Kunal Shah on winning in India, second-order thinking, the philosophy of startups, and more
Kunal Shah, CEO and founder of Cred, discusses the unique aspects of building products in India compared to US markets, including challenges like low ARPUs, high risk aversion, and the role of trust. He shares insights on the success of Indian CEOs, the power of curiosity, and second-order thinking.
Deep Dive Analysis
19 Topic Outline
The Delta 4 Framework for Product Innovation
Success Factors of Indian CEOs in the U.S.
Risk Aversion and Entrepreneurship in India
DAUs vs. ARPU Dynamics in Indian Markets
The Unique Perception of Time in India
Why Focus Can Be a Curse in Low-Trust Markets
India's Tech Landscape: Challenges and Opportunities
Lessons Learned from Building CRED and Scaling Startups
Profit Pools as Indicators of National Values
The Indian Perspective on Startup Profitability
Navigating Criticism and Trolling as an Indian Founder
India's Promising Future for Startups
The Power and Importance of Curiosity
Learning from Problem Solvers and Avoiding 'Favorites'
Kunal's Approach to Information Gathering
The Art of Asking Great Questions
Contrarian Take: Wealth as Stored Energy
Learning from Failure and the 'Gift of Struggle'
Lightning Round
7 Key Concepts
Delta 4 Framework
A product framework stating that a product's efficiency must be at least four points higher than the existing solution (on a 1-10 scale) to be successful. Products with a Delta 4 or higher become irreversible, foster high tolerance for failure, and generate unique brag-worthy propositions (UBPs) leading to low customer acquisition costs (CACs).
Dharma
In the context of Indian mythology and management, Dharma refers to the core principles or values established by the founders of a company. Many successful Indian CEOs are seen as excelling by upholding and sustaining this Dharma rather than trying to impose their own identity or radically change the company's foundational values.
Low Trust Markets
Societies where consumers are generally wary of trying new things due to a lack of strong institutions that protect against company misbehavior. In such markets, trust tends to concentrate around established brands or 'super apps' that offer a wide range of services, as consumers prefer to stick with known entities.
Uncertainty Absorbers
Founders are described as uncertainty absorbers for employees, investors, and customers. Their role is to remove uncertainty from people's lives, and they are rewarded for this ability, though the type and amount of stability required evolve as a company scales.
Profit Pools
The areas within a country's economy where businesses generate the most profit, which Kunal suggests reflect the country's underlying values and societal structures. Analyzing profit pools can reveal what a country truly values, influencing product and business strategy.
Information Asymmetry
Kunal defines wealth as information asymmetry, where successful companies possess unique or unfair insights derived from constant curiosity and the ability to connect disparate pieces of information. This 'edge' is accumulated through continuous learning and adaptation.
Wealth as Storage of Energy
A contrarian view that wealth is fundamentally a storage of energy, not a zero-sum game, because energy itself is not zero-sum. Human civilization's ability to convert various forms of energy to its advantage has led to disproportionate wealth creation, and its concentration is seen as a natural physical phenomenon.
11 Questions Answered
Indian immigrants often possess a strong drive and 'chip on the shoulder' from their humble beginnings. Indian society's emphasis on math and logic creates a strong talent filter. Many Indian CEOs excel at 'sustenance' leadership, upholding the founders' core principles (dharma) rather than seeking personal legacy, a trait rooted in Indian cultural archetypes.
Long-term oriented societies like India are naturally more risk-averse. Failed founders can face significant social stigma, impacting personal life (e.g., marriage prospects) and career progression, as the culture often favors stable career paths over entrepreneurial endeavors and celebrates risk-takers less.
ARPU is a direct function of a country's per capita income, which is relatively low in India. While India offers cheap data and high smartphone penetration for user growth, consumers are less likely to pay for content or services when abundant free alternatives exist, making monetization challenging for many global companies.
Most Indians have never been paid an hourly salary, leading to a cultural absence of valuing time in monetary terms. This makes it difficult for consumers to justify paying for time-saving products or services, as the concept of 'efficiency' itself is not deeply ingrained in many Indian languages or cultural values.
Challenges include low female labor participation and the potential for AI to cause job displacement if not managed. Opportunities lie in leveraging AI to enhance skills, a large young demographic with increasing tech access, and a growing ecosystem of government support and digital public infrastructure, despite being a first-generation entrepreneurial market facing large-scale failures.
He learned the importance of focusing on a specific, high-value customer segment (wealthy families) and that the skills for 0-to-1 growth differ from 10-to-100 scaling. Founders must evolve, and organizations need to balance their initial DNA with the reliability required for growth, often by 'gentrifying' the team with experienced talent.
Traditional Indian businesses are often trading-based with an immediate focus on profit, making the concept of venture-backed, high-growth, later-monetization models less understood. India's tech market cap is still small, and it's the first generation of founders proving the viability of large, profitable tech companies, leading to public scrutiny over losses.
Founders should prioritize feedback from those who have achieved more or deeply understand their work, rather than reacting to general criticism or 'hyperlocal envy.' Cultivating a 'noble gas' mentality, being hard to provoke, helps maintain focus and avoid being derailed by uninformed opinions.
Curiosity signifies a willingness to adapt and learn, which is crucial for survival and growth. It enables individuals to constantly collect and connect disparate pieces of information, creating unique insights and 'information asymmetry' that Kunal equates to wealth, fostering continuous evolution rather than relying solely on existing expertise.
He forms conjectures in his mind and then extensively researches across various disciplines (e.g., chemistry, physics, human behavior, history) to find proof or disproof. He believes every piece of learning makes the brain 'more porous' for subsequent knowledge, constantly building an 'information asymmetry' for himself.
Entrepreneurs develop a unique ability to forget the emotional pain of failures but retain the lessons. He believes life is too short to make all mistakes oneself, emphasizing learning from others' failures. His own life began with a severe financial crisis, which he views as a 'gift of struggle' that continues to motivate him.
15 Actionable Insights
1. Cultivate Curiosity & Adaptability
Prioritize demonstrating curiosity over expertise to foster continuous growth and adaptation. Cultivate the security to ask ‘dumb questions’ and embrace problems you don’t know how to solve, as this drives learning and innovation, allowing you to adapt like long-lasting species.
2. Develop Second-Order Thinking
Cultivate second-order thinking by asking ‘why’ questions about origins, choices, and future consequences, especially when observing successful individuals or historical events. This practice helps uncover deep insights and trains the brain for complex problem-solving.
3. Embrace Long-Term Thinking
Cultivate a long-term mindset, as short-term thinking often leads to bad behavior and limits lasting success. Choosing a long-term perspective is a significant decision that contributes to enduring achievements and cultural resilience.
4. Sustain Founder’s Dharma
As a leader, focus on sustaining the ‘dharma’ (core principles and values) of the company’s founders rather than imposing your own identity or seeking personal legacy. This humility helps maintain the company’s pure form factor and ensures long-term success.
5. Be an Uncertainty Absorber
As an entrepreneur, embrace the role of an ‘uncertainty absorber’ for employees, investors, and customers. Your ability to provide stability and remove uncertainty is a key value proposition and a driver of reward, especially as the company scales.
6. Apply Delta 4 Framework
Use the Delta 4 framework to assess product viability by rating existing solutions and your product on a 1-10 efficiency scale. Your product needs to be at least 4 points higher to be irreversible, have high failure tolerance, and generate unique brag-worthy propositions (lower CAC).
7. Focus on Hard Problems
Regularly reflect on and prioritize solving the hardest problems, especially as a senior leader, rather than just being busy. Emulate predators by expending minimal energy for maximum impact, focusing on high-conversion, significant challenges.
8. Filter Criticism Wisely
Filter criticism by prioritizing feedback from those who have achieved more than you or deeply understand your context, while largely disregarding comments from those who lack nuance or empathy for your work. This allows you to evolve without being derailed by unproductive negativity.
9. Learn from Others’ Failures
Actively learn from the failures of others, rather than believing you are special and immune to similar setbacks. This approach allows you to gain valuable lessons without personally experiencing every mistake.
10. Align with Country Values
Analyze a country’s existing profit pools to understand its inherent values, as these dictate where economic value is created. Avoid blindly copying profit models from other countries, as they may not align with local values.
11. Build Super Apps in Low-Trust Markets
In low-trust markets (common in developing nations), focus is a ‘curse’; instead, build super apps or leverage strong, trusted brands to offer multiple services. Consumers in these markets prefer concentrated trust over trying new, specialized products.
12. Adapt to Low ARPU Markets
When building products in low ARPU markets like India, avoid directly copying Western monetization strategies. Acknowledge that revenue per user is tied to per capita income, and plan for alternative monetization or international expansion if high ARPUs are critical.
13. Understand Time Value Differences
Understand that in markets where hourly wages are uncommon (e.g., India), the concept of valuing time is different, and paying for time-saving products or services may be challenging. This impacts product design and monetization strategies.
14. Adopt Conjectural Learning
Develop a learning method by forming conjectures based on existing knowledge, then actively seeking proofs across various domains (chemistry, physics, human behavior) to validate or refine them, using validated insights to connect further dots.
15. Share Learnings Openly
Share your learnings and evolving thoughts openly, without fear of judgment from peers. Your willingness to share your journey and insights can significantly benefit and educate many others.
8 Key Quotes
a lot of CEOs have done well because they follow the dharma of the founders quite well.
Kunal Shah
If somebody who's done anything better than me gives me any amount of criticism, I will absolutely flip and make all the changes and evolve. But if I start taking feedback from everybody who do not understand and nuance and empathize with what I'm doing, I'm not saying that we should not take customers' feedback. That's very different. But let's say somebody commenting about your business who does not understand the nuance of it, you can't be reacting to everything.
Kunal Shah
envy is hyperlocal.
Kunal Shah
A curious person is somebody who is constantly demonstrating that they are not proud of their expertise and they will demonstrate extraordinary amount of excitement when they face a problem which they have no clue how to solve.
Kunal Shah
the largest employer of the world is inefficiency.
Kunal Shah
To me, wealth is nothing but storage of energy.
Kunal Shah
this is the biggest curse of successful parents, that that's the only gift they'll not be able to give to their kids, the gift of struggle that they had.
Kunal Shah
For all the challenges, India remains the most promising market that one can be building for right now because everything is going our way.
Kunal Shah
3 Protocols
Traits of Long-Lasting Species (for survival and adaptation)
Kunal Shah- Ability to reduce metabolism at will (e.g., slowing down during crises like COVID).
- Very high conversion rate on every attempt to secure 'food' (high judgment, deadly bite, not chasing many options but converting effectively when pursued).
- Ability to adapt to all sorts of crazy environmental changes (demonstrating curiosity and quick change).
Monthly Hard Problem Review (for leaders)
Kunal Shah- Ask yourself and your key reportees: 'What are the hardest problems we solved last month?'
- Assess the answers to ensure focus on significant 'displacement' (solving big, difficult problems) rather than just being busy.
Wi-Fi School for Kids (to foster second-order thinking)
Kunal Shah- Ask kids one 'why' question every meal (e.g., 'Why do humans wear jewelry?', 'Why is it so expensive to advertise on the Super Bowl?').
- Encourage them to research and come back with the answers the next day, delving into the full depth of history and causal chains.