Ian Cassel Ian is a full-time microcap investor and founder of MicroCapClub.com and IntelligentFanatics.com to help him fine-tune his qualitative lens for finding and investing in exceptional leaders.

Dr. Venkataswamy and Aravind Eye Care: The Power of Compassionate Constraints

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Enjoy this excerpt from our case study on Dr. V and Aravind Eye Care. Members can access the full case study [HERE]

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“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” – George Bernard Shaw

Aravind-Eye-Care

Aravind Eye Care (‘Aravind’ or the ‘Organization’) is the outcome of an unreasonable goal of an unreasonable man. The unreasonable goal was to remove needless blindness in the world, and the unreasonable man was Dr. Govindappa Venkataswamy, affectionately known as Dr. V.

To put it in context, of the 45 million people who were blind across the world, 12 million were from India. Of the 12 million, 80% were needlessly so, that is they could be cured through some form of intervention. Dr. V was 58 years old when he started Aravind in 1976 with an 11 bed eye care hospital (of which 6 was reserved for those who could not pay) in Madurai, Tamil Nadu (a state in South India). Aravind’s goal in the beginning, was to remove needless blindness in India, and then it evolved to remove needless blindness in the world.

Since 1976, Aravind has treated over 50 million patients and performed over 5.5 million surgeries – more than half of them either free or highly subsidized. And no, the organization does not run on charity; they are entirely self-funded and vigorously profitable. And no, the quality of care is not compromised –the clinical outcomes are among the best in the world. Today, Aravind is the largest eye care system by far in the world with 12 eye care centres, 63 eye care clinics, a manufacturing set-up, a consulting division and a research centre.

How did an 11-bed hospital started by a 58 year old with his relatives turn into a world renowned institution which trains the largest number of ophthalmologists in the world?

To understand the story of Aravind, it is first necessary to understand the power of constraints and stressors in inspiring innovation. Nicholas Nassim Taleb said it best in his book ‘Antifragile’ –

"How do you innovate? First, try to get in trouble. I mean serious, but not terminal, trouble. I hold—it is beyond speculation, rather a conviction—that innovation and sophistication spark from initial situations of necessity, in ways that go far beyond the satisfaction of such necessity (from the unintended side effects of, say, an initial invention or attempt at invention)….The excess energy released from overreaction to setbacks is what innovates!"

And Aravind was in deep trouble in the beginning. The source of the trouble was the founders’ refusal to compromise on a series of seemingly irreconcilable self-imposed constraints –

  1. No one in need shall be turned away. If someone needs eye care Aravind will provide it, even at a price point of ‘zero.

  2. There shall be no compromise on quality. The quality provided to the patients should be on par with the best in the world

  3. Aravind shall always remain self-reliant

How can an organization decide to provide free services at high quality levels and still continue to be self-reliant? The unlikely question has an equally unlikely answer– through qualities of compassion, spirituality and deep empathy. It is the founders’ refusal to compromise on these altruistic qualities that inspired them to come up with the above set of unique constraints which would later result in the Aravind model of operations. The model works, as we will see, because of the qualities and not despite them. These constraints developed during inception continue to be the bedrock of the organization’s (un)business model (‘business’ is intuitively associated with profitability; what do you call a model where profit is just another input in the goal to maximize long-term compassion?).

In a study done in 2010, it was found that National Health Service for UK does a little more than 500,000 surgeries annually, at which point Aravind did around 300,000. While NHS spends around 1.6 billion pounds on eye care delivery, Aravind spends 13.8 million pounds, less than 1%. And Aravind did this with much better clinical outcomes, that is, lesser complications.

Also, an average Aravind surgeon does ~ 2,000 cataract surgeries a year while the number for an average Indian eye surgeon is 400 and for US it is <200. The natural question here would be – How on earth does this make sense? How does an organization in a complex and expensive industry like healthcare spend less, cure more, and have lower complications?

What is Dr. V’s story and what influenced him to place such seemingly irreconcilable compassionate constraints?

Hat tip to @rohithpottigmail-com for writing the case study.

Members can access the full case study on Dr. V and Aravind Eye Care [HERE]

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Disclaimer: We may/may not have positions in the companies mentioned in the blog. This case study/article is not a stock recommendation. We are not SEBI registered investment advisors. Our Intelligent Fanatics Case Studies and Articles are meant to retell the stories and strategies used to create exceptional businesses so that we can learn from them.

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