Warren Bennis, Leadership Crucible and Sidney Rittenburg

“A crucible is, by definition, a transformative experience through which an individual comes to a new or an altered sense of identity.”

-Warren Bennis

Warren Bennis is to leadership what Peter Drucker is to management and what Michael Porter is to strategy.

Central to Warren Bennis’s theory of leadership is concept of “crucible of leadership”. He describes it as…

We came to call the experiences that shape leaders “crucibles,” after the vessels medieval alchemists used in their attempts to turn base metals into gold. For the leaders we interviewed, the crucible experience was a trial and a test, a point of deep self-reflection that forced them to question who they were and what mattered to them. It required them to examine their values, question their assumptions, hone their judgment. And, invariably, they emerged from the crucible stronger and more sure of themselves and their purpose—changed in some fundamental way.

Sidney Rittenberg is owner of Rittenberg & Associates, a consulting firm which he and his Chinese wife Wang Yulin operate. The firm provides assistance to businesses who work with Chinese companies.

Sidney was interested in communism and went to China during Second World War. He interacted with top Chinese Communist Party leaders during this period.  But he was accused of being spy in 1949 and was thrown in prison. He was put in solitary confinement; the cell was completely dark.

“In that sense, prison emancipated me”

-Sidney Rittenberg

Sidney managed to influence prison guards and got candle and some books from them. During his confinement, a poem by American poet Edwin Markham helped him to survive. He wrote book – Manage Your Mind, which is based on his experience of imprisonment

    They drew a circle that shut me out

    Heretic, rebel, a thing to flout

    But love and I had the wit to win;

    We drew a circle that took them in.

In 1955, he was released from prison. After his release from prison, he stayed in China and was active supporter for cultural revolution. He was again imprisoned and was released in 1977.

These 16 years in prison was leadership crucible for Sidney. He returned to United States in 1980. But he never felt bitter about his experience of communist China and used his experience to start consultancy which help US companies who want to start business in China.

He wrote book on his Chinese experience – Man Who Stayed Behind.

“What’s more, Rittenberg emerged from prison certain that absolutely nothing in his professional life could break him and went on to start a company with his wife. Rittenberg Associates is a consulting firm dedicated to developing business ties between the United States and China. Today, Rittenberg is as committed to his ideals—if not to his view of the best way to get there—as he was 50 years ago, when he was so severely tested.”

-Warren Bennis

Lake Wobegon Effect and Normal Distribution

Gary Edward Keillor is an American author and radio personality. In his radio show Keillor created the fictional Minnesota town called Lake Wobegon, a small rural town in central Minnesota ( similar to Malgudi town of RK Narayan). He described it as “the little town that time forgot, and the decades cannot not improve.”. In Lake Wobegon “all the women are strong, all the men are good looking, and all the children are above average.” 

Psychologist David Myers coined a term “Lake Wobegon Effect”. The Lake Wobegon effect is a natural tendency to overestimate one’s capabilities and see oneself as better than others.

While normal distribution may predict that very few people in given sample are above average, Lake Wobegon Effect shows that more than 90% of people feel that they are above average.

Chip Heath is psychologist from Stanford Business School and an author, he and his brother Dan have written book called “Switch” in which they say that…

  • Only 2% of high school seniors believe that their leadership skills are below average.
  • 25% of people believe that they are in the top 1% in their ability to get along with others.
  • 94% of college professors report doing above-average work.
  • People believe that they are at lower risk than peers for heart attacks, cancer, and even food-related illnesses, like salmonella.

This also explains why management students think that they can revolutionize corporate world, CEOs justify their salaries, politicians make tall claims etc. It is Lake Wobegon Effect.

Trisha Gupta and falling standards of liberal leftists

I was reading article by self styled liberal leftist Trisha Gupta in Mumbai Mirror. Trisha claims to be a film critic and wrote article connecting liberalism with poetry of Sahir Ludhianvi in film ” Phir Subah Hogi”. Given below is paragraph from her article.

His journey from park bench to pavement is accompanied by a sardonic take on a nation that boasts of inroads into China and the Arab world while its educated youth – and its labourers – are homeless: “Chino-Arab hamara, Hindustan hamara/Rehne ko ghar nahi hai, saara jahan hamara.”

Trisha cannot even translate work of Sahir, her lack of knowledge Urdu is glaring. It is disappointing to see that today’s leftists are just interested in writing articles in newspapers, far cry from Progressive Writers Movement that produced poets like Sahir and Kaifi Azmi.

Chino Arab hamara, popularly known as Tarana e milli was written by Allama Iqbal, who believed in pan Islamism and wanted to bring back golden age of Islam.

The tarana talks about spread of Islam from Arab world to Central Asia ( Chin) and India, it does not mean India made inroads into China and Arab world!

Recareering, Encore Career and Lifestyle Creep

For those in 50’s retirement means different things to different people.

If you are the lucky one to be in “sarkari naukri” (Govt job), retirement means inflation linked pension for rest of your life and after your death pension to your spouse.

If you are working in private sector, it means managing your post retirement life with retirement benefits like provident fund savings, superannuation pension and gratuity. Here biggest worry is how to protect your money from inflation.

Those in late 50’s should spend some time thinking on three issues- Recareering, Encore Career and Lifestyle Creep.

Recareering is not just a job change, but a move to a completely different career path for ex. a journalist may become stock broker. If you feel that your current job has reached dead end then recareering makes sense, it can give you money for longer period than remaining stuck in dead-end career.

Encore Career is different from recareering, it about using your skills for public service ex. using your experience and knowledge for NGOs. As social entrepreneur Marc Freedman puts it – “An encore career seeks to combine a sense of purpose with public-service passion and a paycheck for people in their 50s and 60s”. Encore Career can also be described as second vocation in second half in one’s second life.”

Just before retirement the income of individual is at its peak. He/She uses that income to improve lifestyle. After retirement, it becomes difficult to maintain that lifestyle.

Lifestyle creep is a situation where people’s lifestyle or standard of living improves as their discretionary income rises either through an increase in income or decrease in costs. As lifestyle creep occurs, and more money is spent on lifestyle, former luxuries are now considered necessities.

It makes sense to tone down your lifestyle after retirement.


Carson Block, Yang Kai and Huishan Dairy

“Muddy waters makes it easy to catch fish.”

-Chinese proverb


Yang Kai started his life as a farm worker. He was talented and was able to use his business acumen in buying a government dairy- Shenyang Dairy. He increased revenue and profits of dairy and called it Huishan Dairy. The company is into growing alfalfa grass, owning cows, packing of milk and milk products and delivering them to supermarkets. Yang called his company – grass to glass company.

Yang was ably supported by CFO So Wing Hoi and treasury head Ge Kun.

Carson Block is a short-seller and the founder of Muddy Waters Research. It specializes in exposing fraudulent accounting practices of publicly traded Chinese companies.

Huishan Dairy was on radar of Muddy Waters. Carson declared that stock of Huishan dairy was worthless. He said that the company had overstated its sales, misrepresented its self-sufficiency in alfalfa and made an unannounced transfer of assets to an entity controlled by Yang.

“When others were using underhanded means to snatch market share and capital, I created the most perfect supply chain…I’ve fulfilled my dreams, but Huishan has its own dreams: of 1 million cows, 100 year-old stores and a 100 year-old brand.”

-Yan Kai

Yang dismissed allegations and said that Huishan was financially sound company.

Since Chinese economy is very opaque and media too lacks transparency, it was difficult for Muddy Waters to do more research.

“Since at least 2014, the company has reported fraudulent profits largely based on the lie that it is substantially self-sufficient in producing alfalfa…even if Huishan’s financials were not fraudulent, the company appears to be on the verge of default due to its excessive leverage.”

-Muddy Waters Research

But some time later, treasury head Ge Kun just disappeared, followed by resignation of CFO Hoi, who underwent heart surgery. This was followed by news of huge debt accumulated by Huishan Dairy and its inability to pay debt on time. The share price of Huishan Dairy crashed in Hong Kong Stock market. Yang being biggest shareholder of dairy lost billions in just 2 hours. The company now owes $ 5.8 billion to banks and other creditors. Now Yang wants government to bail out dairy as closing down of dairy will mean bad debts for banks.

High leverage and lack of transparency resulted in financial losses to shareholders and bankers.

“If you add derivatives and CO2 to the mix, it can be quite sexy”

-Allen Chan, CEO Sino Forest on monetization of forestry industry

Carson also targeted $5 billion market capitalization company Sino Forest Corporation. It was a tree plantation management company, which planned to sell wood fibre to other organisations.

Muddy Waters Research report suggested that Sino-Forest had been fraudulently inflating its assets and earnings, and that the company’s shares were essentially worthless. Muddy Waters claimed that Sino Forest was a “multibillion-dollar Ponzi scheme”. Sino Forest denied allegations. But soon Sino Forest filed for bankruptcy protection.



Price Gouging, Financial Fraud and Valeant Pharma

“The butcher, the baker and the drugmaker don’t produce and sell us the things we want out of benevolence, but out of their own self-interest.”

-Adam Smith

Whenever you have allergic reaction due to insect bite, food, medication etc., effective medicine for it is Epinephrine. Mylan Pharma had developed an autoinjector called EpiPen which helps in injecting Epinephrine.

“That $608 is a list price (of EpiPens) …What Mylan takes from that, our net sales is $274, so $137 per pen…Mylan has costs that include manufacturing the product, distributing the product, enhancing the product, investing.”

-Heather Bresch, CEO Mylan

To improve profits the company decided to increase price by 500%. US does not have any price controlling mechanism. This improved profit of company and CEO of the company Heather Bresch got 600% salary hike.

“To me the drug was woefully underpriced,” he said. “It is not a question of ‘Is this fair?’ or ‘What did you pay for it?’ or ‘When was it invented?’ It should be more expensive in many ways.”

-Martin Shkerli

Martin Shkerli was a fund manager who founded a company called Turing Pharmaceutical. He acquired drug called Daraprim, it was an old drug whose patent had expired, but no generic version of it was available. Daraprim is used to treat parasitic infection in case of HIV patients, so it is a critical drug for HIV patients.

Martin decided to tightly control distribution of Daraprim, and increased price from $ 13.5 per pill to $ 750 per pill. Lifesaving drug became money making racket for Turing pharma.

This act of hiking prices beyond reasonable limits is called as price gouging. It is exploiting customers to earn windfall profits.

CEO of Valeant Pharma, Michael Pearson, used combination of price gouging and financial frauds to take company to dizzy heights and then whole thing collapsed.

Diabetic patients use metformin tablets to keep their blood sugar under control. Valeant pharma manufactures metformin tablet called Glumetza. Valeant decided to increase price by 800%. It also increased prices of other drugs in range of 300%-1600%.

“I don’t think you’d want your son to grow up and run a company in the manner that Valeant was run,”

-Warren Buffet

Michael Pearson had worked with McKinsey & Company for two decades, before taking over as CEO of Valeant Pharma. Michael came up with strategy for growth of company. He decided to slash cost of R & D (from nearly 12-15% of sales to 3%), instead of spending money on research he decided to buy smaller companies with better track record.

To make it more profitable he decided to move the company to Canada to save taxes. He slashed manpower of acquired companies. He then went for price gouging to improve the sales.

Acquisition combined with price gouging and cut in manpower and R & D cost made Valeant darling of Wall Street. Since compensation of Pearson was skewed towards stock options, he too benefited from rise in share price.

One of the major shareholder of Valeant Pharma was American investor William Ackman. Ackman fulling supported Pearson and kept buying shares of Valeant.

But year of year growth based on price gouging and cost cutting was not sustainable.

Soon Valeant started getting negative press due to price hikes. Citron Research accused Valeant of creating a network of phony pharmacies to generate “phantom sales”. Valeant recorded sales when drugs where shipped to pharmacies not when drugs were actually dispensed to patients. Citron said that Valeant dumped medicines in pharmacies, which lay unsold, but were shown as sales by Valeant. This created fake sales and profits for Valeant. Besides acquisition of companies resulted in debt of $ 30 billion.

Philidor is an online pharmacy, it was used by Valeant to push its drugs instead of giving patient freedom to choose from cheaper generic drugs.  In some cases, the drugs prescribed by doctors were altered and patients were instead sold drugs manufactured by Valeant.

Unethical practices, fake accounting and huge debt resulted in sharp fall in prices of Valeant, as a result Ackman suffered huge loss. Ackman confessed that hiring Pearson was a mistake and Pearson was sacked. He was replaced by pharma industry veteran Joseph Papa. Joseph Papa is now busy undoing the damages done by aggressive Pearson.

Ying Mingshan, Labour Camps and Anchee Min

“My time in jail only strengthened my resolve to succeed”

-Yin Mingshan

During days of Mao Zedong, many Chinese who were suspected of having “rightist views” were either executed or were sent to labour camps for reformation (having rightist views was equivalent to having a horrible  disease or committing heinous crime)

One such person who landed up in labour camp was young 20 years old student Yin Mingshan. It was alleged that he had capitalist views, which was never verified. Yin landed up in jail and then labour camp without even knowing what his crime was. Labour camp was meant for “correcting his views”. After 20 years in labour camp he was released, because communist party of China realised that they had made mistake, however there was no formal apology or compensation.

At 40 years of age and with his labour camp background, Yin found it difficult to get employment. He started earning by selling books, then he shifted to selling of bike spare parts. Later he started manufacturing bikes and cars under the brand Lifan. Today Lifan Group has turnover in billions and Yin is a billionaire.

“It’s difficult to negotiate with Indian companies…The talks proceed at such a slow pace and your country is still not as open as ours to foreign investment…Your (India’s) roads are slow, your negotiations are slow, everything is slow except for your dances.”

Yin Mingshan in The Hindu

Yin also tried to start business in India. But he did not find Indian environment favourable for business. It was communist party that threw him in jail, but today he is great supporter of communist party and his greatest inspiration is Mao Zedong.

“I’m thrilled that I raised a kid who went to Stanford and this is the miracle that would never happen in China.”

-Anchee Min in The Telegraph

Another person who too landed up in labour camp at age of 17 years was lady called Anchee Min. After spending time in labour camp, she took “leap of faith” and landed up in US. Initially she had difficult time in US, but she overcame difficulties and today is a famous author and is proud of fact that her daughter is Stanford graduate.