Faces that define ‘real’ entrepreneurship!
As I sit down to write this editorial [Ed note: as on November 9, 2008], the selling pressure in the markets have been so intense today that the Sensex broke the 8,000-mark and slumped to a low of 7,697 – down a whopping 63.7% (13,510 points) from its all-time peak of 21,207, touched on January 10, 2008. I remember having written the last time on the same subject for the February 3, 2008 issue – when the markets had fallen to around 15,000 – in an edit titled, “If you can, invest to become an entrepreneur instead of investing in stock markets!!!” As the index falls to almost half of what it was then, there is nothing more important that I feel like sharing again with my readers.
Readers of our publications know that over the last few months, I’ve constantly been focussing on the impending global crisis, the sub-prime crisis and the failure of the banking system in the USA. In that edit then, I remember having written about the huge losses that Morgan Stanley and Merrill Lynch had been facing and how the entire American system was on the brink of a disaster. Then again, I hope all our readers would agree that we were the first to write on the entire crisis; and on how to save capitalism. And to keep our leadership in trying to impart the right knowledge to our readers – that can also immediately impact and benefit them – this time again I want to share my views on investing in stock markets with the readers. Just in case you think that I myself may not be doing what I preach, let me tell you that in my entire life, neither have I, nor has my father, mother or wife, invested even one rupee in the share markets. Well, this despite having majored in finance during my business management studies and having topped in the Investment Analysis and Portfolio Management paper with an 80 plus score under a professor who was the strictest in town! Also, this despite having some very close friends who were stock market fanatics and doing very well in the financial sector themselves!
And this has been so because after properly studying and analysing all possible portfolio investment models, the only conclusion I could come to as a very keen student of management (who has always believed that there is nothing more practical than a good theory) was that “all the theories that suggested that the most ultimate way to make money in stock markets, were utter garbage.” There is no way that one can draw a regression line and show that because over the last 20 years, people have made money in the stock markets like this, therefore they can do the same in the future too. The last time the Nobel Prize was given to two economists for their portfolio investment model, one saw the US government having had to bail out the venture of these very economists just one year down the road! That, indeed, is the one and only truth about share market investments. So why should the share markets exist at all? And if so, who should invest in it and who will make money from there?
Well, the answers are complicated. I wonder often: do we need a share market at all in the first place? I have always had a personal objection to the paper ownership of others’ sweat and toil. That’s why the worker feels so alienated from what he does in a modern-day large corporation, while someone who contributes nothing to the organisation’s production process reaps the profits on the basis of capital power. But then, entrepreneurs need money to create production and in turn jobs and growth, don’t they? But entrepreneurship also means responsibility and accountability; and if entrepreneurship is responsible, then shouldn’t entrepreneurs be answerable about the money that they take from others?
And if they are to be responsible, why shouldn’t they take the money as debt from banks or owners of capital where the entrepreneurs know that they are obliged to give regular returns – unlike on equity? Well, I am sure at least Fidel Castro, for one, must have had similar thoughts – for when he took over the reigns of Cuba, he did convert the stock exchange building into a hospital... for masses need hospitals, education and employment first, before they are encouraged to gamble their money away on stocks! But then, let’s not get so extreme! The share market is one of the lifelines of the (inhuman) capitalist system, which unfortunately appeals most to the selfish human personality and psyche. And since I am all for democracy and freedom of choice, I would keep my loud thinking to myself – though that’s exactly the reason we haven’t yet gone public. As an organisation, we believe in being responsible spenders. Thus, we will go to the market the day we know we will be able to do so much productive work with the money generated that we will give the right returns to our investors.
As I sit down to write this editorial [Ed note: as on November 9, 2008], the selling pressure in the markets have been so intense today that the Sensex broke the 8,000-mark and slumped to a low of 7,697 – down a whopping 63.7% (13,510 points) from its all-time peak of 21,207, touched on January 10, 2008. I remember having written the last time on the same subject for the February 3, 2008 issue – when the markets had fallen to around 15,000 – in an edit titled, “If you can, invest to become an entrepreneur instead of investing in stock markets!!!” As the index falls to almost half of what it was then, there is nothing more important that I feel like sharing again with my readers.
Readers of our publications know that over the last few months, I’ve constantly been focussing on the impending global crisis, the sub-prime crisis and the failure of the banking system in the USA. In that edit then, I remember having written about the huge losses that Morgan Stanley and Merrill Lynch had been facing and how the entire American system was on the brink of a disaster. Then again, I hope all our readers would agree that we were the first to write on the entire crisis; and on how to save capitalism. And to keep our leadership in trying to impart the right knowledge to our readers – that can also immediately impact and benefit them – this time again I want to share my views on investing in stock markets with the readers. Just in case you think that I myself may not be doing what I preach, let me tell you that in my entire life, neither have I, nor has my father, mother or wife, invested even one rupee in the share markets. Well, this despite having majored in finance during my business management studies and having topped in the Investment Analysis and Portfolio Management paper with an 80 plus score under a professor who was the strictest in town! Also, this despite having some very close friends who were stock market fanatics and doing very well in the financial sector themselves!
And this has been so because after properly studying and analysing all possible portfolio investment models, the only conclusion I could come to as a very keen student of management (who has always believed that there is nothing more practical than a good theory) was that “all the theories that suggested that the most ultimate way to make money in stock markets, were utter garbage.” There is no way that one can draw a regression line and show that because over the last 20 years, people have made money in the stock markets like this, therefore they can do the same in the future too. The last time the Nobel Prize was given to two economists for their portfolio investment model, one saw the US government having had to bail out the venture of these very economists just one year down the road! That, indeed, is the one and only truth about share market investments. So why should the share markets exist at all? And if so, who should invest in it and who will make money from there?
Well, the answers are complicated. I wonder often: do we need a share market at all in the first place? I have always had a personal objection to the paper ownership of others’ sweat and toil. That’s why the worker feels so alienated from what he does in a modern-day large corporation, while someone who contributes nothing to the organisation’s production process reaps the profits on the basis of capital power. But then, entrepreneurs need money to create production and in turn jobs and growth, don’t they? But entrepreneurship also means responsibility and accountability; and if entrepreneurship is responsible, then shouldn’t entrepreneurs be answerable about the money that they take from others?
And if they are to be responsible, why shouldn’t they take the money as debt from banks or owners of capital where the entrepreneurs know that they are obliged to give regular returns – unlike on equity? Well, I am sure at least Fidel Castro, for one, must have had similar thoughts – for when he took over the reigns of Cuba, he did convert the stock exchange building into a hospital... for masses need hospitals, education and employment first, before they are encouraged to gamble their money away on stocks! But then, let’s not get so extreme! The share market is one of the lifelines of the (inhuman) capitalist system, which unfortunately appeals most to the selfish human personality and psyche. And since I am all for democracy and freedom of choice, I would keep my loud thinking to myself – though that’s exactly the reason we haven’t yet gone public. As an organisation, we believe in being responsible spenders. Thus, we will go to the market the day we know we will be able to do so much productive work with the money generated that we will give the right returns to our investors.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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