A lot has changed since Dr. Suren Mansinghka began his career as a university business professor. Over the course of his career he has taught business in many different countries, however one thing that makes him unique when compared to other professors is that he helped pioneer the MBA program in India.
Alan: Welcome back I'm here today with Dr. Suren Mansinghka, welcome to today's show.
Dr. Mansinghka: Thank you
Alan: So for the listeners, you have remarkable teaching credentials and experience in the academia world, can you give us your background for the listeners and what brought you to where you are today?
Dr. Mansinghka: I came to the US in 1966, slightly more than fifty years ago as a graduate student and I happened to come here because I went to a school in India for my MBA- which I had just started- it's called the Indian Institute of Management. They had started two of these institutes, the one that I went to was in collaboration with MIT, so we used to have professors from MIT or deputed by MIT to come and teach there for a few months a year. I was very fortunate to be in the class of a professor who was from UCLA and he and I some how clicked. And he then started to encourage me to apply. I come from a middle class family and the idea of going, coming to the US and not being able to afford the cost of higher education was not even conceivable, so the assumption that some how I will be funded as we say, that sometimes all the things they tend to fall in unison. He was interested in studying the businesses in India and being a Canadian he was able to go to China. So he wanted to do a comparative study of China and India and the US. He had just received a grant from Ford Foundation and he said if you can get admitted to UCLA I will fund you, I will give you enough money per month that you will be able to sustain yourself. And I said fine. And so I applied and I was lucky too. After some interesting experience I was able to get into the Ph.D program and my interest in- I have an accounting background and I come from background of family which is always in business so I am the black sheep of the family. So when I told my parents and particularly my grandfather that I want to go and study further. At that time in India you could not do a Ph.D, anything beyond Master's. So it's like William Sutton, why do you rob a bank, because that is where the money is. And similarly why do you come to the US? Because that is where you can get an education in business [a] PhD education. So at the Institute of Management we had a professor that had come from Canada to teach and he was the first one to teach me finance. We were only three people in the class but it's a life experience that completely turned me- not away from accounting- but started to make me look at an extension of accounting in a more conceptual way and to study finance. Finance was not a required course as it is in most MBA programs at that time and so that made it very easy and at that time in United States there were very few schools that focused on finance. UCLA was one of them. And so I ended up coming to UCLA and once I got on the path of doing the PhD after finishing the PhD in 1970 I wanted to try my hand in industry because there was always something in my blood that I should do something else- work in industry. So I interviewed with some of the investment banking firms, but without ascribing any motives at that time, if you where on the west coast, except for Stanford, the opportunity for getting into either the corporate world or Investment Banking world from even universities like business schools like UCLA or UC Berkeley was not there. I went through several such experience at that time I decided that I should continue. The thought was there that I will go back. And I did try. But then I found out that because Finance was- given the regulated nature of our economy in India at that time, the scope for finance, teaching finance was extremely limited. What used to be taught at at these institutes in the name of Finance was basically accounting, maybe management accounting, maybe cost accounting.
Alan: What time frame are we in now?
Dr. Mansinghka: This is 1970-71 and so I was not not interested doing that and so I did have an offer but I did not take it from the Institute that I graduated from.
Alan: So Dr. Mansinghka, I need to take a quick break and we'll be right back after these messages. I'm visiting here today with Dr. Suren Mansinghka, and we're going through the history of his teaching profession which actually is a really remarkable story but we right back after these messages.
Dr. Mansinghka: Thanks
Alan: Welcome back, I'm visiting here today with Dr. Suren Mansinghka and we've been talking about his road to the teaching profession and to catch up the listeners in the first segment Dr. Mansinghka was outlining you know how he was looking at coming into the US but you know he ended up being one of the early pioneers- a finance teacher, professor in India and in the mid-seventies, let's fast-forward this to-
Dr. Mansinghka: So I was saying, I did not go back to India, I took a position at University of California Riverside about 60 miles from UCLA and there were two reasons. You could say partly it was weather, it was warm, because I did have an offer from Michigan, but I made the mistake of visiting it in January February and I was not ready, but mostly it was because I was doing some work with my professor in Mergers and Acquisitions and he and I both thought that it would be easier if I was close enough to continue with the research that which was ultimately published and so in any case and I remained at Riverside which was a small campus and then I moved to the Bay Area to take a position at San Francisco State in 1975 and once you get into the teaching profession then you have combined with the teaching you have consulting you have research, those are the two other aspects of it. And I continued that and working with the students until the year 2000, about 25 years I spent there. Like CPA, the designation of CFA was becoming very popular and both to establish to gain some knowledge as well as to gain some association in the investment and financial community in San Francisco. I decided it would be appropriate for me to finish CFA. So I started to take CFA exam and finished it in 1993 which helped me tremendously intellectually as well as professionally but most importantly in my opinion it helped my students because I was able to place some of the students in various firms which made it possible for me primarily because of my CFA designation. And in 2000 I took a retirement. I was 55 and the retirement was mostly governed by- let me be very candid, my less than positive impression or experience at the university and rather than going through it- the political side of it I decided because while at San Francisco State I had started to go to Hong Kong under a university called Hong Kong University of Science and Technology which is started in '91. And I was there the very first year I spent the whole year on sabbatical which is one of the good things of academic profession. And so that was always very good and I continued, I used to go there almost every summer and so my hope was that I will continue that plus do something in the community and live comfortably because my son- only one child- he had left home to go to college in year 2000. So it worked out fairly well. And while in Hong Kong they wanted me to come full-time and so I ended up without going through the details. I ended up spending about four to five years in Hong Kong and those were some of the best years of my life in terms of professionally, personally, of course financially because it allowed me to travel a lot in China, Indonesia, Thailand all the countries nearby because we had so many programs and the university that I was with is usually referred as MIT of Asia. That was the whole idea.
Alan: So Dr. Mansinghka, I need to take another break. I'm visiting here today with Dr. Suren Mansinghka he really is one of the pioneers in the teaching profession bringing that in the field of Finance over there- starting first from Hong Kong then eventually over to India. And that we'll be right back after these messages.
Alan: Welcome back I'm visiting here today with Dr. Suren Mansinghka, and Dr. Mansinghka we were talking about the progression of your education, you immigrated over from India to the US, started your teaching profession and then got yourself going back to Asia teaching at the University of Hong Kong and then what was the next steps from there?
Dr. Mansinghka: First if you have been to Hong Kong, you always want to distinguish between the University of Hong Kong and Hong Kong University of Science and Technology
Alan: Thank you
Dr. Mansinghka: Because one is more along the British model the Hong Kong University and the Hong Kong University of Science and Technology as I said in more along the American models in fact it was started by the local government with the thought of giving an opportunity for American type education so nothing personal but that distinction is important but having said that while in Hong Kong as they say, you have to be at the right place at the right time. In 2001 or 2002 I don't remember the date in Hong Kong I was teaching what is called EMBA, Executive MBA classes and Hong Kong, HKUST, Hong Kong University of Science and Technology had a wonderful joint program with Kellogg School of Management we used to call it KH program and that subsequently for several years in running was number one program in the world and I was very fortunate to be asked to teach in that and part of the benefit of teaching was that the Dean from Kellogg used to come there twice a year, once or twice a year and meet the faculty in a social setting and the first time that he met me he took me aside and he said, 'We are starting a place in India would you be interested' I would never have had that opportunity had I not been in Hong Kong and had not been teaching in that program and of course my response was I am open to the opportunity and one thing led to the other I was invited by what is now known as ISB or Indian School of Business in 2002 and to this day I go there several times a year to teach. It is a school that was set up and started in 2001 and was set up with and led by McKinsey but with the help of Wharton, Kellogg, London School of Business and then later on joined by MIT and Fletcher.
Alan: That's quite a support group there.
Dr. Mansinghka: Yeah and we have two campuses and a total of about 850 MBA students, it's the largest MBA program in India, but anyway leaving that aside we can talk about the India a little bit later. But I came when I came back in 2005, a friend of mine, very close friend he was on the faculty at UC Irvine he knew that I was coming back and he called me and said how about coming to Irvine and I said I will be willing to teach at Irvine with one condition, you don't ask me to move there. And he said, 'why don't you want to move?' and I said I have lived in Southern California for ten years, without any offense to you or anybody else who likes the lifestyle of Southern California please understand that after having lived in Bay Area for such a long time I have to develop a lot to start to like the lifestyle again. So anyway I took up a position at Irvine but I used to commute from Bay Area and the first three years I commuted almost every week and so that is where I started to teach a group of courses for MBA for EMBA and also they had a program called healthcare EMBA so we had a joint program with the business school and medical school and this was for students who want to go into the administrative side- management side of healthcare. So I retired from there, so I retired from San Francisco State in 2000 and then I retired from Irvine in about 2013 or 2014- I don't exactly recall- but I continue to teach at Indian School of Business I go there regularly as I said. I used to go about 7-8 times a year. But now, I think the age is catching up, I only go about 2-3 times a year because they have a large portfolio. We have a very large MBA program, we also have a very reputable family business program and but we have an EMBA program which has which has an extremely well design and also we have a very large portfolio of management education program so I have taught in all of them.
Alan: So how does that is teaching internationally in these other countries different from teaching in the US?
Dr. Mansinghka: In the business education, there are not identifiable differences except for the following: that when I teach in India and will teach the same subject but I have to localize it in terms of taking examples from Indian companies and Indian background and Indian institutional framework. And the reason is two fold, one almost all the textbooks that we use are published in United States and now there are editions of the same books available in India. In fact I am going in late July to teach an MBA class in corporate finance and the textbook I am using is the same one that I was using at Irvine.
Alan: Point well said.
Dr. Mansinghka: So that's one thing and the second I think, the students are same. Their expectation is, 'will I get an MBA degree that will compare with Kellogg or Wharton or London because that is how we have branded our product so they I don't find that much of a difference. The difference that is there is the seriousness of these students. I don't mean to say American students are less serious, but I think what I find in India and also in other countries, they are hungrier, they don't mind working very hard to go where they want to go.
Alan: What are some of the financial strategies for value creation in today's world?
Dr. Mansinghka: The way that I teach and this is one of the subjects that I have taught to MBA students, EMBA students and also many short management education program to senior executives, the key is why starting late 70s early 80s we started to focus on value creation in teaching of finance and my response is that we needed a unified focus around which we can develop various topics, various subjects that we cover. And value creation was one of that framework because, A: we can easily measure it by looking at the market and B: we can easily explain it by looking at its various components. So the way I look at it is, I have always taught it in terms of the financial statements and I start by looking at the balance sheet and say here is the asset side and here is the liability side. Think about what can you do on the asset side that will cause the value creation, the decisions that would result in value creation. Now those are little bit easier because we can make easier investment decisions and the techniques are fairly common textbook, select the projects that have positive net present value or find the IRR, internal rate of return greater than the cost of capital so on the asset side the things are easier. On the liability side, there is lot of controversy. Can you really create value on the liability side as much as on the asset side. One of the obvious one that one could always find is to take on debt if you borrow more, you get the tax savings and the tax savings accrues to the shareholders so they have now more cash flows and therefore the value should be higher. The problem is, there is some evidence to that but when we add up all the studies we see that the approximate amount of value creation is about one third of the possible value creation from the tax savings because the firm's don't tend to borrow that. Then you start to see what are the other ways and we again come back to the asset side which is one to look at the mergers and acquisitions the both organic growth and inorganic growth?
Alan: Which is better, organic or inorganic?
Dr. Mansinghka: Let me quote a one-liner that I use in my class. All generalizations are false including this one. So I will refrain. It depends on the firm, and it depends on the firm and it depends more importantly on the nature of the industry. In some industries, organic growth may be much better because you start from the scratch and you learn from your mistakes and the competition is still not as overpowering that you have the time to compete effectively, but in some other industries you want to move very quickly and so inorganic growth may be better. You see, so it would be extremely difficult, as a general rule my feeling is that in organic growth may be better in what we call commodity industries, because if you are selling a product or service where product differentiation is a little bit harder, then you want to get into and get the market share as quickly as possible and go. If on the other hand with the innovation and other things, organic growth is more possible. The question is, once you know that you want to create value, then how do you operationalize it? This is where the whole issue of economic profit has entered into picture. So we I spend a great deal of time not on accounting profit but on economic profit and the economic profit is an idea that was popularized by various people but actually operationalized by McKenzie in in its consulting practice. And what it basically comes down to is that operating economic profit depends upon three things, one what is the rate of return that this investors require and compare it with the rate of return that you can produce or generate. That rate of return that you can generate which we call ROIC, return on invested capital is driven by two meters the first parameters. The first is margin and the second parameter is the turnover. The margin is how much profit you are making on a dollar of sales and the turnover is how many sales for a dollar of invested capital. So in terms of operationalizing the culture of economic profit you have to focus on these two things, the turnover of the assets and the margin. And that allows also then to take it to the next step and say that this idea can be filtered down to the to as low a level as you want to. But everybody does not need to know we are going to create value but depending upon where they are in the organization they can start to appreciate what they need to do. So some may be if you are focusing on profit margins or some may be interested in pricing decision, some may be interested in cost aspect of it, some may be interested in sales aspect of it, the production aspect of it, so almost every part of the organization becomes part of it and that is the whole idea of economic profit, but differentiated from accounting profit.
Alan: Dr. Mansinghka, I appreciate your insight today and also for your being a guest here on American Dreams, but we're out of time. We've been visiting here today with Dr. Suren Mansinghka, and thanks for joining us here on American Dreams and remember, we will have today's show taped and you can find to on GROCO.com