FORTUNE 500 2007  
FORTUNE 500    

The strange existence of Ram Charan

David Whitford, Fortune writer

Charan's roots are in a small city near Delhi in the north Indian state of Uttar Pradesh. (I can't say which city because Charan has relatives there and worries about kidnapping.) His family (he is the sixth of seven children) lived on the second floor of a two-story house they shared with his uncle's family. Together they were 17 people under one roof. "And then a portion to keep the cows," says Charan. "I personally took the cow dung and made patties out of that for burning in Mother's stove. We cut the fodder in the fodder machine for the cows. My brothers and my uncle did the milking." While they had everything they needed to survive, they had no more than that. No plumbing, no electricity, no luxuries of any kind. The children pumped water from a well. They did their nightly homework on the floor in a flickering circle of light from a mustard-oil lamp.

There was intense fighting between Hindus and Muslims in Charan's city during the struggle for Indian independence. He remembers when he was 7 years old in 1947, watching from the roof of his home as flames destroyed the cloth shop belonging to his father and uncle. After the fire the brothers started over with a shoe shop. Charan was in the shop every morning before school to help open and every afternoon after school until closing. He counted the rupees in the till at the end of the day, inspiring a lifelong appreciation for the "blood" of business. ("Any company I go to, the first thing I check is cash. How's your cash? Where's your cash flow? No blood, you got a problem right away.")

In the lulls between customers, Charan studied. Using a system of his own devising, he condensed onto a single unlined page the essence of what he had learned that day in each subject. (Today he provides similar one-page summaries for his CEO clients.) "Am I going to get good grades?" he would ask himself, knowing there was only one right answer. "Am I the master of this subject?" He knew from Sanskrit teachings that "fear, anger, laziness - these are the downfalls of human beings"; that peace of mind alone is worth striving for; that dedication and mastery are their own rewards.

One by one, most of the older children left school to work in the family business. Charan was an exception. His teachers visited the shop to beg his parents to let him continue his education. At 15, he enrolled as an engineering student at the elite Banaras University in Varanasi, a 250-mile train ride away. He was two years younger than his classmates, a humble member of the trading caste surrounded by "students whose fathers were big business people." He kept quiet because he was self-conscious about his "lousy English." He excelled, graduating third in his class. "Oh, incredible growth!" is how he describes those years. "Incredible learning!"

After college Charan was invited to participate in a work exchange program in Australia. His grandmother pawned her jewelry to buy him a plane ticket. (Charan recorded that debt, together with every cent his family spent on his education, and paid it back within a year. "This is a return of capital," he wrote on the note accompanying final payment.) Charan ran into a problem at the passport office. The application asked for his first and last names. Like most provincial Indians, Charan didn't use a family name. So he split his one name in two, and Ramcharan became Ram Charan.

It was winter when Charan arrived in Sydney. He had never been so cold in his life. A kind woman in the placement office at the University of New South Wales arranged some interviews, but job offers were hard to come by. You can always try gardening, she said. "I'll do that," Charan said. "But I can't go home because I don't have any money."

Finally he found a job as a draftsman at a utility company. He worked days and attended classes at night. Charan soon attracted the attention of his bosses, one of whom invited him one day to his office. Did Charan have any questions he wanted to ask? As a matter of fact, Charan did. He had been studying the financial statements in his spare time, attentive as always to cash flow, and had concluded that the company was borrowing money to pay its dividend. Was this true? Charan's boss was sure it was not. Until he checked with the CFO. Oops. The young Indian's standing rose accordingly.

Encouraged by his bosses, Charan left Australia after four years to attend Harvard Business School. MBA students in the early 1960s had to read and be prepared to discuss as many as three case studies a day, six days a week. One of Charan's more practical section mates suggested they divide the cases, then get together every night to share notes. "I'm not going to do that," Charan said. "I'm spending my own money. I don't care if I flunk. If I learn something, I'll succeed." Charan did not flunk. He completed all the reading and, as was his habit, summarized the notes for each case on a single sheet of paper, which he brought to class for reference during the discussion.

His roommate, Boston real estate developer John Joyce, remembers seeing Charan's grades at the end of the first trimester second year, when Charan took advanced statistics, a class normally reserved for doctoral candidates. "They were all distinction-pluses," says Joyce. "Kind of a stunning achievement."

While at Harvard, Charan worked summers for a gas company in Honolulu. Again, he took it upon himself to study the books, and again he discovered a looming problem with the dividend. This time his boss asked him to solve it. Charan came back six weeks later. "The pressures in the pipes between 10 P.M. and 4 A.M. are too high," he reported. "You take them down, and your gas leakage will go down, and you will make the dividend."