the basis of Moksha(Liberation) ,Dharma (Righteousness) and Kama ( Pleasure) . It trains a person on the underlying philosophies behind “Key Result Areas” and “Key Performance Indicators” and also the financial numbers, you might see in your salary structure . Infact , the salary structure of the Government employees of that time , and the rationality behind it was given, along with the details of measuring systems in Arthasastra. The only thing needs to done is to bring the wisdom from there, and apply it in modern context, to really make your financial life easier.

Some Concrete Reasons “Why” Training on Subject of Finance, through Arthasastra is Important?

1. Finance beyond Jargons – You don’t learn finance to learn language , but you learn finance to make your life easier, that you can handle your finance and your outer life, in a better way . Understanding of the regulatory environment, is very important in order to learn finance, as it is important to understand your own capabilities of self regulation, which is to destroy the inner six enemies. This is the most vital part of Arthasastra which takes a “inside-out” approach to the world of finance , rather than an “Outside-in” modern management approach.

2. Avinashakshee Strategy and Number Phobia – The science of sensecontrol, which is described by kautilya, as one of the foremost mental capability and strategic ability, to deal with any kind of phobia will help you also to get out from the phobia of numbers.

3.Its all about Money : kautilya , shows that creating money, is about putting self effort with a strong sense control and mastery over mind . As he continues saying all through out the Arthasastra, that wealth slips away from a person, who continuously consults fortune tellers for creating wealth . What can fortune teller do , it is wealth only, which brings wealth . Rather than building a rosy picture about different financial products , which your financial advisor will always do to strip you out of money , kautilya shows simple and easy route , and that is self effort with sense control to create and protect wealth . It might look harder to start with , but once you learn it you have solved our all financial problem in your lifetime, in one straight stroke.

4.With Kautilya Finance is not boring: kautilya shows in Arthasastra that Artha is actually a sadhana . His no-nonsense description, on the subject of wealth , its management and protection makes one to move on the path of enlightening wealth .

So where do I start Arthasastra?

This is a question I come across all the time. If I wanted to learn Arthasastra where should I start from

The best place to start from is to read the book . There are so many translation available in the web.

Several books are coming which are trying to apply Kautilya, in the context of modern financial problems and also in context of Governence. It good to keep your eyes open and see those books from different publication . I , myself is writing two such books, which is about to be published .

If you take , kautilya as your Financial advisor , you will see that your capability to acquire and protect righteous wealth grows. kautilya is non-judgemental and his advises are eternal , so with Kautilya you might not have to encounter the remark of Warren Buffet which says, “Wall Street is the only place where people who drive Rolls Royce take advice from people who take the subway. ” I think you will have the best advisor with you when you read arthasastra , it is your own intelligence.

Essential things to learn “first” when you start:

Kautilya gives you the fundamental and basic concepts on finance . You can obviously build a skyscraper on it , and apply it, in different context of finance , if your fundamentals are strong on the basics of arthasastra.

Kautilya has precise advise on how to maintain accounts in Arthasastra. It is again de-jargonised ways, to understand the principles of accounting . So you can learn it from there ,and apply it in present accounting context.

Right from doing a basic math, upto complex merger, acquisitions and spin offs, there are thousands of concepts of kautilya , which you can apply, and have a better understanding on those subjects.

But first there are a few concepts which will help you to make your foundation strong before you start building your sky scraper on it:

Knowledge of Kautilyas principles: kautilya’s teaching in artjhasastra could be divided into three pillars – 1) Self Governance 2) Market Governance (State Governance) 3) Market (State) War & Diplomacy . In Corporate Finance , the subject could be narrowly focused towards market governance and market war instead of State Governance and State war. After this three pillars you can look to the different tactics, Kautilya recommends for achieving this goals . For self Governance , one must look on the knowledge of Anvishakshee strategy , for market Governance he should understand the 7 Constituents of market, and how to work on bringing that constituents on order. One could also look after Kautilya’s accounting principles, and see how he had ask to maintain accounts on daily basis, and follow that in modern accounting practices

Understanding Financial Statements by kautilya’s wisdom: Kautilya also gives a lot of different ways to write different, form of financial statement in different part of Arthasastra . These could be taken as Knowledge points, and used in understanding modern financial statements .

3, Financial Management: kautilya also gives different ways on raising capital from Market and building systems that could utilize that capital and make the people or the subjects happy, which is the fundamental objective of Corporate Financve . The raising capital part , also gives details and also the diplomatic routes which should be taken for raising capital . However this is all given on the context of state and King . You have to understand that Entreprenuer is the modern version of Kind and Corporate or Enterprise are modern version of states in market . You could see once you see things in these way , it could make you life easier on understanding financial management.

To summarize, we can say that learning of Arthasastra, could help to understand modern finance in dejargonised and fundamental way .This learning will be will line with business ethics, Corporate Governence and Strategic management which is critical to success of any individual or an organization in today’s world.

There are four main reasons of learning finance through Arthasastra route: (1) With Arthasastra , you go beyond understanding the Finance lingos and learn the fundamentals, which are important and could be applied in any financial situation you face,

(2) Avinaskhee strategy helps you to deal Number phobia.

(3) The biggest reason why a person who makes money but do not get rich, is due to the bad advice. Kautilya provides you that intelligence, where you can be your own advisors on finance . kautilya’s knowledge on finance which he has given on Arthasastra is eternal . It stayed for last 2300 years, and I am sure it is going to stay for next 2300 years . Because , though it uses precise words , statements , chapters , deep down it carries the spirit of finance, and so it is scripture not a book as such .

I am also attaching one presentation, to have more deeper understanding on this scripture and the series of the courses we provide to understand Kautilya Arthasastra and its application in Modern Management for achieving Financial Transformation .

In addition to that ,in 31st Decembor we are going to have a BTCON 05 on Financial Transformation which would be based out of using the principles of Arthasastra to achieve Financial Transformation . –

1 comment:

Anonymous said...

Hello sir,
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waiting for ur revert
regds sangeeta