Another cool concept i took away from my negotiations class.... The Condorcet Paradox. Imagine a situation in which people have conflicting preferences. Is it possible to influence other's choices to reach an outcome which you prefer, while at the same time appearing fair and just? The answer is a clear "Yes". Condorcet paradox could come to your rescue. Let me explain with an example.
Suppose we have three candidates, A, B and C, and that there are three voters with preferences as follows (candidates being listed in decreasing order of preference):
Voter 1: A B C
Voter 2: B C A
Voter 3: C A B
Assume you are Voter 1, so you obviously want "A" to win. The condorcet strategy to reach this outcome is as follows:
1. Choose a strategy to eliminate out least preferred candidates.
2. Specifically, for the first step, choose the candidates other than "A".
3. Ask all the members to vote between "B" and "C".
4. Between "B" and "C", both voter 1 (you) and voter 2 prefer "B".
5. So, by a vote of majority "B" will get to stay and "C" is eliminated
6. Now again choose the elimination strategy between "A" and "B".
7. Both voter 1 (you) and voter 3, prefer "A" over "B".
8. So, by a vote of majority "A" will get to stay and "B" is eliminated.
Wow... you got what you wanted and at the same time appeared fair and just by taking majority votes all the time. Cool isn't it?
Saturday, December 29, 2007
Wednesday, December 26, 2007
The Annual Circus
I read this post in a blog of an IIM student (Alok Rustagi). Found it really cool and interesting. Read on.... its about placements (I have modified some parts to suit ISB better)
An annual circus that is organized in every business school which attracts the participation of many of the ringmasters from the corporate world to hire some musketeers for performing the same jugglery at their private circuses is branded as summer placements. But a circus cannot be organized without thorough preparation and planning else the ring masters might be displeased with the current lot of monkeys on sale. So let me (a monkey) take you through the preparations which may put a wedding planner to shame.
The preparation starts well in advance for the annual ritual of selling raw uncooked pieces of meat packaged as delicacies to hungry customers. The Alum gyaan flows uninterrupted... Read about this, read about that, read about everything under the sun. Forget about academics, forget about personal life, forget about extracurrics, and some people do forget even sleep, food and other Maslow’s basic needs. We are told to mug up ready responses to clichéd questions like, Why finance/marketing/consulting? We are actually taught to lie about our ambitions, career dreams and even why are we alive. A “tell me about yourself” question becomes so difficult that it requires 100s of hours of coaching from 10s of people, 5 out of these 10 don’t know anything about their tomorrow themselves is a different thing altogether. So this process continues for a long time, we (junior monkeys) are threatened repeatedly by alums (senior monkeys) who have gone through the same process of hire-purchase last year. A perfect example of Knowledge Sharing.
So now the monkeys are ready with impressive CVs to lure the best ringmaster. They all purchase nice costumes for the big day. The first step in the actual sale is coordinated by some internal ringmasters fondly known as PlaCom members, who make sure that every monkey is looking like some imported kangaroo and every third grade ringmaster gives an impression of an expert in his field. The ringmasters come with a jazzy presentation to lure the best monkey. Isn’t it nice, monkeys luring ringmaster and ringmasters luring monkeys!! Nobody knows who the smarter monkey is though. The masters indulge in a self appraisal mode crossing all lines of modesty, telling about the quality of food in the office canteen, the gender ratio, the cleanliness of toilets etc. After this blabbering comes the next part of announcing the names of shortlisted monkeys which suit the requirements of their circus. After all they can’t ask every monkey to jump for the same height. The rejected monkeys go back to their trees, some become sad, some cry, some shout, some drink and some simply go to sleep.
Meanwhile the shortlisted monkeys are taken to a separate chamber for further screening. Monkeys who ate together, smoked together now become enemies; they fight badly for a place in the circus. After this fight some more monkeys are sent home. The remaining monkeys are now interviewed and now it’s the turn of the monkeys to put modesty and humility to shame. Every answer is exaggerated to its limit; a simple thing is blown out of proportions and presented. Glib liars rule and honest monkeys lose. The sequence of lies continues till the ringmaster finally decides on the best monkey to dance in his circus. He goes back happily and I don’t think I need to mention about the joy of the monkey involved. Finally he is proved a superior monkey and may get some attention from the opposite sex. He is proved to be more adept in lying than others, he is proved to be a decent crook, and he can surely pull off a double face more easily than others.
This process of hire-purchase continues till all monkeys get a ringmaster. During this time, monkeys jump from one selection tent to other, changing their career choices in the flight time. They vomit the good things about a circus in front of that particular ringmaster, a sure shot formula for selection. The process is hard and takes a toll on the weaker monkeys; they get disheartened and lose hope, thereby losing their confidence to jump higher. A vicious circle sets in, a less confident monkey is more likely to fall down and a fallen monkey loses more hope. But for the rescue of these monkeys come forward the internal ringmasters. They make sure that finally every monkey gets a place to jump and dance. In the end we have a bunch of happy and gay monkeys who now believe that the world is theirs.
An annual circus that is organized in every business school which attracts the participation of many of the ringmasters from the corporate world to hire some musketeers for performing the same jugglery at their private circuses is branded as summer placements. But a circus cannot be organized without thorough preparation and planning else the ring masters might be displeased with the current lot of monkeys on sale. So let me (a monkey) take you through the preparations which may put a wedding planner to shame.
The preparation starts well in advance for the annual ritual of selling raw uncooked pieces of meat packaged as delicacies to hungry customers. The Alum gyaan flows uninterrupted... Read about this, read about that, read about everything under the sun. Forget about academics, forget about personal life, forget about extracurrics, and some people do forget even sleep, food and other Maslow’s basic needs. We are told to mug up ready responses to clichéd questions like, Why finance/marketing/consulting? We are actually taught to lie about our ambitions, career dreams and even why are we alive. A “tell me about yourself” question becomes so difficult that it requires 100s of hours of coaching from 10s of people, 5 out of these 10 don’t know anything about their tomorrow themselves is a different thing altogether. So this process continues for a long time, we (junior monkeys) are threatened repeatedly by alums (senior monkeys) who have gone through the same process of hire-purchase last year. A perfect example of Knowledge Sharing.
So now the monkeys are ready with impressive CVs to lure the best ringmaster. They all purchase nice costumes for the big day. The first step in the actual sale is coordinated by some internal ringmasters fondly known as PlaCom members, who make sure that every monkey is looking like some imported kangaroo and every third grade ringmaster gives an impression of an expert in his field. The ringmasters come with a jazzy presentation to lure the best monkey. Isn’t it nice, monkeys luring ringmaster and ringmasters luring monkeys!! Nobody knows who the smarter monkey is though. The masters indulge in a self appraisal mode crossing all lines of modesty, telling about the quality of food in the office canteen, the gender ratio, the cleanliness of toilets etc. After this blabbering comes the next part of announcing the names of shortlisted monkeys which suit the requirements of their circus. After all they can’t ask every monkey to jump for the same height. The rejected monkeys go back to their trees, some become sad, some cry, some shout, some drink and some simply go to sleep.
Meanwhile the shortlisted monkeys are taken to a separate chamber for further screening. Monkeys who ate together, smoked together now become enemies; they fight badly for a place in the circus. After this fight some more monkeys are sent home. The remaining monkeys are now interviewed and now it’s the turn of the monkeys to put modesty and humility to shame. Every answer is exaggerated to its limit; a simple thing is blown out of proportions and presented. Glib liars rule and honest monkeys lose. The sequence of lies continues till the ringmaster finally decides on the best monkey to dance in his circus. He goes back happily and I don’t think I need to mention about the joy of the monkey involved. Finally he is proved a superior monkey and may get some attention from the opposite sex. He is proved to be more adept in lying than others, he is proved to be a decent crook, and he can surely pull off a double face more easily than others.
This process of hire-purchase continues till all monkeys get a ringmaster. During this time, monkeys jump from one selection tent to other, changing their career choices in the flight time. They vomit the good things about a circus in front of that particular ringmaster, a sure shot formula for selection. The process is hard and takes a toll on the weaker monkeys; they get disheartened and lose hope, thereby losing their confidence to jump higher. A vicious circle sets in, a less confident monkey is more likely to fall down and a fallen monkey loses more hope. But for the rescue of these monkeys come forward the internal ringmasters. They make sure that finally every monkey gets a place to jump and dance. In the end we have a bunch of happy and gay monkeys who now believe that the world is theirs.
Friday, December 21, 2007
A world of unequals
From today (actually yesterday) the world will not be comprised of equals. Some are more equal than the others. McKinsey shortlists came out yesterday. There were a few happy and lots of sad faces floating in ISB. Lots of back biting as well. War lines are drawn and people take positions. A few swore yesterday that they would never hire McKinsey when they become CEOs. A few said they would shortsell the company's stock (unfortunately it is a partnership firm). Another group resolved that they will make McKinsey realize its mistake of not hiring them by excelling in their careers that would make McKinsey beg them to join their firm (at a future date). Yet another club was formed yesterday - "I hate McK" and memberships to this club sold like hot cakes. And yes, there were a few (a clear minority), who reaffirmed their belief that McK was indeed the best. Curious to know what my stand is? Here you go...
First of all let me clarify that i am on the side of majority - Not by thinking, but by my status. However, my admiration and respect for the organization hasn't come down a bit. McK had explained to us in detail (through a number of interactions) the pains they undertake to evaluate the applications. The things they look for, turn offs, evaluation criteria, the time they spend on the shortlisting process etc... I am sure they would have done a thorough job before coming out with the shortlist. If at the end, your name doesn't figure in the list, it does not mean that the shortlisting process was bad. They knew what they were looking for and they found that in some applications. Yes, they could have made a few mistakes. But that is the trade off between being 100% right and the time pressures. I am sure they are OK with losing a few degree of fairness in the interest of time.
Congratulations for the all the newly crowned kings and queens. And for others, do think hard. Do think why you really wanted consulting? Is it the money or the work? Is it the glamour or your true interest? In marriages you are better off marrying someone who likes you, rather than marrying someone whom you like. Its the same with respect to career. If you do not have forceful answers to some of the questions posted above, may be you will be better off sticking to an area of your strength/ interest. Money will follow. Money has to catch up with skills... at least in most cases.
First of all let me clarify that i am on the side of majority - Not by thinking, but by my status. However, my admiration and respect for the organization hasn't come down a bit. McK had explained to us in detail (through a number of interactions) the pains they undertake to evaluate the applications. The things they look for, turn offs, evaluation criteria, the time they spend on the shortlisting process etc... I am sure they would have done a thorough job before coming out with the shortlist. If at the end, your name doesn't figure in the list, it does not mean that the shortlisting process was bad. They knew what they were looking for and they found that in some applications. Yes, they could have made a few mistakes. But that is the trade off between being 100% right and the time pressures. I am sure they are OK with losing a few degree of fairness in the interest of time.
Congratulations for the all the newly crowned kings and queens. And for others, do think hard. Do think why you really wanted consulting? Is it the money or the work? Is it the glamour or your true interest? In marriages you are better off marrying someone who likes you, rather than marrying someone whom you like. Its the same with respect to career. If you do not have forceful answers to some of the questions posted above, may be you will be better off sticking to an area of your strength/ interest. Money will follow. Money has to catch up with skills... at least in most cases.
Saturday, December 15, 2007
2022
I was feeling bored in a class and just to keep myself occupied started thinking about what shapes technology might take in the times to come and how it might impact our daily lives.... Read on
1. Information transmission: Attaching RFID tags to the items we use on a daily basis. Eg. toothpaste, deodorant, soaps, provisions.. whatever. Let these tags transmit the information about the remaining weight/ quantity of these items on a daily basis to the place where we shop. The shop can then deliver these goods directly to our homes based on our agreed reorder points.
2. Early morning health scan: Automatic health monitoring systems attached to toilets. These take our health readings on a daily basis and transmit them to our family doc. The doc can then suggest corrective/ preventive measures based on that.
3. Nutrition/ Diet: Sensors which read our brain cells, outside climate and health readings and fix our ideal diet for the day taking into account nutrition and health requirements, taste preferences etc.
4. Organizers: We should have digital secretaries which track
a. News/ happenings in the world
b. Changes in our wealth position - stocks, mutual funds, bank accounts
c. Schedule for the day - Appointments, reminders..
d. New products of interest in the market etc..
e. Other customized information which we would like to see early in the morning
and present a crux of all these stuff in a single A4 sheet to us which can be read while we are brushing in the morning
5. Mood lifters: Sensors which are able to read my mood and change lighting, TV channels, temperature and music accordingly
6. Time optimization - The digital secretaries (described above) should be able to talk with the digital secretaries of the people with whom i need to interact during the day and should be able to optimize my time. For eg, if need to meet Mr. X today and if Mr. X is planning to visit a local store today and i also intend to visit the same store today, may be it is optimal for both of us to meet at the store rather than visit each other in our offices and waste our times.
7. Energy needs: Carrying multiple chargers is a pain - laptop, mobile, Ipod, PDA.. what not? A simple wireless charging device, which can charge all these devices would be great
8. Pocket convergence - This simply means that a single device should be able to combine the utilities of all the items you generally keep in your pockets - Palmtop, MP3 player, PDA, Mobile. This device should also be in a position to substitute my car keys, home keys & office keys. May be if i send in a message/ signal from this device and upon authentication with a password i should automatically get entry into my car, home etc... I should also be able to use this device
for doing my shopping i.e as a substitute for carrying my debit/ credit cards, loyalty cards etc.
9. Physical Google - I should be in a position to search things in the real world using my PDA. Let me explain. If I want to buy a Allen Solly shirt of a particular colour if the price is less than Rs. 1000, then i should program this into my PDA. The sellers can use a spectrum and transmit their advertising messages through radio waves. If for example a particular seller, lets say Shoppers Stop is indeed having a sale and it meets all my purchase criteria, then my PDA should pick up this radio signal and intimate me, If i happen to pass Shoppers Stop. It should be able to send me a message like "Hi, the light Blue Allen Solly shirt (size 40) which you wanted is available in this Shopper's Stop (100 meters from here... address....) in fourth floor. It is not crowded now, and you will approximately take 8 minutes to complete the shopping".
10. End Of Day health scan - When i come back from work late at night and sink into a refreshing hot water bath, the bathroom should automatically do a complete health scan and give me a crisp report suggesting preventive and and corrective measures which i should adopt before going to bed, so that i get up refreshed the next day... It should also give me a quick summary of the health status of all my family members...
One thing is sure in the digital world. Nothing is impossible... May be i would read this post of mine 15 years from now and wonder, how primitive was I in my thinking...
1. Information transmission: Attaching RFID tags to the items we use on a daily basis. Eg. toothpaste, deodorant, soaps, provisions.. whatever. Let these tags transmit the information about the remaining weight/ quantity of these items on a daily basis to the place where we shop. The shop can then deliver these goods directly to our homes based on our agreed reorder points.
2. Early morning health scan: Automatic health monitoring systems attached to toilets. These take our health readings on a daily basis and transmit them to our family doc. The doc can then suggest corrective/ preventive measures based on that.
3. Nutrition/ Diet: Sensors which read our brain cells, outside climate and health readings and fix our ideal diet for the day taking into account nutrition and health requirements, taste preferences etc.
4. Organizers: We should have digital secretaries which track
a. News/ happenings in the world
b. Changes in our wealth position - stocks, mutual funds, bank accounts
c. Schedule for the day - Appointments, reminders..
d. New products of interest in the market etc..
e. Other customized information which we would like to see early in the morning
and present a crux of all these stuff in a single A4 sheet to us which can be read while we are brushing in the morning
5. Mood lifters: Sensors which are able to read my mood and change lighting, TV channels, temperature and music accordingly
6. Time optimization - The digital secretaries (described above) should be able to talk with the digital secretaries of the people with whom i need to interact during the day and should be able to optimize my time. For eg, if need to meet Mr. X today and if Mr. X is planning to visit a local store today and i also intend to visit the same store today, may be it is optimal for both of us to meet at the store rather than visit each other in our offices and waste our times.
7. Energy needs: Carrying multiple chargers is a pain - laptop, mobile, Ipod, PDA.. what not? A simple wireless charging device, which can charge all these devices would be great
8. Pocket convergence - This simply means that a single device should be able to combine the utilities of all the items you generally keep in your pockets - Palmtop, MP3 player, PDA, Mobile. This device should also be in a position to substitute my car keys, home keys & office keys. May be if i send in a message/ signal from this device and upon authentication with a password i should automatically get entry into my car, home etc... I should also be able to use this device
for doing my shopping i.e as a substitute for carrying my debit/ credit cards, loyalty cards etc.
9. Physical Google - I should be in a position to search things in the real world using my PDA. Let me explain. If I want to buy a Allen Solly shirt of a particular colour if the price is less than Rs. 1000, then i should program this into my PDA. The sellers can use a spectrum and transmit their advertising messages through radio waves. If for example a particular seller, lets say Shoppers Stop is indeed having a sale and it meets all my purchase criteria, then my PDA should pick up this radio signal and intimate me, If i happen to pass Shoppers Stop. It should be able to send me a message like "Hi, the light Blue Allen Solly shirt (size 40) which you wanted is available in this Shopper's Stop (100 meters from here... address....) in fourth floor. It is not crowded now, and you will approximately take 8 minutes to complete the shopping".
10. End Of Day health scan - When i come back from work late at night and sink into a refreshing hot water bath, the bathroom should automatically do a complete health scan and give me a crisp report suggesting preventive and and corrective measures which i should adopt before going to bed, so that i get up refreshed the next day... It should also give me a quick summary of the health status of all my family members...
One thing is sure in the digital world. Nothing is impossible... May be i would read this post of mine 15 years from now and wonder, how primitive was I in my thinking...
Thursday, December 13, 2007
Congratulations
The results for the R1 applicants have been declared. I remember the day the results came in last year. I was driving my car when the SMS reached me. My first reaction was that, I was not going to take the offer. Finally i did decide to take up the offer after a lot of soul searching.
Congratulations to all the R1 admits. Enjoy your days now and get ready for a really hectic year ahead. Amidst all your celebrations, spending some time on the following will do a lot of good:
1. Try and see if you can negotiate a good sabbatical package with your existing employer. You may hate your existing job/ boss. But having a back up plan doesn't hurt.
2. Work you best for the rest of time you spend with the organization. People forget all your earlier contributions, but will remember clearly the way you exited. True colours come out at this time. Dont spoil all the hard work and the good name you have earned till now.
3. Dont burn your bridges. Make sure you end your relationship with a positive note with your colleagues/ bosses/ clients/ competitors. Its a small world.
4. Spend some quality time on what you want to get out of ISB and why? Is it a career shift? Better job in existing field? Networking? Knowledge? Platform for launching own venture? Once you are clear on these objectives, have your back plans ready too. Then start charting your strategies
5. Spend some time on revising/ getting ideas on some subjects. Revising quant skills (for the Non IIT/ Engg) and getting some ideas on subjects like finance, economics, accounting (for the IIT/ Engg) will not hurt. You will atleast get an idea of what is waiting for you.
6. Be mentally prepared for a challenging year ahead.
7. Research on various loan options facilitated by ISB. And yes.. remember that you have other options as well. The 3 Fs - Friends, Family and Fools.
8. Meet up with other admits in you area/ city. In my view it really doesn't help much. But you will feel really special and great. And thats good.
And yes dont forget to party hard, enjoy with your family and friends and live a life of a normal human being. Catch up on sleep, movies and whatever things interest you.
Enjoy well and congratulations once again.
Congratulations to all the R1 admits. Enjoy your days now and get ready for a really hectic year ahead. Amidst all your celebrations, spending some time on the following will do a lot of good:
1. Try and see if you can negotiate a good sabbatical package with your existing employer. You may hate your existing job/ boss. But having a back up plan doesn't hurt.
2. Work you best for the rest of time you spend with the organization. People forget all your earlier contributions, but will remember clearly the way you exited. True colours come out at this time. Dont spoil all the hard work and the good name you have earned till now.
3. Dont burn your bridges. Make sure you end your relationship with a positive note with your colleagues/ bosses/ clients/ competitors. Its a small world.
4. Spend some quality time on what you want to get out of ISB and why? Is it a career shift? Better job in existing field? Networking? Knowledge? Platform for launching own venture? Once you are clear on these objectives, have your back plans ready too. Then start charting your strategies
5. Spend some time on revising/ getting ideas on some subjects. Revising quant skills (for the Non IIT/ Engg) and getting some ideas on subjects like finance, economics, accounting (for the IIT/ Engg) will not hurt. You will atleast get an idea of what is waiting for you.
6. Be mentally prepared for a challenging year ahead.
7. Research on various loan options facilitated by ISB. And yes.. remember that you have other options as well. The 3 Fs - Friends, Family and Fools.
8. Meet up with other admits in you area/ city. In my view it really doesn't help much. But you will feel really special and great. And thats good.
And yes dont forget to party hard, enjoy with your family and friends and live a life of a normal human being. Catch up on sleep, movies and whatever things interest you.
Enjoy well and congratulations once again.
Friday, December 7, 2007
Its a small world
I have take a course titled "Negotiation Analysis" this term. This could easily be one of the best courses i have taken at ISB. In our previous class, the professor was explaining that it is very important to build trust before starting to negotiate. One of the easiest ways to build trust is to strike a common chord with the other person. We could either discuss about a common friend, problem, enemy... whatever
To prove the point that it is not difficult to find common links with any person in the world, he took us through a small experiment conducted by "University of Virginia". This university had built an elaborate database of all actors and actresses. You simply type in the names of any two actors or actresses and program searches the database and tells us how they both are linked. Its fun..
Try it out for yourself using the following link
http://oracleofbacon.org/cgi-bin/oracle/movielinks
Another moral of the story - Never burn your bridges.
To prove the point that it is not difficult to find common links with any person in the world, he took us through a small experiment conducted by "University of Virginia". This university had built an elaborate database of all actors and actresses. You simply type in the names of any two actors or actresses and program searches the database and tells us how they both are linked. Its fun..
Try it out for yourself using the following link
http://oracleofbacon.org/cgi-bin/oracle/movielinks
Another moral of the story - Never burn your bridges.
Friday, November 30, 2007
Retail investors... The step sons
Does this graph strike a bell? Its is not the blood pressure reading of someone... Its the price chart of Reliance Petroleum for the past one year. It is quite possible that this graph definitely might have a strong correlation with the blood pressure of its retail shareholders. Reliance Industries has sold about 18 crore shares or 4 per cent in Reliance Petroleum (RPL) recently. The sale happened when the price was near its peak. This deal has hogged considerable media light and has opened more questions than answers. Consider the following facts in this deal:
1. With the rise in prices RPL, a refinery which is still under construction and to be ready by only next fiscal, has overtaken the combined shareholder wealth of the three PSU refiners-cum-marketers - IOC, HPCL and BPCL.
2. The modus operandi of the sale is still not known. Whether RPL shares were sold in small lots or in huge block deals to small investors or private equity firms is still a matter of conjecture. These details were neither available in the block or bulk trade details of BSE and NSE, nor was it put on the stock exchange notice board.
3. Reliance Industries communicated about this deal to the stock exchanges late on Saturday night. (Of course both the exchanges are closed on weekends)
4. Earlier this month, the RPL share was on the rise on a market rumour that Chevron could pay $6 billion for 21 per cent in RPL. The US oil major promptly repudiated the news, but Reliance was slack in denying it and RPL shares climbed northwards probably on this rumour, to a 52-week high of Rs 295. Mind you the sale happened sometime after this.
5. While all these were happening on one side, there were players who were building huge short positions (betting that the stock price will fall) in the derivatives segment. There were 16 crore shares position built up in this category (which is around 250-300% the normal levels). These short positions peaked on the same day, the promoters began selling shares. Of course we only know it post mortem. Needless to say that these guys must be laughing their way to banks.
Thats "transparency". RIL's communications post this sale are even more curious.. "The sale of RPL shares was conducted by transactions through the stock exchanges and has helped to further broad-base the shareholding pattern of RPL and is a bid to maximise overall shareholder value".. said the company statement.
"Maximize shareholder value".... thats a nice and neat phrase. At who's cost?
RIL made a profit of Rs 3662 crore in the deal... and as usual retail investors like you and me (thank god i am spared in this case) would have been caught on thier wrong foot.
Monday, November 26, 2007
Gymoconomics
If you enrol into a gym which offers us two payment options - Either a pay-per-visit of Rs.100 or a flat fee of Rs. 1000 per month, which one would you choose?
Most of us end up choosing the flat fee option. We calculate that with this option we would be better off, if we end up using the gym more than 10 times in a month. However, if we were to do a true audit of our own behaviour subsequently, a significant portion of us would have actually visited the gym less than 10 times in a month. Yet we all fall into this trap of not choosing the pay per option. Behavioural Economics throws some light..
We tend to overestimate our needs and fail to change our views on it. Most companies understand this behaviour of ours and rightfully exploit us. Most of us fall into the trap of "zero interest rates for the first three months" in our credit card. Even if we knew upfront that the rate increases to 20% after three months, we end up choosing this option thinking that we would stop using the credit after the offer period. But if we are like a typical customer, we will not have the self control to do it.
Another case in point. For pay-per-use TV, we end up choosing a bouquet as against an a-la-carte option. The problem is, we may never watch all the channels we have subscribed to.
Coming back to initial gym example - Some might argue that they chose the flat fee option because it will then force them to use the gym and in the process keep them fit. Yet if we reflect on our own actual behaviour, we will understand that this never translates into reality.
P.S: This article appeared in Business Line.
Most of us end up choosing the flat fee option. We calculate that with this option we would be better off, if we end up using the gym more than 10 times in a month. However, if we were to do a true audit of our own behaviour subsequently, a significant portion of us would have actually visited the gym less than 10 times in a month. Yet we all fall into this trap of not choosing the pay per option. Behavioural Economics throws some light..
We tend to overestimate our needs and fail to change our views on it. Most companies understand this behaviour of ours and rightfully exploit us. Most of us fall into the trap of "zero interest rates for the first three months" in our credit card. Even if we knew upfront that the rate increases to 20% after three months, we end up choosing this option thinking that we would stop using the credit after the offer period. But if we are like a typical customer, we will not have the self control to do it.
Another case in point. For pay-per-use TV, we end up choosing a bouquet as against an a-la-carte option. The problem is, we may never watch all the channels we have subscribed to.
Coming back to initial gym example - Some might argue that they chose the flat fee option because it will then force them to use the gym and in the process keep them fit. Yet if we reflect on our own actual behaviour, we will understand that this never translates into reality.
P.S: This article appeared in Business Line.
Sunday, November 25, 2007
Business Plan - II
Looks like the judges seem to share our enthusiasm. Our plan has got shortlisted for three prestigious B Plan competitions. Lets see where this takes us.
The biggest pat on our back came when we were presenting the B-plan to a panel of judges, one of whom is a Venture Capitalist. The VC commented that he is mightily interested in our area of work and has asked us get in touch with him.
Am reading some extremely interesting articles on Behavioural Economics, which explains why we do things, the way we do it. Watch this space for a few interesting pieces...
The biggest pat on our back came when we were presenting the B-plan to a panel of judges, one of whom is a Venture Capitalist. The VC commented that he is mightily interested in our area of work and has asked us get in touch with him.
Am reading some extremely interesting articles on Behavioural Economics, which explains why we do things, the way we do it. Watch this space for a few interesting pieces...
Saturday, November 17, 2007
Interviews
Attended two interviews over the last three days. Could not make it beyond Round 3 in both. Despite doing an in depth review of what could have gone wrong in either of this, i am honestly not able to come out with even a single answer.
In the consulting interview in round 2, i got to solve 4 cases. I solved all of them. The interviewer was visibly impressed and acknowledged it during the interview itself. But i got a reject mail later during the day. The story is no different in the Investment Banking interview. I got 5 puzzles in round 1, solved all of them (and that too very quickly). In Round 2, they tested my banking knowledge and understanding of stock markets (both my passions) and i did a pretty neat job. Proceeded to Round three, where they just spent 5 minutes with me and we had a general chit chat and nothing went wrong there as well. I did not take any controversial stance, no showing off, i did nothing to put of the interviewer, showed genuine interest in the job and the firm.... Reject mail promptly finds its way to my mail box later in the day.
I have never really faced failures in my life. I take these as good learning experiences. I am learning to handle failures. I will never be able to find a reason for these failures today, but i am sure someday i will be able to connect these dots and it will form a brilliant design.
Nothing can separate me and my self confidence.
In the consulting interview in round 2, i got to solve 4 cases. I solved all of them. The interviewer was visibly impressed and acknowledged it during the interview itself. But i got a reject mail later during the day. The story is no different in the Investment Banking interview. I got 5 puzzles in round 1, solved all of them (and that too very quickly). In Round 2, they tested my banking knowledge and understanding of stock markets (both my passions) and i did a pretty neat job. Proceeded to Round three, where they just spent 5 minutes with me and we had a general chit chat and nothing went wrong there as well. I did not take any controversial stance, no showing off, i did nothing to put of the interviewer, showed genuine interest in the job and the firm.... Reject mail promptly finds its way to my mail box later in the day.
I have never really faced failures in my life. I take these as good learning experiences. I am learning to handle failures. I will never be able to find a reason for these failures today, but i am sure someday i will be able to connect these dots and it will form a brilliant design.
Nothing can separate me and my self confidence.
Monday, November 12, 2007
The Business Plan
I have never written a business plan in my life. I have never forced myself to write one, for i never had any idea that is strong enough to influence me to write one. But now this is a thing of the past...
For the first time, I have written a new business plan (jointly with another friend of mine at ISB). We are excited by this idea and firmly believe that this idea may have strong implications in future. I do not know if the judges would perceive the business plan with the same enthusiasm as ours, but our journey was wonderful.
From a mere idea (a random thought) we have now travelled a long way to conceptualize and give life to this idea. It had forced us to think in a structured manner and challenge assumptions and we have come out victorious.
Or have we? As always time will tell us. But right now, its time to bask in this comforting feeling..
For the first time, I have written a new business plan (jointly with another friend of mine at ISB). We are excited by this idea and firmly believe that this idea may have strong implications in future. I do not know if the judges would perceive the business plan with the same enthusiasm as ours, but our journey was wonderful.
From a mere idea (a random thought) we have now travelled a long way to conceptualize and give life to this idea. It had forced us to think in a structured manner and challenge assumptions and we have come out victorious.
Or have we? As always time will tell us. But right now, its time to bask in this comforting feeling..
Wednesday, October 31, 2007
Random thoughts
1. Today was an important day. I got my first shortlist at ISB for a job posting. Was feeling pretty kicked up about that. Some of my friends did not make it. I would have felt much better if they had also made it. Joy multiplies when shared... I have heard from many alums that placements season is when the true colours of people come out...war lines are drawn...best of the chums become worst of the enemies. I will do everything in my control to make sure that this bug encounters a premature death in my hands.
2. When some students ask a really good question in class and when the Prof. is not able to give a convincing reply, the best thing he could do is to say "Thats a really brilliant question". He does not need to answer it, because once he gives this comment, the student who had originally asked the question is immensely satisfied and is no more interested in actually finding out the answer.
3. Came across an interesting statistics in our Business Valuation course.. India has some 22% of the world's total hair. When you are valuing a company which is into hair care products, be sure to keep this in mind along with other estimates like Net rate of hair growth amongst Indians (hair growth - hair fall), per capita consumption of the hair care product per inch of hair.... Thank god we stopped with valuing a company which is into hair care and did not delve further below..
4. The coming fortnight is going to be one of the busiest periods... Amidst our usual assignments, tests, pre reads and case studies we have a whole lot of other stuff... Mid term exams, announcement of shortlists for many other job postings, atleast 3 companies are coming to campus for interviews, Global Social Venture Business Plan competition, finance interview preparation, case interview preparation, diwali celebration, trip to chennai and probably a trip to Mumbai as well.... Mind u all this is to be done in the next fortnight...
5. One of my friend's hobby - To watch the status messages of other people in GTalk. I tried that too... i must admit it is damn interesting...
6. ISB has brought out a new policy for entreprenuers. If they are planning to start their own ventures immediately after graduation, to encourage and protect them from downside risks, the school has proposed to allow these people to sit for placements in the next year or the year after that. Brilliant
7. Keep your shopping lists ready and have a bottom less bank account.... Some of the best IPOs are around the corner.
2. When some students ask a really good question in class and when the Prof. is not able to give a convincing reply, the best thing he could do is to say "Thats a really brilliant question". He does not need to answer it, because once he gives this comment, the student who had originally asked the question is immensely satisfied and is no more interested in actually finding out the answer.
3. Came across an interesting statistics in our Business Valuation course.. India has some 22% of the world's total hair. When you are valuing a company which is into hair care products, be sure to keep this in mind along with other estimates like Net rate of hair growth amongst Indians (hair growth - hair fall), per capita consumption of the hair care product per inch of hair.... Thank god we stopped with valuing a company which is into hair care and did not delve further below..
4. The coming fortnight is going to be one of the busiest periods... Amidst our usual assignments, tests, pre reads and case studies we have a whole lot of other stuff... Mid term exams, announcement of shortlists for many other job postings, atleast 3 companies are coming to campus for interviews, Global Social Venture Business Plan competition, finance interview preparation, case interview preparation, diwali celebration, trip to chennai and probably a trip to Mumbai as well.... Mind u all this is to be done in the next fortnight...
5. One of my friend's hobby - To watch the status messages of other people in GTalk. I tried that too... i must admit it is damn interesting...
6. ISB has brought out a new policy for entreprenuers. If they are planning to start their own ventures immediately after graduation, to encourage and protect them from downside risks, the school has proposed to allow these people to sit for placements in the next year or the year after that. Brilliant
7. Keep your shopping lists ready and have a bottom less bank account.... Some of the best IPOs are around the corner.
Thursday, October 25, 2007
The extra mile
We had an official Pre Placement Talk by BCG yesterday . The talk was supposed to commence at 9.30 PM but got delayed by an hour due to late arrivals of their flight. The first part of the session went on till 12.30 AM. Since it was already pretty late, the BCG guys asked if wanted to stay on for some more time to do a live case interview. You may not believe it, but people actually said "Yes". And the BCG guys enthusiastically went on do a wonderful case till 2.30 AM. The classroom was almost packed throughout.
That is commitment. Both from the students side and the company's side. This morning i was speaking to another student and he exactly hit upon the same point. The difference between targeting a company and desiring to work in the company is Commitment.
How committed are we towards our goals? What separates wishful thinking and aims? Lots to ponder over...
That is commitment. Both from the students side and the company's side. This morning i was speaking to another student and he exactly hit upon the same point. The difference between targeting a company and desiring to work in the company is Commitment.
How committed are we towards our goals? What separates wishful thinking and aims? Lots to ponder over...
Wednesday, October 24, 2007
Defying Gravity
It is very interesting to watch the various theories people come out to justify equity valuations. We are really ingenious in coming out with creative concepts to understand crazy valuations to mentally calm ourselves and make sense of the madness..
We started with Par values and then slowly moved on to the concept of premiums, wherein we were willing to pay something higher today considering the possibility that the stock price might soon catch up. Then some analyst came and taught us the concept of P/E ratios when we graduated from the world of additions (premiums) to the world of multiples (P/Es). When it became difficult for us to justify the stock prices even according to this concept of PE, we then went one more step ahead.
We broke down PE into trailing PEs and Forward PEs and calmed ourselves saying that a forward PE after all makes more sense. However, at today's Sensex levels even the forward PE is not in a position to justify valuations. But I read an article today which seems to have an answer. The article makes a convincing argument for coming out with a new measure - Market Cap to GDP.
The crux of the article is - Market cap of a company represents a public consensus on the value of a company and GDP is the sum of value added at every stage of production of all final goods and services produced in a country by both listed and unlisted entities. Market cap and GDP of a country together form a positive relation to determine the growth potential of the economy. The article thus concludes that India's Market Cap to GDP is as of now just 0.99 as compared to other countries like Singapore (2.65), UK (1.6), US (1.35) and China (1.10). It thus represents that India is significantly undervalued even at present levels.
There is a theory in marketing which states that once consumers have purchased a certain good/ service, they then look for reasons to justify their purchase behaviour. To me these things appear to exactly satisfy this concept. I dont know what measures will these guys come up in future to still justify that we are undervalued. Let me make their life simpler by suggesting a few things...
1. Earning Potential Vs. Market Cap - India's working population and their potential PPP adjusted average wages scaled up to developed economies compared with the market capitalization
2. Population to market cap - Assuming that the per capita market cap in US is XXXX, in India it should be atleast 3.5XXXX because we beat them black and blue as far as population is concerned.
3. Employees to Market cap - A US company produces so much revenues with X amount of employees. In India, we produce the same amount with 3X employees. So our market cap should be atleast 3x times that of US.
Dont laugh at these. The gravity defying Sensex might actually make all these ratios come true pretty soon.
We started with Par values and then slowly moved on to the concept of premiums, wherein we were willing to pay something higher today considering the possibility that the stock price might soon catch up. Then some analyst came and taught us the concept of P/E ratios when we graduated from the world of additions (premiums) to the world of multiples (P/Es). When it became difficult for us to justify the stock prices even according to this concept of PE, we then went one more step ahead.
We broke down PE into trailing PEs and Forward PEs and calmed ourselves saying that a forward PE after all makes more sense. However, at today's Sensex levels even the forward PE is not in a position to justify valuations. But I read an article today which seems to have an answer. The article makes a convincing argument for coming out with a new measure - Market Cap to GDP.
The crux of the article is - Market cap of a company represents a public consensus on the value of a company and GDP is the sum of value added at every stage of production of all final goods and services produced in a country by both listed and unlisted entities. Market cap and GDP of a country together form a positive relation to determine the growth potential of the economy. The article thus concludes that India's Market Cap to GDP is as of now just 0.99 as compared to other countries like Singapore (2.65), UK (1.6), US (1.35) and China (1.10). It thus represents that India is significantly undervalued even at present levels.
There is a theory in marketing which states that once consumers have purchased a certain good/ service, they then look for reasons to justify their purchase behaviour. To me these things appear to exactly satisfy this concept. I dont know what measures will these guys come up in future to still justify that we are undervalued. Let me make their life simpler by suggesting a few things...
1. Earning Potential Vs. Market Cap - India's working population and their potential PPP adjusted average wages scaled up to developed economies compared with the market capitalization
2. Population to market cap - Assuming that the per capita market cap in US is XXXX, in India it should be atleast 3.5XXXX because we beat them black and blue as far as population is concerned.
3. Employees to Market cap - A US company produces so much revenues with X amount of employees. In India, we produce the same amount with 3X employees. So our market cap should be atleast 3x times that of US.
Dont laugh at these. The gravity defying Sensex might actually make all these ratios come true pretty soon.
Friday, October 19, 2007
The fever begins
The elective terms have started... ISB is very different these days. During the core terms there was a common thread running through all the students. All of us had the same profs, assignments, tests, exams, groups, sections... All that has changed in a single sweeping moment. Each of us now have different schedules, different profs, multiple sections, different tests... But its good fun. From this term on, we dont need to take subjects which we dont like. We even have freedom to choose the pedagogy (to a limited extent). So most of us dont complain these days.
On the other side the action is even getting better. The placement fever is slowly catching up. International companies have started flowing in. The scene as of now looks bright and sunny. Every ISB student nowadays carries his resume on a A4 sheet. Trespassers would be severely punished and asked to review his/ her resume. Almost four times a week we have one company or the other coming to ISB for an official pre-placement talk. At the end of every talk atleast 75% of the students mentally make a note that this is the company they want to join in. The other 25% would have already made that decision before the talk began.
This apart we also have the flagship events of various clubs lined up. The flagship events of the Real Estate and the Pharma club just got over. The events of the Marketing, Net Impact and the Finance clubs are scheduled for the near future.
Finally, almost every student is busy participating in the countless B-school competitions which come our way. We can do anything. We can write research papers, design mutual funds, make a marketing plan for an MNC for a multi continent launch, answer 100 questions in 30 minutes, advice a multi billion dollar company for an India entry strategy, study emerging trends in technology, advice leading CEOs what should be their next steps, write business plans.... anything.
Anything for just another bullet point in our resume to differentiate ourselves from 425 other most sought after b-school grads...
On the other side the action is even getting better. The placement fever is slowly catching up. International companies have started flowing in. The scene as of now looks bright and sunny. Every ISB student nowadays carries his resume on a A4 sheet. Trespassers would be severely punished and asked to review his/ her resume. Almost four times a week we have one company or the other coming to ISB for an official pre-placement talk. At the end of every talk atleast 75% of the students mentally make a note that this is the company they want to join in. The other 25% would have already made that decision before the talk began.
This apart we also have the flagship events of various clubs lined up. The flagship events of the Real Estate and the Pharma club just got over. The events of the Marketing, Net Impact and the Finance clubs are scheduled for the near future.
Finally, almost every student is busy participating in the countless B-school competitions which come our way. We can do anything. We can write research papers, design mutual funds, make a marketing plan for an MNC for a multi continent launch, answer 100 questions in 30 minutes, advice a multi billion dollar company for an India entry strategy, study emerging trends in technology, advice leading CEOs what should be their next steps, write business plans.... anything.
Anything for just another bullet point in our resume to differentiate ourselves from 425 other most sought after b-school grads...
Monday, October 15, 2007
Farmers of ISB
Our life at ISB closely resembles that of an Indian farmer...
1. If there is a bumper harvest, a typical Indian farmer doesn't rejoice. Instead he is sad (he gets a much lesser price). Same thing here. If an exam is easy, we feel sad, because its all relative grading. An easy exam means the class average is going to be sky high, hence even a small slippage costs us dearly.
2. If there is a draught a farmer doesn't cry if his relative misfortune is lesser. If the exam is really tough, there is a silent smile which crosses our lips.
3. The land bank owned by the farmers put together in India is huge, but we are plagued with productivity problems because of fragmented land holdings. Same stuff here... the relative knowledge we hold amongst ourselves is huge, but we are afraid to share it with others/ dont find the right incentives to share it with others. So, while we are collectively rich, many a times we are individually poor.
4. An Indian farmer knows that he might not be able to service the loan he takes, yet he takes it and enters the classic debt trap. Here too, we know that if we are not regular with our studies we will find it extremely difficult. But still, that never translates into action, despite such commitments and resolutions being made at the beginning of every term. Both of us never learn..
5. A typical Indian farmer's farming strategy can be summarized in one word - "HOPE". He has no control over the rain, wind, climate, soil conditions, expected market prices, expected costs in future in terms of transport, storage, interest rates etc.... Still he goes and farms every year with the hope that he will somehow make a profit. Again its the same story here... We almost have no clue/ control on the number of things that might affect our grade, yet we start each term with a noble intention. Most often we do not know whats hitting us and from which direction? Homeworks, Assignments, cases, class participation, mid term, end term, presentation, group projects... Yet we feed on HOPE..
Contrary to what you might expect at the end of such a pessimistic post, right now it is raining in my farm land. It is this rain, which really forced me to think, do i deserve this rain? But then i neither deserved the draught earlier....
I have decided to get drenched while i can.
1. If there is a bumper harvest, a typical Indian farmer doesn't rejoice. Instead he is sad (he gets a much lesser price). Same thing here. If an exam is easy, we feel sad, because its all relative grading. An easy exam means the class average is going to be sky high, hence even a small slippage costs us dearly.
2. If there is a draught a farmer doesn't cry if his relative misfortune is lesser. If the exam is really tough, there is a silent smile which crosses our lips.
3. The land bank owned by the farmers put together in India is huge, but we are plagued with productivity problems because of fragmented land holdings. Same stuff here... the relative knowledge we hold amongst ourselves is huge, but we are afraid to share it with others/ dont find the right incentives to share it with others. So, while we are collectively rich, many a times we are individually poor.
4. An Indian farmer knows that he might not be able to service the loan he takes, yet he takes it and enters the classic debt trap. Here too, we know that if we are not regular with our studies we will find it extremely difficult. But still, that never translates into action, despite such commitments and resolutions being made at the beginning of every term. Both of us never learn..
5. A typical Indian farmer's farming strategy can be summarized in one word - "HOPE". He has no control over the rain, wind, climate, soil conditions, expected market prices, expected costs in future in terms of transport, storage, interest rates etc.... Still he goes and farms every year with the hope that he will somehow make a profit. Again its the same story here... We almost have no clue/ control on the number of things that might affect our grade, yet we start each term with a noble intention. Most often we do not know whats hitting us and from which direction? Homeworks, Assignments, cases, class participation, mid term, end term, presentation, group projects... Yet we feed on HOPE..
Contrary to what you might expect at the end of such a pessimistic post, right now it is raining in my farm land. It is this rain, which really forced me to think, do i deserve this rain? But then i neither deserved the draught earlier....
I have decided to get drenched while i can.
Friday, October 12, 2007
Pehla Nasha...
It was somewhere about an year back that i first saw her. She was sitting like an angel amidst countless earthly beings. It was love at first sight for me. There was something inside me which said that we were made for each other.
Overcoming my initial trepidations and with an anxious heart, i slowly proceeded towards her. She was openly flaunting her looks and men of all statures were gaping. Our first interaction was not so pleasant. I thought she acted pricey and arrogant. Anyways I had already lost my heart and decided to go against what my rational mind was screaming from inside and accepted her. My life was never the same again.
I am at times very demanding and if someone doesn't meet my expectations, i lose interest very fast. But not once had she ever let me down. There were times in which she had cooperated with me throughout the day and the night. She has donned various roles to please me. She has given me the best of the news and she had stayed with me right through when things did not seem so pleasant. She had sang for me, showed me the worlds which i never knew existed, had entertained me when i was bored of life and had revealed her secrets to me. Many a times, i had woken her up at all unearthly hours, but not once had she ever complained. I am not sure if my life at ISB would have ever been the same without her.
But she is getting older by the day... her once beautiful body has today lost its sheen and is marred by scratches, her battery life is running down.... My sweet HP Laptop
Overcoming my initial trepidations and with an anxious heart, i slowly proceeded towards her. She was openly flaunting her looks and men of all statures were gaping. Our first interaction was not so pleasant. I thought she acted pricey and arrogant. Anyways I had already lost my heart and decided to go against what my rational mind was screaming from inside and accepted her. My life was never the same again.
I am at times very demanding and if someone doesn't meet my expectations, i lose interest very fast. But not once had she ever let me down. There were times in which she had cooperated with me throughout the day and the night. She has donned various roles to please me. She has given me the best of the news and she had stayed with me right through when things did not seem so pleasant. She had sang for me, showed me the worlds which i never knew existed, had entertained me when i was bored of life and had revealed her secrets to me. Many a times, i had woken her up at all unearthly hours, but not once had she ever complained. I am not sure if my life at ISB would have ever been the same without her.
But she is getting older by the day... her once beautiful body has today lost its sheen and is marred by scratches, her battery life is running down.... My sweet HP Laptop
Monday, October 1, 2007
Buffett and the Beast
Some of the best quotes of the man who tamed the beast (read markets...)
1. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
2. Wide diversification is only required when investors do not understand what they are doing.
3. Only when the tide goes out do you discover who's been swimming naked
4. Chains of habit are too light to be felt until they are too heavy to be broken
5. If past history was all there was to the game, the richest people would be librarians
6. When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
7. In the business world, the rearview mirror is always clearer than the windshield
8. Our future rates of gain will fall far short of those achieved in the past. Berkshire's capital base is now simply too large to allow us to earn truly outsized returns. If you believe otherwise, you should consider a career in sales but avoid one in mathematics (In his letter to the shareholders)
9. Price is what you pay. Value is what you get.
10. In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world.
1. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
2. Wide diversification is only required when investors do not understand what they are doing.
3. Only when the tide goes out do you discover who's been swimming naked
4. Chains of habit are too light to be felt until they are too heavy to be broken
5. If past history was all there was to the game, the richest people would be librarians
6. When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
7. In the business world, the rearview mirror is always clearer than the windshield
8. Our future rates of gain will fall far short of those achieved in the past. Berkshire's capital base is now simply too large to allow us to earn truly outsized returns. If you believe otherwise, you should consider a career in sales but avoid one in mathematics (In his letter to the shareholders)
9. Price is what you pay. Value is what you get.
10. In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world.
Saturday, September 29, 2007
The Gladiators
When you enter ISB you will be put into study groups (the composition of which is decided by ISB). You and your study group (of 4 or 5 people) will stick together, like the Gladiators trying to fight off and survive whatever comes off out of the gate, in the first four terms. All your group assignments, presentations, write ups etc have to be submitted group wise. So it goes without saying that a good portion of your fortune at ISB in terms of grades is decided by your study group.
I must say that one of the best parts of my stay at ISB was my study group. Not because we four were the toppers of the batch or we scored highest in every assignment, but because we cried together and laughed together, we enjoyed and suffered and we did learn a lot from each other...
Here goes my blog in the honour of my study group - C11. A brief profile of the rockstars of this group
Kaustubh Verma: He can sing in 9 languages, can play the guitar (all learnt by himself) and he is one of the most "networked". He will be the first to invite others for a game of cricket/ tennis, he is the first to vote for a party, he is the first to take a short break in any assignment, he is active in most clubs - consulting, operations, energy, social life.....but if you really think he is a Poet (which is what he claims in his blog - http://www.kaustubhverma.blogspot.com/), you are badly mistaken. Whenever our group reaches a deadend in any assignment, we all look up to him and he will not disappoint us... This man from L & T is truly Lovable & Talented..
Sudhanshu Dutt: We call him Mr. President, for he leads the Real Estate club at ISB. He is one of the most organized persons i have ever seen. A health and fitness freak. A work machine. He never gets tired and its rumored that he can study non-stop for 100 hours. In ISB sometimes.. sorry most times, the amount of work involved is herculean. And many people just give up, but not Chugi (his nick name). Irrespective of how many assignments, how many pre reads or how many cases have to be read, our man is always prepared for everything. Dont know where he gets the time.. Its going to be easy for the real estate firms this year at ISB, they know where to look for...
Ashutosh Kumar: (http://www.ashutoshatisb.blogspot.com/) A banker. If i were to describe him in just one word, i would say "Determination". He is a truly self-made man. Hails from Bihar, studied physics but then joined a bank. Rose through the ranks, worked hard for GMAT and here he is now at ISB. If he has reached till here, i know nothing can stop him from his dreams. May be he will start his own bank someday...
Rangarajan Krishnan: Come on, you know me... i am not going to bore you..
Yesterday we finished our last group assignment for the core terms and went out together for dinner. My best wishes to these gladiators to come out in flying colours in the days to come...
Thursday, September 27, 2007
Connecting the dots
Unplanned chance random events sometimes can have profound implications in our lives. Many a times, if we look back at our own lives, we will find that it is these chance events that leave a indelible mark on our lives. These chance events can guide us, warn us and put us back on our life's path.
History is abound with examples... Narayana Murthy might have never started Infosys, had he not had a chance encounter with a computer scientist on a breakfast table... Apple Computers might have never thought of GUIs, fonts and fancy stuff had Steve Jobs not learnt Calligraphy (totally unplanned though) during his college days. Today our finance prof was telling that he decided to take up finance seriously, only when his marketing prof asked him a question for which he did not know the answer.
To quote Steve Jobs.. "Its not always easy to connect these dots (random events) looking forward, but these dots will certainly form a brilliant design when we look back someday"
History is abound with examples... Narayana Murthy might have never started Infosys, had he not had a chance encounter with a computer scientist on a breakfast table... Apple Computers might have never thought of GUIs, fonts and fancy stuff had Steve Jobs not learnt Calligraphy (totally unplanned though) during his college days. Today our finance prof was telling that he decided to take up finance seriously, only when his marketing prof asked him a question for which he did not know the answer.
To quote Steve Jobs.. "Its not always easy to connect these dots (random events) looking forward, but these dots will certainly form a brilliant design when we look back someday"
Wednesday, September 26, 2007
A million dollars or knighthood
A million dollars - No more cramming up crazy management theories, no more assignments, no more mind numbing case studies, no more tests, no more getting crushed between bird-brained subordinates and dinosaur-egoed bosses, no more alarm clocks, no more traffic signals, no more deadlines, no more appraisals, no more worries..... Just beaches, babes, bars and BMWs... Sounds too good to be true.
....but wait a minute. What sort of a life is this? Whats the one differentiating factor between you and an animal. Whats your motivation to live? What do you look forward to in your life? Whats the one thing you want to accomplish today? Is there one being in this world which would look upon you as a role model?.... this side of the coin looks terrible...
How about knighthood? This option seems to address all the downsides of the million dollar option. Kids look up to you as their role model. You automatically command respect wherever you go. You are consulted upon on all matters of importance and you have a meaningful life. But whats the use of knighthood if you don't have the means to enjoy your life or live comfortably? How about leading a life of a pauper knight? You command respect alright, but you don't have money to fill your own stomach. A knighthood sans money looks terribly miserable too..
Be it a million dollars or a knighthood, what matters is what would you do with it once you achieve it. Both are meaningless if not put to proper use.
What do I want? I want to be a knight with million dollars. But there is one difference though. I don't want either of these thrusted on me. I don't want to wake up one fine morning and realize that I am either a knight or a millionaire from that day on. I want to earn it. I am convinced that the journey towards achieving these would be as meaningful as the destination itself. I want to experience the immense sense of satisfaction and the feeling of a life well-lived, when I get there. I want to show others that it is not difficult to achieve...
....but wait a minute. What sort of a life is this? Whats the one differentiating factor between you and an animal. Whats your motivation to live? What do you look forward to in your life? Whats the one thing you want to accomplish today? Is there one being in this world which would look upon you as a role model?.... this side of the coin looks terrible...
How about knighthood? This option seems to address all the downsides of the million dollar option. Kids look up to you as their role model. You automatically command respect wherever you go. You are consulted upon on all matters of importance and you have a meaningful life. But whats the use of knighthood if you don't have the means to enjoy your life or live comfortably? How about leading a life of a pauper knight? You command respect alright, but you don't have money to fill your own stomach. A knighthood sans money looks terribly miserable too..
Be it a million dollars or a knighthood, what matters is what would you do with it once you achieve it. Both are meaningless if not put to proper use.
What do I want? I want to be a knight with million dollars. But there is one difference though. I don't want either of these thrusted on me. I don't want to wake up one fine morning and realize that I am either a knight or a millionaire from that day on. I want to earn it. I am convinced that the journey towards achieving these would be as meaningful as the destination itself. I want to experience the immense sense of satisfaction and the feeling of a life well-lived, when I get there. I want to show others that it is not difficult to achieve...
Tuesday, September 25, 2007
Economic logic
This term we have a paper on Government, Business and Society. The professor who taught us this course, Mr. Mudit Kapoor presented us some of the most compelling economic arguments we have ever encountered. And this course is clearly is one of my favourites at ISB.
Some of the counter intuitive economic logic I came across in this course are:
1. Government subsidies incentivizes farmer suicides.
2. Private sector benefits maximum from regulation.
3. A bribe could actually help in better economic allocation
4. Markets can be used for creating cleaner environments
5. Being righteous may be good for the individual, but in some cases the society is worse off
Some other interesting stuff which came along our way...
CEOs:
1. Stock prices on an average have historically increased, when a CEO dies
2. There is some empirical evidence which suggests that CEOs are actually being compensated for luck and nothing else.
Rules of Economics:
1. Every economist has an equivalent opposite economist
2. And both are wrong
Useful advice - Never ask an economist for a solution:
Some economists in US were asked to study the impact of making seat belts compulsory, on accidents. They came out with their findings that making seat belts compulsory would actually increase the number of accidents, as people would start driving more recklessly. So, when these economists were asked to come out with a solution to counter this problem, their suggestion was
"Put a dagger on the steering wheel"
Some of the counter intuitive economic logic I came across in this course are:
1. Government subsidies incentivizes farmer suicides.
2. Private sector benefits maximum from regulation.
3. A bribe could actually help in better economic allocation
4. Markets can be used for creating cleaner environments
5. Being righteous may be good for the individual, but in some cases the society is worse off
Some other interesting stuff which came along our way...
CEOs:
1. Stock prices on an average have historically increased, when a CEO dies
2. There is some empirical evidence which suggests that CEOs are actually being compensated for luck and nothing else.
Rules of Economics:
1. Every economist has an equivalent opposite economist
2. And both are wrong
Useful advice - Never ask an economist for a solution:
Some economists in US were asked to study the impact of making seat belts compulsory, on accidents. They came out with their findings that making seat belts compulsory would actually increase the number of accidents, as people would start driving more recklessly. So, when these economists were asked to come out with a solution to counter this problem, their suggestion was
"Put a dagger on the steering wheel"
Sunday, September 23, 2007
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Tuesday, September 18, 2007
Life under a normal curve
If there is one thing that you are going to hate in ISB it is the Normal curve. ISB follows a relative grading system and uses a "bell curve" grading system, wherein the grades are assigned according to the frequency distribution known as the Normal distribution. While it does benefits a few, its victims easily outnumber the beneficiaries.
Why should grades be normative? When scores are referenced to the performance of group member, there will always be students who have lower scores than this, even if the individual student scores are themselves quite high when evaluated against specific performance criteria or standards. Conversely, if all students perform poorly relative to a larger population, even the highest graded students may be failing to meet standards.
More fundamentally, this whole process is based on a deep misunderstanding of statistics. Many measurements can be approximated by the normal distribution, not the other way around. A class’s marks are not an imperfect observation of what should be the normal distribution. The marks are what they are. The normal distribution might or might not approximate that. If it does not, mathematically transforming the grades to match it is meaningless. Instructors should grade papers according to their intrinsic merit and give out whatever grades result even if the distribution results in a lot of A's or F's. On tests, an instructor should know, before looking at the results, what score will be required for each grade and what grade this paper deserves. How can the performance of one student go down just because the someone else has also performed well? Why should good grades be a commodity in short supply?
I have no grudges against using the normal distribution where it is appropriate (e.g., in estimating confidence intervals from random samples). To make this correct usage clear, it might be wise to revert to the original phrase used to describe the normal curve - "Normal curve of error." This would make it clear that the normal bell curve is "normal" only if we are dealing with random errors. Social life, grading, IQ, attitudes etc. however, are not a lottery, and there is no reason to expect these variables to be normally distributed.
I hope the law of averages will catch up and today's victims (Me) will benefit someday from the same stupid concept.
Why should grades be normative? When scores are referenced to the performance of group member, there will always be students who have lower scores than this, even if the individual student scores are themselves quite high when evaluated against specific performance criteria or standards. Conversely, if all students perform poorly relative to a larger population, even the highest graded students may be failing to meet standards.
More fundamentally, this whole process is based on a deep misunderstanding of statistics. Many measurements can be approximated by the normal distribution, not the other way around. A class’s marks are not an imperfect observation of what should be the normal distribution. The marks are what they are. The normal distribution might or might not approximate that. If it does not, mathematically transforming the grades to match it is meaningless. Instructors should grade papers according to their intrinsic merit and give out whatever grades result even if the distribution results in a lot of A's or F's. On tests, an instructor should know, before looking at the results, what score will be required for each grade and what grade this paper deserves. How can the performance of one student go down just because the someone else has also performed well? Why should good grades be a commodity in short supply?
I have no grudges against using the normal distribution where it is appropriate (e.g., in estimating confidence intervals from random samples). To make this correct usage clear, it might be wise to revert to the original phrase used to describe the normal curve - "Normal curve of error." This would make it clear that the normal bell curve is "normal" only if we are dealing with random errors. Social life, grading, IQ, attitudes etc. however, are not a lottery, and there is no reason to expect these variables to be normally distributed.
I hope the law of averages will catch up and today's victims (Me) will benefit someday from the same stupid concept.
Friday, September 14, 2007
The Emperor’s clothes – Part II
All of us would have at sometime heard the fairy tale – “The Emperor’s New Clothes”, the story of a little boy puncturing the pretensions of the emperor's court. We now have a sequel – The Subprime
Here is how the whole thing had worked –
Scene 1: Home loan borrowers with less than stellar credit were approved for a mortgage. The emperor (lenders) obviously wanted to get the monkey off his back and so invited the wise men – The investment agencies.
Scene 2: The rating agencies knew that the emperor was indeed naked. But may be they were willing to pull of an impressive story, for a fee. All of a sudden the risky consumer loans were reconstituted into something seemingly no more risky than a government Treasury bond and highest ratings were being issued. Of course like the wise men in the original fairy tale they too claimed that those who do not see these investments as safe were either stupid or not fit for their position.
Scene 3: Enter the investment banks. (I bet they knew clearly that the emperor was indeed naked). But why miss an investment opportunity, if the whole world is ready to believe that the emperor’s clothes’ are indeed magnificent, based on the claims of the wise men? Result – dress up these pigs into princess and sell them to the suitors.
Scene 4: It took a little boy to say that the emperor is indeed naked to actually wake up the world from its blissful slumber. Skeletons are being unearthed by the hour - allegations of predatory lending, misrepresentation and omissions related to the valuation of the loans and the profits from selling or servicing them, suitability of investments, breach of contract related to loan servicing, fraudulent conveyance issues, collusions with rating agencies…
It might be of interest to note that one of the wise men in our drama – Moody’s earned about $3 billion from rating structured deals from 2002 through 2006, and this area accounted for 44% of its 2006 revenues. Since the subprime fallout S&P has downgraded more than $ 12 Billion worth of these bonds and Moody’s has followed suit with downgrading more than $ 5 billion.
In one of the recent conference calls which this rating agency had with a hedge fund, the MD of the fund had a question:
I'd like to understand why you're making this move today and why you didn't do this many, many months ago."
It's a good question," responded the analyst.
"You need to have a better answer," said the MD.
Here is how the whole thing had worked –
Scene 1: Home loan borrowers with less than stellar credit were approved for a mortgage. The emperor (lenders) obviously wanted to get the monkey off his back and so invited the wise men – The investment agencies.
Scene 2: The rating agencies knew that the emperor was indeed naked. But may be they were willing to pull of an impressive story, for a fee. All of a sudden the risky consumer loans were reconstituted into something seemingly no more risky than a government Treasury bond and highest ratings were being issued. Of course like the wise men in the original fairy tale they too claimed that those who do not see these investments as safe were either stupid or not fit for their position.
Scene 3: Enter the investment banks. (I bet they knew clearly that the emperor was indeed naked). But why miss an investment opportunity, if the whole world is ready to believe that the emperor’s clothes’ are indeed magnificent, based on the claims of the wise men? Result – dress up these pigs into princess and sell them to the suitors.
Scene 4: It took a little boy to say that the emperor is indeed naked to actually wake up the world from its blissful slumber. Skeletons are being unearthed by the hour - allegations of predatory lending, misrepresentation and omissions related to the valuation of the loans and the profits from selling or servicing them, suitability of investments, breach of contract related to loan servicing, fraudulent conveyance issues, collusions with rating agencies…
It might be of interest to note that one of the wise men in our drama – Moody’s earned about $3 billion from rating structured deals from 2002 through 2006, and this area accounted for 44% of its 2006 revenues. Since the subprime fallout S&P has downgraded more than $ 12 Billion worth of these bonds and Moody’s has followed suit with downgrading more than $ 5 billion.
In one of the recent conference calls which this rating agency had with a hedge fund, the MD of the fund had a question:
I'd like to understand why you're making this move today and why you didn't do this many, many months ago."
It's a good question," responded the analyst.
"You need to have a better answer," said the MD.
Wednesday, September 12, 2007
EOGO
This is the new mantra at ISB. Most of us in the current batch, have volunteered to be part of the Admissions Task Force Committee. As a part of this group we undertake activities such as interacting with prospective candidates, resolving queries, providing guidance, mentoring etc..
This year ISB has invited each of us to encourage atleast one brilliant student with leadership potential, to apply to ISB. After having identified this candidate, we could then refer them (along with our comments) to the admissions committee. Simply put this policy is called "Each One Get One" or EOGO...
Am still looking around for exercising my right...
This year ISB has invited each of us to encourage atleast one brilliant student with leadership potential, to apply to ISB. After having identified this candidate, we could then refer them (along with our comments) to the admissions committee. Simply put this policy is called "Each One Get One" or EOGO...
Am still looking around for exercising my right...
Wednesday, September 5, 2007
Windfall weeds
One of my colleagues circulated a very interesting entrepreneurial story, which illustrates the power of Internet and the new opportunities it has opened for all of us.
Here is an entrepreneur who did not have any earth shattering idea. Nor did she have money. But she has created a successful venture of her own. Here goes the story...
Linda Katz sells tumbleweeds on the Web.The lowly tumbleweed is a nuisance to most inhabitants of Western Kansas. The Russian thistle bushes are everywhere. They clog drainage ditches, pile up against fence rows, and have even been known to cause traffic accidents.
"It all started as a joke,"says Katz. She asked her son to build her a family Web page so she could communicate with friends and give it the tongue-in-cheek name Prairie Tumbleweed Farm. Never mind that she didn't even live on a farm, but in a subdivision. Nevermind that you can't cultivate tumbleweed, which spreads its seed as it tumbles in the wind. For authenticity's sake, Katz added a price list ($35 for a big weed, $25 for a midsize one, $20 for the small economy model). And she guaranteed that each tumbleweed was "Y2K compliant" and quality-tested to tumble in even the gentlest of breezes.
Remember, Katz wasn't looking for business, but it found her all the same, thanks to the power of Web search engines. Orders started to pour in from all the places where people love Hollywood Westerns: Alaska, Austria, Britain, Hong Kong, India. Japanese customers proved so eager that she has added a section to her Web site in Japanese. Movie and TV production companies in Britain, Finland, and the U.S. have ordered tumbleweed for props, too, including a $1,000 order for the children's show Barney & Friends. A scientist from New Mexico wanted tumbleweed for research purposes. Many of Katz's newfound customers use tumbleweed to decorate their homes, even in lieu of the traditional Christmas tree.
During Katz's first two months on the Web, the site logged 2,000 visitors. By mid-January, the number had grown to more than 56,000. Katz says she's making about 30 tumbleweed sales a week, which suggests revenues of about $40,000 a year.
That may not sound like much, but neither are her costs. She fills orders by grazing Kansas fence lines for tumbleweed and buys her mailing boxes in bulk lots. For labor, Katz uses her five nieces and nephews (aged 11 to 19) to help collect the stuff, and she gives them a share of the profits.
So why are u waiting? Go find something to sell on the net...
P.S: For the curious souls who wish to check if this is actually true... check out http://www.prairietumbleweedfarm.com
Here is an entrepreneur who did not have any earth shattering idea. Nor did she have money. But she has created a successful venture of her own. Here goes the story...
Linda Katz sells tumbleweeds on the Web.The lowly tumbleweed is a nuisance to most inhabitants of Western Kansas. The Russian thistle bushes are everywhere. They clog drainage ditches, pile up against fence rows, and have even been known to cause traffic accidents.
"It all started as a joke,"says Katz. She asked her son to build her a family Web page so she could communicate with friends and give it the tongue-in-cheek name Prairie Tumbleweed Farm. Never mind that she didn't even live on a farm, but in a subdivision. Nevermind that you can't cultivate tumbleweed, which spreads its seed as it tumbles in the wind. For authenticity's sake, Katz added a price list ($35 for a big weed, $25 for a midsize one, $20 for the small economy model). And she guaranteed that each tumbleweed was "Y2K compliant" and quality-tested to tumble in even the gentlest of breezes.
Remember, Katz wasn't looking for business, but it found her all the same, thanks to the power of Web search engines. Orders started to pour in from all the places where people love Hollywood Westerns: Alaska, Austria, Britain, Hong Kong, India. Japanese customers proved so eager that she has added a section to her Web site in Japanese. Movie and TV production companies in Britain, Finland, and the U.S. have ordered tumbleweed for props, too, including a $1,000 order for the children's show Barney & Friends. A scientist from New Mexico wanted tumbleweed for research purposes. Many of Katz's newfound customers use tumbleweed to decorate their homes, even in lieu of the traditional Christmas tree.
During Katz's first two months on the Web, the site logged 2,000 visitors. By mid-January, the number had grown to more than 56,000. Katz says she's making about 30 tumbleweed sales a week, which suggests revenues of about $40,000 a year.
That may not sound like much, but neither are her costs. She fills orders by grazing Kansas fence lines for tumbleweed and buys her mailing boxes in bulk lots. For labor, Katz uses her five nieces and nephews (aged 11 to 19) to help collect the stuff, and she gives them a share of the profits.
So why are u waiting? Go find something to sell on the net...
P.S: For the curious souls who wish to check if this is actually true... check out http://www.prairietumbleweedfarm.com
Tuesday, September 4, 2007
Term 4
The last of our core terms has started yesterday. This term promises to be completely action packed.
This term is one week shorter than our usual terms. Additionally we have a host of interesting activities scheduled to take place during the term. There is a session conducted by McKinsey on Structured Problem Solving. Many international names are expected to come to campus during this term and address the student body. I just came back from a session conducted by Credit Suisse (This was scheduled at 7 AM, because that's the only time they can catch the batch as a whole.... Around 125 students attended). Citibank will also be interviewing candidates for their scholarship program this term. We have the flagship event of the Real Estate club too in this term. It brings together some top academia and professionals to deliberate on the topic "Indian Real Estate Scenario".
This apart we have a lot of club activities planned for during the term. Investment banking workshops, CV preparation sessions, case preparation sessions and a crash course on options and futures. We also need to get started on our interview preparations in case we are targeting any of the international names which might be visiting the campus late October. To top it all I am doing an ELP (Experiential Learning Program) for a private equity firm and undertaking an independent study on the IPO markets.
Today is September 4th and our end term exams commences on October 4th. Exactly a month away. And yes..... we have to study too..
This term is one week shorter than our usual terms. Additionally we have a host of interesting activities scheduled to take place during the term. There is a session conducted by McKinsey on Structured Problem Solving. Many international names are expected to come to campus during this term and address the student body. I just came back from a session conducted by Credit Suisse (This was scheduled at 7 AM, because that's the only time they can catch the batch as a whole.... Around 125 students attended). Citibank will also be interviewing candidates for their scholarship program this term. We have the flagship event of the Real Estate club too in this term. It brings together some top academia and professionals to deliberate on the topic "Indian Real Estate Scenario".
This apart we have a lot of club activities planned for during the term. Investment banking workshops, CV preparation sessions, case preparation sessions and a crash course on options and futures. We also need to get started on our interview preparations in case we are targeting any of the international names which might be visiting the campus late October. To top it all I am doing an ELP (Experiential Learning Program) for a private equity firm and undertaking an independent study on the IPO markets.
Today is September 4th and our end term exams commences on October 4th. Exactly a month away. And yes..... we have to study too..
Wednesday, August 29, 2007
Should I or should I not?
One of the favorite questions of many prospective applicants to ISB is “My GMAT score is ____ (around 600), should I apply to ISB with this score?” And the most popular reply for this question is “ISB evaluates the application as an overall package and GMAT score is only one of the ingredients, hence you can apply to ISB”. Nine out of ten people you meet will give the above answer.
I beg to differ on this issue. Actually the way this question is framed is itself self-defeating. When you ask this question to someone you are mentally not prepared to take ‘no’ for an answer and the person who answers this question has no incentive to give you a honest reply (at the risk of not offending you) and hence the obvious choice is, why not take a chance and apply?
My own perspective on this issue is that you and you alone can answer this question honestly. Nobody else. While thinking about this question, please do consider the following aspects:
1. ISB is a very academically demanding course. In a short span of about 50 weeks you would be taking around 32 courses, 60 exams, 200 assignments, amidst attending on an average about 50-60 guest lectures, taking up some independent studies, experiential learning projects, planning an entrepreneurial venture, consulting assignments, b-plan and b-school competitions, professional club activities, networking, placement preparations and attending atleast about 50 parties.
2. ISB follows a relative grading system. Hence your own grade in a course depends on the person who scores best. In a typical ISB batch you will always find student experts in every field. There will always be economics majors, finance experts, quant jockeys, IT veterans, and some people for whom statistics is a hobby (I really find this one very hard to digest). My own batch represents people from over 25 sectors. In a world of relative grading remember that you are competing against these best brains for your own grades.
In the light of the above two points it should be quite evident that ISB is not for the weak hearted. To get into ISB is only a means of achieving something else in life. It is not an end in itself.
Hence to survive in this competitive environment, notwithstanding your other achievements, academic excellence is crucial. It is hence very important for you to ask the question “Is my GMAT score a real reflection of my academic performance?” It may sometime happen that your GMAT score doesn’t truly reflect your abilities. In these cases where you believe that your potential is far higher and that your low GMAT score is only an aberration, either retake the GMAT or please go ahead and apply to ISB by all means. But if you believe that your low score is fairly reflective of your academic performance (be honest), refrain from applying to ISB blindly (notwithstanding what others might say). Concentrate first on fixing this issue and then apply to ISB. Otherwise you might end up giving up more than what you can ever hope to recoup.
P.S: The views expressed here are purely personal. I am sure even amongst the current/ past ISB students, there would be a 1000 other differing views. So be it. That’s what makes life interesting.
I beg to differ on this issue. Actually the way this question is framed is itself self-defeating. When you ask this question to someone you are mentally not prepared to take ‘no’ for an answer and the person who answers this question has no incentive to give you a honest reply (at the risk of not offending you) and hence the obvious choice is, why not take a chance and apply?
My own perspective on this issue is that you and you alone can answer this question honestly. Nobody else. While thinking about this question, please do consider the following aspects:
1. ISB is a very academically demanding course. In a short span of about 50 weeks you would be taking around 32 courses, 60 exams, 200 assignments, amidst attending on an average about 50-60 guest lectures, taking up some independent studies, experiential learning projects, planning an entrepreneurial venture, consulting assignments, b-plan and b-school competitions, professional club activities, networking, placement preparations and attending atleast about 50 parties.
2. ISB follows a relative grading system. Hence your own grade in a course depends on the person who scores best. In a typical ISB batch you will always find student experts in every field. There will always be economics majors, finance experts, quant jockeys, IT veterans, and some people for whom statistics is a hobby (I really find this one very hard to digest). My own batch represents people from over 25 sectors. In a world of relative grading remember that you are competing against these best brains for your own grades.
In the light of the above two points it should be quite evident that ISB is not for the weak hearted. To get into ISB is only a means of achieving something else in life. It is not an end in itself.
Hence to survive in this competitive environment, notwithstanding your other achievements, academic excellence is crucial. It is hence very important for you to ask the question “Is my GMAT score a real reflection of my academic performance?” It may sometime happen that your GMAT score doesn’t truly reflect your abilities. In these cases where you believe that your potential is far higher and that your low GMAT score is only an aberration, either retake the GMAT or please go ahead and apply to ISB by all means. But if you believe that your low score is fairly reflective of your academic performance (be honest), refrain from applying to ISB blindly (notwithstanding what others might say). Concentrate first on fixing this issue and then apply to ISB. Otherwise you might end up giving up more than what you can ever hope to recoup.
P.S: The views expressed here are purely personal. I am sure even amongst the current/ past ISB students, there would be a 1000 other differing views. So be it. That’s what makes life interesting.
Saturday, August 25, 2007
Sinister Subsidies
I attended an excellent presentation on WTO conducted by Mr. Shishir Priyadarshi, former officer of the IAS and presently a Director in WTO. He presented us some very interesting perspectives.
For all the hype about India being over protectionist in the WTO negotiations, consider the following facts:
For all the hype about India being over protectionist in the WTO negotiations, consider the following facts:
India's agriculture subsidies averages about 4% of the value of the agriculture goods produced. The comparable percentages for US, EC and Japan ranges about 80%.
US provided agriculture subsidies worth $ 22 Bn last year. 90% of this amount went to 10% of the farmers in US (Because subsidies are given based on the land holdings. Hence, obviously these subsidies reached the richest of the US farmers. It should be noted here that rich farmers in US are a powerful lobby and they contributed about $ 11.5 million during last election towards campaign contributions).
In UK the largest recipient of the agriculture subsidies is THE QUEEN
In Switzerland, a farmer gets an average $ 1600 per year for every cow he owns. (Incidentally, this is more than the per capita income of two thirds of the nations in the world)
In Norway, farmers get subsidies for the hedges they maintain in the rural areas (Optical soothing)
The import tariffs for rice is Japan is more than 1000%.
In Rajnikanth style.... the rich get richer and the poor get poorer...
Friday, August 24, 2007
Ithaka
Today, our entrepreneurship professor ended his class by citing this poem. Its a poem about a man who sets upon a long journey towards his island home - Ithaka.
In a subtler sense each of us are on our journeys to find our own homes (treasures) - wealth, fame, happiness, position, power.. The point is to realize that we get rich not by arriving at Ithaka, but by undertaking the journey to reach Ithaka..
Am reproducing a few lines of this poem below..
"Keep Ithaka always in your mind. Arriving there is what you're destined for. But don't hurry the journey at all. Better if it lasts for years, so you're old by the time you reach the island, wealthy with all you've gained on the way, not expecting Ithaka to make you rich.
Ithaka gave you the marvelous journey. Without her you wouldn't have set out. She has nothing left to give you now.
And if you find her poor, Ithaka won't have fooled you. Wise as you will have become, so full of experience, you'll have understood by then what these Ithakas mean. "
You can read the full poem at
"http://homepage.newschool.edu/~wrightd/cavafy-ithaka.html"
In a subtler sense each of us are on our journeys to find our own homes (treasures) - wealth, fame, happiness, position, power.. The point is to realize that we get rich not by arriving at Ithaka, but by undertaking the journey to reach Ithaka..
Am reproducing a few lines of this poem below..
"Keep Ithaka always in your mind. Arriving there is what you're destined for. But don't hurry the journey at all. Better if it lasts for years, so you're old by the time you reach the island, wealthy with all you've gained on the way, not expecting Ithaka to make you rich.
Ithaka gave you the marvelous journey. Without her you wouldn't have set out. She has nothing left to give you now.
And if you find her poor, Ithaka won't have fooled you. Wise as you will have become, so full of experience, you'll have understood by then what these Ithakas mean. "
You can read the full poem at
"http://homepage.newschool.edu/~wrightd/cavafy-ithaka.html"
Monday, August 20, 2007
Chasing the horizon
As a part of the Independence day celebrations we had an event titled "Bandhan" at ISB. This event basically brought together many children from various NGOs in Hyderabad to ISB. Most of these children are specially-abled. During the first part of the event we (the students) had organized various fun events for these children to make them feel special. The second part of the event was these children's turn.
One event which deeply touched me was a dance program by a group of 6 boys. They were dancing to the beats of a popular fast tune and It was exceptional. The coordination was supreme. Though it was a group dance, within that limited time frame of about five minutes, each of the boys had a specific time slot to showcase their individual talent as well, when they danced solo.
As the dance came to a close, we heard an announcement on the stage that these boys who just performed are actually visually challenged. I just could not believe this when i heard it. There were a thousand questions which arose in my mind... How could someone coach them? How could these people visualize something they have never seen and implement it with perfection? How could they achieve that coordination? What could these people have achieved had they been gifted with a sight like ours?
I do not know the answers... i may never know. But John Milton's quote clearly flashed in front of my eyes "The mind can make a heaven out of hell or a hell out of heaven".
All limitations are perceived horizons. The secret is that the mind is limitless, and that we truly have no limits except those that we have accepted as real. David Cameron puts it nicely when he says "It is all just a horizon, and no matter how much you chase the horizon, you will never fall off the end of the earth. So chase it!"
One event which deeply touched me was a dance program by a group of 6 boys. They were dancing to the beats of a popular fast tune and It was exceptional. The coordination was supreme. Though it was a group dance, within that limited time frame of about five minutes, each of the boys had a specific time slot to showcase their individual talent as well, when they danced solo.
As the dance came to a close, we heard an announcement on the stage that these boys who just performed are actually visually challenged. I just could not believe this when i heard it. There were a thousand questions which arose in my mind... How could someone coach them? How could these people visualize something they have never seen and implement it with perfection? How could they achieve that coordination? What could these people have achieved had they been gifted with a sight like ours?
I do not know the answers... i may never know. But John Milton's quote clearly flashed in front of my eyes "The mind can make a heaven out of hell or a hell out of heaven".
All limitations are perceived horizons. The secret is that the mind is limitless, and that we truly have no limits except those that we have accepted as real. David Cameron puts it nicely when he says "It is all just a horizon, and no matter how much you chase the horizon, you will never fall off the end of the earth. So chase it!"
Tuesday, August 14, 2007
Class Participation
Almost every ISB student writes about this phenomenon in his blog. Its now my turn.
As part of the ISB grading system, student participation in class discussions carries marks and affects the final grade. The weightage varies from subject to subject. This system has been kept in place to ensure that the students come adequately prepared for class and also benefit from the views and experience of peers in the class. However, what actually translates is quite different. People in their enthusiasm to score some CP points make all sorts of comments. I have thus classified people into the following nine categories.
1. Commonsensical Point: This league of extraordinary gentlemen camouflage mere commonsensical points into brilliant works of art. They tend to take even rhetorical questions very seriously and carefully enlist their response
2. CraP: This group's only aim is to make sure that their voice is heard in the class. It is not of much relevance to them to think, if it makes sense..
3. CoPied: Brilliant imitators. Borrow ideas from others, but not words. Shrewd listeners who will be quick to borrow an idea, para phrase/ re-phrase/ cut/ edit/ add but essentially maintain the chastity of the soul and give out the same point..
4. Continuous Pain: Intellectual masturbaters. Their sole aim is display their knowledge. The problem is, they dont bother if it is relevant in the current context.
5. Crossed Past: They dont have any genuine point, nor can they display their knowledge (or the lack of it), but still they have a tremendous desire to participate in the class. So they end up asking questions which the professor has just answered. They however try to mask their intentions by keeping a seriously concentrated face which reads "genuine doubt". Fall not into this trap, for less than 10% of this group is genuinely interested in hearing the answer to the question, for the rest "asking the question" is an end in itself..
6. Chronically Pointless: They dont mind taking a ridiculous stance, questioning fundamental concepts or even making up impossible hypothetical situations, as long as it promises some "airtime" in the class
7. Calling Professor: They miss their chances to grab the professor's attention to make their point. So, when their impatience reaches a peak and they become desperate to make their presence felt, they call out the professor and camouflage their comments as questions/ doubts
8. Curtain Puller: Take a peek at the next slide and base your question/ comment on them and try to pass them off as intelligent remarks
9. Class Participant: It is this small but sensible proportion of the population that actually understands the true spirit of CP and genuinely tries to contribute towards the learning and development of the entire class...
As part of the ISB grading system, student participation in class discussions carries marks and affects the final grade. The weightage varies from subject to subject. This system has been kept in place to ensure that the students come adequately prepared for class and also benefit from the views and experience of peers in the class. However, what actually translates is quite different. People in their enthusiasm to score some CP points make all sorts of comments. I have thus classified people into the following nine categories.
1. Commonsensical Point: This league of extraordinary gentlemen camouflage mere commonsensical points into brilliant works of art. They tend to take even rhetorical questions very seriously and carefully enlist their response
2. CraP: This group's only aim is to make sure that their voice is heard in the class. It is not of much relevance to them to think, if it makes sense..
3. CoPied: Brilliant imitators. Borrow ideas from others, but not words. Shrewd listeners who will be quick to borrow an idea, para phrase/ re-phrase/ cut/ edit/ add but essentially maintain the chastity of the soul and give out the same point..
4. Continuous Pain: Intellectual masturbaters. Their sole aim is display their knowledge. The problem is, they dont bother if it is relevant in the current context.
5. Crossed Past: They dont have any genuine point, nor can they display their knowledge (or the lack of it), but still they have a tremendous desire to participate in the class. So they end up asking questions which the professor has just answered. They however try to mask their intentions by keeping a seriously concentrated face which reads "genuine doubt". Fall not into this trap, for less than 10% of this group is genuinely interested in hearing the answer to the question, for the rest "asking the question" is an end in itself..
6. Chronically Pointless: They dont mind taking a ridiculous stance, questioning fundamental concepts or even making up impossible hypothetical situations, as long as it promises some "airtime" in the class
7. Calling Professor: They miss their chances to grab the professor's attention to make their point. So, when their impatience reaches a peak and they become desperate to make their presence felt, they call out the professor and camouflage their comments as questions/ doubts
8. Curtain Puller: Take a peek at the next slide and base your question/ comment on them and try to pass them off as intelligent remarks
9. Class Participant: It is this small but sensible proportion of the population that actually understands the true spirit of CP and genuinely tries to contribute towards the learning and development of the entire class...
Saturday, August 11, 2007
The boy who lived
This is one of the greatest business phenomenon of our times. For those "muggles" who still couldn't make meaning of the title, i am talking about Harry Potter. Consider the numbers... More than 325 million copies of the first 6 books of this series is sold world over. The seventh installment, which was released last month in more than 93 countries, sold 11 million copies within the first 24 hours of its release.The books have been translated in about 65 languages and is distributed in 200 countries. The five movies released till date have grossed more than $ 4 billion.
I read a nice article which summarized the reasons for the grand success of this series. The article traces five basic reasons for its success - 1. Its not just a children's story, it crosses several boundaries and appeals to the interests of numerous categories of people. 2. JK Rowling's exceptional writing 3. It has chosen a subject which is universally alluring 4. It brings to life all our fantasies, everything we always wanted to be, but never can be.. 5. Its social relevance..
JK Rowling's present networth is estimated to be more than $ 1 billion. Not bad for someone who was unemployed and living on State benefits, when she completed her first book.
What fascinates me the most is the way it all started. Rowling says "It all began on a train ride in which the whole idea just dropped in my head. Harry, as a character, came fully formed as did the idea for the entire plot".
I call this a gift of god...
I read a nice article which summarized the reasons for the grand success of this series. The article traces five basic reasons for its success - 1. Its not just a children's story, it crosses several boundaries and appeals to the interests of numerous categories of people. 2. JK Rowling's exceptional writing 3. It has chosen a subject which is universally alluring 4. It brings to life all our fantasies, everything we always wanted to be, but never can be.. 5. Its social relevance..
JK Rowling's present networth is estimated to be more than $ 1 billion. Not bad for someone who was unemployed and living on State benefits, when she completed her first book.
What fascinates me the most is the way it all started. Rowling says "It all began on a train ride in which the whole idea just dropped in my head. Harry, as a character, came fully formed as did the idea for the entire plot".
I call this a gift of god...
Tuesday, August 7, 2007
Ultra Super Hyper Salesmen
I have many times thought about "What constitutes an effective sales call?". And the answer is pretty obvious.. "The Sales".. If a sales call cannot be converted into sales then it is useless. Now comes the more difficult part. In a world where time is increasingly becoming more precious, and where people are willing to shell out large sums of money (Eg..fast food, home deliveries, Internet banking, air travel etc..) to maximize their Return On Time Invested (ROTI, as one of my previous bosses used to say), the effectiveness of a sales call cannot be overemphasized.
The attention span of customers is becoming increasingly shorter. Which means the time available for you to convince your client and make a sale is increasingly becoming small. It is hence very very important to deliver your best in each second that you spend with your client. People who are best at this are called Ultra-Super-Hyper Salesmen (A term i have coined :-)
I know of at least one group of people who are best at this - The beggars who stand in traffic signals. Imagine their plight. Their maximum window of opportunity is about 45-60 seconds. They have to cater to multiple clients within this time frame. No office, no air conditioning, no mobile, no handouts to help them in their sale, not even a chair to sit and many times an empty stomach too...
But they cannot afford to take no for an answer, because for them no sale means no food. They try to understand their customer's psychology and use every weapon in their armour to convert each of their interaction into a sale. Within the first few seconds they assess what sort of a customer you are, and then they come out specific techniques to cater to each of these types. And with my limited experience, i must say that their conversion ratios are at least more than 75%, if not higher. A pretty impressive feat, given the constraints...
I salute these Ultra-Super-Hyper Salesmen and hope to learn some transferable techniques...
P.S: This analysis is purely from a sales process point of view. I request readers to take it in the same spirit and not bring social issues into the picture.
The attention span of customers is becoming increasingly shorter. Which means the time available for you to convince your client and make a sale is increasingly becoming small. It is hence very very important to deliver your best in each second that you spend with your client. People who are best at this are called Ultra-Super-Hyper Salesmen (A term i have coined :-)
I know of at least one group of people who are best at this - The beggars who stand in traffic signals. Imagine their plight. Their maximum window of opportunity is about 45-60 seconds. They have to cater to multiple clients within this time frame. No office, no air conditioning, no mobile, no handouts to help them in their sale, not even a chair to sit and many times an empty stomach too...
But they cannot afford to take no for an answer, because for them no sale means no food. They try to understand their customer's psychology and use every weapon in their armour to convert each of their interaction into a sale. Within the first few seconds they assess what sort of a customer you are, and then they come out specific techniques to cater to each of these types. And with my limited experience, i must say that their conversion ratios are at least more than 75%, if not higher. A pretty impressive feat, given the constraints...
I salute these Ultra-Super-Hyper Salesmen and hope to learn some transferable techniques...
P.S: This analysis is purely from a sales process point of view. I request readers to take it in the same spirit and not bring social issues into the picture.
Saturday, August 4, 2007
Pursuit of leadership
Today, one of our professors gave a very interesting definition of business leadership... It goes as follows: "All business leadership is about chasing perpetually changing perpetually vanishing arbitrage opportunities".. I liked this definition of business leadership because this brings many other things to perspective.
First of all this connotes that business leadership is a journey and not a destination. To be on the top of the ladder requires one to continually seek newer and emerging opportunities. To understand emerging trends and opportunities, while it is necessary to have a bird's eye view of the entire landscape, it is not sufficient. You should also have your feet on the ground to feel the pulse of the market. Possessing only one of these attributes may lead us to either taking a myopic view of opportunities or in just missing out the details.
Secondly, every opportunity vanishes or runs out of steam some day. We necessarily don't need to take a very long term view of opportunities to profit from them. Every opportunity needs to be evaluated as an investment and this means weighing cost vs. benefit. We should be indifferent while weighing short and long term opportunities, if the ratios of cost versus benefit are the same.
Some people may not necessarily subscribe to this view of placing short term opportunities on an equal footing with long term opportunities. Fair enough. But what is long term? Remember what Keynes said "In the long run we are all dead"...
First of all this connotes that business leadership is a journey and not a destination. To be on the top of the ladder requires one to continually seek newer and emerging opportunities. To understand emerging trends and opportunities, while it is necessary to have a bird's eye view of the entire landscape, it is not sufficient. You should also have your feet on the ground to feel the pulse of the market. Possessing only one of these attributes may lead us to either taking a myopic view of opportunities or in just missing out the details.
Secondly, every opportunity vanishes or runs out of steam some day. We necessarily don't need to take a very long term view of opportunities to profit from them. Every opportunity needs to be evaluated as an investment and this means weighing cost vs. benefit. We should be indifferent while weighing short and long term opportunities, if the ratios of cost versus benefit are the same.
Some people may not necessarily subscribe to this view of placing short term opportunities on an equal footing with long term opportunities. Fair enough. But what is long term? Remember what Keynes said "In the long run we are all dead"...
Monday, July 30, 2007
The 'dabba' market
The grey market or the “dabba” market, as it is popularly called is fascinating. As a company announces its IPO (book-building) dates, players in the grey market try to put a price on the shares of the company. They try to speculate market response, size of the issue and fix a premium on the shares.
This market is interesting for many reasons. It’s illegal – plain and simple. However, speculators and investors have been doing it for a long time. The grey market premiums themselves are quoted in almost every financial daily and broking firms, worth their salt. Many times these markets also decide the fate of listing gains.
There are many other interesting facets to this market... How do these dabba operators ensure actual delivery right under the nose of the regulator? Many time unscrupulous promoters use this market to fool gullible investors.. And sometimes this market is also used to infuse liquidity into the secondary market...
If you come across any article or news which is related to this, please let me know... i am undertaking some academic stuff on this...
This market is interesting for many reasons. It’s illegal – plain and simple. However, speculators and investors have been doing it for a long time. The grey market premiums themselves are quoted in almost every financial daily and broking firms, worth their salt. Many times these markets also decide the fate of listing gains.
There are many other interesting facets to this market... How do these dabba operators ensure actual delivery right under the nose of the regulator? Many time unscrupulous promoters use this market to fool gullible investors.. And sometimes this market is also used to infuse liquidity into the secondary market...
If you come across any article or news which is related to this, please let me know... i am undertaking some academic stuff on this...
Sunday, July 29, 2007
The black swan strategy
I recently read a few articles on this subject and found it extremely interesting..
Nassim Nicholas Taleb has built his career based on the theory of unexpected rare events. Taleb calls himself a "skeptical empiricist", and believes that people generally overestimate the value of rational explanations of past data, and underestimate the prevalence of unexplainable randomness in that data. Simply put, he says that "No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion."
His company Empirica follows a particular investment strategy - It trades options, i.e it deals not in stocks and bonds but with bets on stocks and bonds. It takes very small bets from people on an unlikely event. For example, if a stock has lets say never dropped below 10% in a particular month, it takes a bet from you for a very small amount (lets say 1 cent) that the stock will indeed drop by 10% or more in this month. You don't mind this bet, because this event has never happened in the past. However, the company buys millions of such options from various people. If as expected the event doesn't happen then the company loses. But remember, its loses are pre-determined and small. However, if indeed the event does happen, the company rakes in millions of dollars.
Empirica makes its money when there is an exceptional day in the market. Something new or different happens and the unexpected unfolds. Under such circumstances, which were probably all but impossible to predict, Empirica will be able to exercise its options and reap a healthy profit. Huge gains will make up for the numerous days of small loses.
Venture Capitalists use this at all times. They invest in tons of “white swans,” lose a little bit all the time on those investments, and be poised for the singular “black swan” whose returns swamp all of those losses.
Nassim Nicholas Taleb has built his career based on the theory of unexpected rare events. Taleb calls himself a "skeptical empiricist", and believes that people generally overestimate the value of rational explanations of past data, and underestimate the prevalence of unexplainable randomness in that data. Simply put, he says that "No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion."
His company Empirica follows a particular investment strategy - It trades options, i.e it deals not in stocks and bonds but with bets on stocks and bonds. It takes very small bets from people on an unlikely event. For example, if a stock has lets say never dropped below 10% in a particular month, it takes a bet from you for a very small amount (lets say 1 cent) that the stock will indeed drop by 10% or more in this month. You don't mind this bet, because this event has never happened in the past. However, the company buys millions of such options from various people. If as expected the event doesn't happen then the company loses. But remember, its loses are pre-determined and small. However, if indeed the event does happen, the company rakes in millions of dollars.
Empirica makes its money when there is an exceptional day in the market. Something new or different happens and the unexpected unfolds. Under such circumstances, which were probably all but impossible to predict, Empirica will be able to exercise its options and reap a healthy profit. Huge gains will make up for the numerous days of small loses.
Venture Capitalists use this at all times. They invest in tons of “white swans,” lose a little bit all the time on those investments, and be poised for the singular “black swan” whose returns swamp all of those losses.
Friday, July 27, 2007
In search of mediocrity
In a world where perfection is expected and excellence is tolerated, this search for mediocrity may seem quite counter intuitive..
One of our professors made us think on the merit of this advice. Many many individuals and companies are making millions by following this strategy of chasing medocrity and not excellence. How could this be done...
The new mantra for very many PE firms now is Invest-Turnaround-Harvest. They don't look for excellent companies for investing, instead they look out for poorly managed companies and use basic management principles and common sense to turnaround these companies to average performing companies and sell them at a much higher valuation.
Take the case of some individuals. A new breed of high performing operating executives are being hired as turnaround experts. These guys are not liquidation managers, they instead repair and build back poorly managed companies. Michael Capellas, who has made serial job hopping a career, is a case in point.
As head of Compaq Computer, Capellas led a turnaround and a sale to Hewlett-Packard before leaving the company in 2002. Capellas then took over MCI while the company was in bankruptcy and eventually sold it to Verizon. He has collected large paychecks along with way and is estimated to have taken home a total of more than $57 million in change-in-control payouts from Compaq, Hewlett-Packard and MCI. He was an adviser for Silver Lake Partners, a buyout firm that specializes in technology and from there on he moved as head of Serena Software, one of Silver Lake's portfolio companies. Now, Capellas is taking over as chief of First Data Corp., the payment-processing giant acquired by the private equity firm KKR in April for $25.6 billion. This will be his fourth technology company in eight years. With an ownership stake in First Data, he could take home millions more.
Convinced? If not, let time heal you..
One of our professors made us think on the merit of this advice. Many many individuals and companies are making millions by following this strategy of chasing medocrity and not excellence. How could this be done...
The new mantra for very many PE firms now is Invest-Turnaround-Harvest. They don't look for excellent companies for investing, instead they look out for poorly managed companies and use basic management principles and common sense to turnaround these companies to average performing companies and sell them at a much higher valuation.
Take the case of some individuals. A new breed of high performing operating executives are being hired as turnaround experts. These guys are not liquidation managers, they instead repair and build back poorly managed companies. Michael Capellas, who has made serial job hopping a career, is a case in point.
As head of Compaq Computer, Capellas led a turnaround and a sale to Hewlett-Packard before leaving the company in 2002. Capellas then took over MCI while the company was in bankruptcy and eventually sold it to Verizon. He has collected large paychecks along with way and is estimated to have taken home a total of more than $57 million in change-in-control payouts from Compaq, Hewlett-Packard and MCI. He was an adviser for Silver Lake Partners, a buyout firm that specializes in technology and from there on he moved as head of Serena Software, one of Silver Lake's portfolio companies. Now, Capellas is taking over as chief of First Data Corp., the payment-processing giant acquired by the private equity firm KKR in April for $25.6 billion. This will be his fourth technology company in eight years. With an ownership stake in First Data, he could take home millions more.
Convinced? If not, let time heal you..
Tuesday, July 24, 2007
Pumpkins and mice
With the bulls raging at Dalal Street and Sensex within a kissing distance from the giddy height of 16000, i want to reproduce one of the classic gems from Warren Buffet...
Buffet says that "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money."
After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. These sensible investors know the cost of overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice.
But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands...
Buffet says that "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money."
After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. These sensible investors know the cost of overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice.
But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands...
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