What an amazing & resilient country. Even after decades of less than adequate governance, economic progress, security challenges and internal issues; if you ask the average Pakistani how they are doing, their initial response is “sab theek ho jaye ga inshallah/all will be well by grace of god” There is no other way to explain this response but a deep bond between man his creator and the belief that better days are coming. Or the absolute lack of education and access to understanding economic fall out.
In some ways it is this, that keeps us going because our rulers, law makers & security apparatus have not given us any thing to write home about. To understand how Pakistan Inc operates we must understand and evaluate how the top 1% of businesses function in this country & perhaps most developing countries.
Before we go down that path we must understand that the 1% are divided after 70 yrs of independence in two very distinct categories. Those who were Born-rich and those who Built-Rich but most of those who built wealth also had the Born-rich on their side. There is a slight nuance but not a lot because in the end the rich are the rich.
The narrative of wealth and achievement ignores the other side of the coin namely, that the opportunity to build wealth is not equally or broadly shared in society especially in ours. Those who are born-rich typically continue to fund those who will eventually be the Built-rich. The real heroes (far and few in between are) those who Built-rich without stealing, nepotism, politics, power, or being born-rich. But it is a vicious cycle. The children of Built-rich are Born-rich. That creates an all other kind of 2nd generation dystopia.
Part of that dystopia is that The born-rich have trouble relating with the built-rich. Ironically, it’s the built rich parent’s fault their kids are born rich. That has a deep rooted impact on how business , our economy and our political structures work.
Keeping this premise in mind the Built-Rich know how money works and can scale wealth compared to Born-rich. We are at a tipping point in our society that the 2nd/3rd generation that has inherited or underway to inheritance is not looking good from the eyes of the first generation. To manage for that, the system has been further broken down.
Let me share the make up of a “Rich-Family office” in Pakistan. I have seen, interacted and engaged with many. When the patriarch feels that the wealth created by them(who are in the category between born-rich and built-rich) is about to go die behind the family barn once they go to meet their maker, they do some thing incredible.
Like any parent they feel preservation of money = preservation of their offspring. So they go in a multi pronged multi faceted approach of recruiting what I fondly call the best “Retirees of the Country”
We are perhaps in very unique position in this country where post 60 yrs of age people begin some of the best corporate careers any one can dream of having. The price of admission is to have been retired a federal secretary, Judge, some one from the forces, police, ministers and the religious right. If you were average all your life but a product of the system fuelled by taxpayer subsidy your value goes up by 10x post retirement.
This is what startup dreams are made of. The real entrepreneurs and startups in this country are this retired lot. Can’t fault them for capitalising on this as they are the definition of capitalists, the folks hiring them are the real venture capitalists of our society.
What is happening here is the creation of a system that will continue to f*** us for generations to come. Because old money found old stall-warts and created a system that went from separating wealth from creating value vs extracting it (e.g. founding vs rent-seeking).
Any family office over 20m$ of wealth to preserve, has built its ‘Retiree Militia‘. The average day job entails coming to an executive suite perched in the head office of the company around 11 am with the company provided Mercedes + 1M PKR monthly retainer, with the job description to “assist” the kids “assist the ceos of the various businesses” ensuring they don’t fall out of favour with the ruling elite or the law. Using their profiles in the boards of their listed companies, some times with the status of Chairman. A good party trick no less on having cracked the system and giving further and extended momentum to cronyism. There is a reason why the systems or systemic changes in this country the average person desires, will never happen because the rich have built an insulation layer to make sure the rent-seeking behaviour continues past their life time.
Behind this shiny veneer of continuity is a sad admission. People who don’t trust their kids directly with an inheritance or to be self sufficient in running the businesses they created, or to go out in to their own and figure out their own shit, admit they failed to raise good stewards. So besides this retired militia the second best thing to handing over all of the families crown jewels and on Mother Dears insistence that “malik sbs kids are so involved with business” , “chowdhry sb decides to setup an investment fund for their offspring” you can replace malik/chowdhry, with a saith of any ilk, the execution remains the same.
This brings us to act 2. Newly minted Saith-a-preneurs (SAPs) with a fancier office than dads, backed by the Militia and knowing they can do no wrong, fuelled by daddy dollars launch in to Pakistan Inc to make their mark. One only has to be reasonably smart to not f**k this up.
The complexity with this structure is that SAPs/new money spends on trends old money spends on tradition. Creating a conflict because for all their fancy offices, daddy dear and his militia just don’t get startups and tech companies. They only get licenses, quotas, dividends, rent-seeking, tax-evasion and representative monopolies. Even the SAPs that have a good head on their shoulders dont get too far because of this overbearance. The real decisions go to daddy dear, this is a golden cage for the SAPs, with their moms and wives happy that chotu sarkar now has a day job and a line up at the mutual admiration club dinners + events, they have finally come of age. The reality couldn’t be farther from the truth.
We likely wont be able to create the Ambanis or Tatas of our world by doing these things. Only a select few families and rich large local conglomerates have their children fully entrenched, but most dont. Those who dont are actually also killing the real chance any startups have at success by making these “band camp boys” in-charge of VC $s that they didn’t earn to invest in startups and founders who have zero in common with them, but like their forefathers who were at the mercy of the saith’s shitty job for 20 yrs. now they are at the mercy of the same blood money to be invested in to their companies. The trigger of investment go-no-go remains with daddy dear and the retiree militia. Delaying the aspirational target of the founders and most cases, mis leading, mis representing because they dont have the ability to make real commitments without permission. This is creating a slew of hungry startups whose time, effort and energy is being wasted chasing the “house of X” for money or the “X Group”.
This is the circle of life we are faced with in Pakistan Inc. The good news is the inflow of foreign capital, but that capital also gravitates to the band camp boys because they take the incoming money to visit daddy’s industrial estates/parks/fertiliser/chemical/food processing/packaging businesses or bank and the incoming money also feel safe in the company of old money.
So if you are a no-body with some money in the tank, this is how you help break this circle of life by funding entrepreneurs in this country at a low low entry price sans daddy dollars. The concept is simple, you need to enable others to build either your idea, a shared idea or their idea, but with the catch that they deploy the MVP or business in under 60 days. It could be as simple as funding some ones inventory or as complex as a Monetization idea for m-commerce.
This concept is called “failure dollars” You need to be able to part with 5k USD for some one else to invest their time to do a pilot of a business idea/concept/company/product/tool . The thesis behind this 5k is, you can afford to loose it but what if you both win? If the idea is successful the person you funded gets to keep 80% of the idea/equity/reward, but if it fails you pick up 100% of the losses. Why would you do this? Because it’s late for you to retire as a federal secretary or be a judge or be a retired general. Also instead of bit**in and moaning this is a concrete way to steer outcomes for people who otherwise will never have an opportunity to take a bet on them selves because they always need a “job” to run their affairs, create the leverage in some ones life by doing this.
It builds trust. With guys/gals who have ability and the capacity to make time & build but no access to capital. It covers their prototype time and the assurance that the failure funding is yours, makes them work 10x harder. Victory is shared and they own it, you get a continuous residual piece and if you can scale this model, you become a cottage industry equivalent of an aarti without being predatory. We don’t need VCs and Angels we need folks with dry powder who can fund small experiments at scale and bring others to do the same. The only way out of the mess and nepotism we have created, is to create a few 1000 M$ revenue business that generate value vs extract value. It has to start some where and it can start from you. It’s time the Pakistani people and government realised that it’s the country’s ambitious young people who are building the future, not its retirees.
Rich men are more harmful than rich food. But then, who cares for the health, be it ours or the nation’s.