Rohith Potti Rohith is based out of India and began his journey into the world of investing under Prof Bakshi at MDI. He started investing full-time in 2016 and currently manages his family money.

How Vikas Oberoi Harnessed the Power of Velocity

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The article below is an excerpt from this long-form research paper that is exclusive to members: Intelligent Fanatics Develop High Velocity Organizations

Sometimes, when I am reading a book or working on a company I get an idea, or what I think to be an important insight. And on occasion, the idea resonates in my head so strongly that it is stuck in my head for days on end. The idea, at times feels like an extremely tall and extremely fat person standing in front of me in a parade - no matter what I do I cannot see beyond him / her. And it is when I am in such a situation that one of the things I learnt from Harry Potter helps me.  

In the series, the author JK Rowling introduces a concept called the Pensieve, a magical device to store one’s thoughts. The Pensieve is best described below:

“A Pensieve is a wide and shallow dish made of metal or stone, often elaborately decorated or inlaid with precious stones, and carrying powerful and complex enchantments.One simply siphons the excess thoughts from one’s mind using the wand, pours them into the basin, and examines them at one’s leisure. It becomes easier to spot patterns and links, you understand, when they are in this form.”  

While I admit that despite my wishes for the contrary, human beings are still quite far from wand technology and thought storing dishes, we do have this amazing skill called writing. Each time I was overwhelmed by thoughts or have a brain-sticking idea (a self-coined term which means an idea which just won't go away) I found that writing helps. The more I penned down my thoughts, the more the bandwidth that was available for my brain. I noticed that as I organized my thoughts and began writing down the key facets of the idea in question, I was generally able to get one or two insights which I had not gotten previously. And thus began my love affair with writing (though many a time my other love 'laziness' does tend to get possessive of me).  

Velocity is one idea which has obsessed me in the recent past. And I thought it might help to write about it.

In this post on velocity, we shall be guided by that beautiful quote of Joseph Tussman.

“What the pupil must learn, if he learns anything at all, is that the world will do most of the work for you, provided you cooperate with it by identifying how it really works and aligning with those realities.”  

As explained by Shane Parrish in his Farnam Street blog, the above quote is about leverage, about getting the maximum output for your efforts. By aligning yourself with the laws of the universe, you can increase what you accomplish by letting the universe do your work for you. This is the foundation of the multi-disciplinary approach espoused by Charlie Munger. The multi-disciplinary approach to understanding life in general says that what has been true for time immemorial in nature and universe should in high probability work in human life and human systems as well.

Some leaders intuitively understand this power of the fundamental forces in the universe we live in, and replicate it in the operations they build. Kinetic energy is one such fundamental force. The formula of kinetic energy for a body with mass ‘m’ moving with a velocity ‘v’ is (1/2)*m*v^2. Thus, for reasons unknown, kinetic energy is influenced disproportionately by changes in velocity than by the changes in mass.  

Curiously, the non-linear impact of velocity in the universe is mirrored in case of businesses as well. If an organization endeavors to generate a disproportionate impact in its sphere, it would be better served by harnessing velocity, for when velocity is harnessed effectively, mass takes care of itself.                                

Oberoi and Velocity  

Oberoi Realty, run by Vikas Oberoi is a $2.5 billion realty company based out of India. The brand of Oberoi is extremely popular in Mumbai. Of all the localities in Mumbai, it is perhaps Goregaon which is most synonymous with Oberoi. The 'Garden City' project at Goregaon put Oberoi on a different trajectory - both in the scale as well as breadth of operations. Prior to Goregaon, Oberoi primarily constructed residential buildings. At Goregaon, it built commercial space, a hotel, a mall and then a residential complex.

How did the Goregaon project come about really?

The whole thing began due to a chance meeting with a Mumbai broker. Sometime around 2001, a broker came to the Oberoi office without an appointment. Irked as he was, Vikas Oberoi agreed to meet the broker who informed him that a huge land parcel (60 acres) was available on the Western Expressway if he was interested. And he was. Only, as far as Mr Oberoi knew, there was no land available in the area the broker was referring to - there was the Aarey Milk Colony but it was protected land as it was part of a national park. But the broker corrected him. Novartis, the pharma company had land in that area and was looking to sell. Mr Oberoi immediately went along with the broker to look at the land - and was stunned. Beautifully located with lush greenery around, the land in Mr. Oberoi's eyes was a veritable gold mine. On further enquiry, he found that Knight Frank, the property consultant was appointed to sell this land parcel. However, when he contacted Knight Frank, the executive there told him that the bids had already been taken and they were not entertaining any new bids. For most people that would have been the end of that.

But Mr. Oberoi was not most people and he decided to try something else. He got directly in touch with Dr. Schillinger, the MD of Novartis India and asked him for his help. The MD was willing to accommodate him and excited, the team at Oberoi worked overtime to submit a bid quickly.  

Oberoi Realty, though a respected developer at that time, was not large enough to be considered a serious contender for a land parcel this big. But Mr. Oberoi was very serious about his bid. He got a meeting with Dr. Schillinger by telling him he was on his way for some work near the Novartis office and thought he might meet Dr. Schillinger for just 5 minutes (Mr. Oberoi had no work in particular, though he guessed that no one was going to say 'No' for a 5 minute meeting). The meetings became a norm with time. While other bidders told Dr. Schillinger that the land parcel had problems, Mr. Oberoi told him it was wonderful. This frankness and honesty was highly appreciated.

When the bids were opened, Oberoi was found to be the highest bidder but the deal was still not consummated as the highest bid did not match the number Novartis was looking for. As the highest bidder, Dr. Schillinger decided to sit with Mr. Oberoi for negotiations first, and the latter readily agreed to match the number the Novartis board had in mind.

The 100cr deal for the 60 acre parcel was one of the largest deals in India at the time, and the largest deal by far for Mr. Oberoi till that time.

What is interesting for me in the story above is how quickly Mr. Oberoi took decisions in the key moments - the time he took to fall in love with the land, the time he took to act on his intuition, the time he took to place the bid, and the time he took to increase the bid. As per the book Consolidators, the broker met Mr. Oberoi in late 2001, and the deal was announced in Feb 2002. That is some decisiveness there for one of the largest land deals in the country.

The Goregaon deal, as mentioned before, put Oberoi in a different league in the real estate industry.


The above story is about the outcome - how Oberoi was able to harness velocity.  But what are the conditions that allowed Oberoi and other businesses to maximize velocity? How is velocity a common thread that runs between Oberoi, Aravind Eye, Narayana Health, Berkshire and Southwest? What is the difference between speed and velocity?  All these questions and more are answered in the long-form research paper that is exclusive to members: Intelligent Fanatics Develop High Velocity Organizations      

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