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Archive for the ‘Business’ Category

Extinction of Homo Economicus – Temporary or Permanent?

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Agents, Brokers, Middlemen…

Remember them??

I bet you do. We can very easily forget those who do something good for us without expecting anything in return. But to forget those, who take money for getting things done for us, is impossible. Now let me ask you something more. Do you remember all those people who did something good for you out of no reason whatsoever, in the last 1 month? And now, try remembering those who tried to extract monetary benefit out of you just like we squeeze a lemon, just like we use a doormat. You will be more prompt in recalling the latter of the two. It’s natural…and it’s not your fault. We all remember more of negativities than positives. We are genetically built that way.

So why am I taking up this issue? Why am I talking about brokers? The reason is my interaction with a CEO of a small brokerage firm in Gujarat, whom I met by chance (I will share more stuff from that interaction in some other post). After I met him and discussed his profession, I got confused. Confused about this whole setup. The age old setup of brokering. I am confused about the future of brokers, the future of agents. I ask about the future because their past was glorious. They have been instrumental in creating history. Or as they say – history is what winners of the wars want. I would prefer it as – history is what the brokers want.

But things are changing. And changing fast. The present is not at all sunny…and I am not saying this because of the ongoing recession.

So what is the basic idea of brokers or agents? To make money, no matter what. Make it from both sides. Take it from the buyer as well as from the seller. But there is a very serious inherent problem with this profession and it is that there is no security for any broker, no matter how big or powerful he is. Anyone can walk into the scene and offer faster, cheaper and more efficient services. And that anyone can just be anyone. And when in the last line in the paragraph before this, I said that ‘I am not saying this because of the ongoing recession’, I meant technology. That anyone can be technology.

Just observe your surroundings…

Most of the travel agents are gone.

Most of the stock brokers are useless these days (though for reasons far bigger than technology).

The airlines don’t want to pay travel agents, because the travel agents were making more money on each flight than they were.

Most of the house sellers hesitate to pay real estate brokers because they feel that known evil is much better than the unknown one.

Traders have comprehensively abandoned full services stock brokers because trading stocks directly is faster and more accurate than taking the older route of calling your broker on phone.

Now days, anyone willing to put in the required effort can do anything with the help of technology instead of paying someone else. (I may be generalizing too much here, but that is my whole idea – I want to talk about the larger pattern of degrowth of brokerism.)

What I feel is that agents are ‘more’ worthless now than they ever were.

They just help you find and get what you want. Just like Google. You ask Google about what you are looking for and Google almost always delivers. Same is for brokers. So if a day comes when something like a Google Killer ‘App’ comes along, won’t you ditch Google for it?

I bet you will…you did the same to Altavista too!!

(I hope you all remember Altavista? 😉 One of the earliest search engines)


So will this species called Homo Economicus survive the present and move towards a glorious future?

I have some serious doubts regarding that.


Written by Dev

March 20, 2009 at 11:26 am

Branded Slavery anyone?

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I was having a discussion with one of my close friends on the ongoing recession (no, we are not economists), when this thought came to my mind. About the brands we use in our daily life. Just ask yourself this thing. When you and I were growing up (if we do belong to the same generation 😉 ), did you here so many brand names? No. Did we pay any attention to the brand of the stuff we brought? No (atleast for me). But now things have changed. We do pay attention to the ‘name’ of the thing more than the functionality of the same. Is it not a dependency on something? I guess it is. Is it not a kind of slavery? I don’t have an answer for this question now. Slavery is something more serious.

To tell the truth, I ‘am’ loyal to certain brands. But there are also items where I am not one bit concerned about the brand I buy.

Like for example, I will never buy my cellphone which is not a Nokia, Motorola, Samsung, HTC, O2 (OMG!! – 🙂 I just love it), Blackberry. I will never buy an a phone which is an LG. And I don’t have any reason for that. I just some how hate it by default.

And there are stuffs for which I am not concerned about the brand. Like “Pani Puri”…I’ll better have it at a road side vendor than look for some Bikanerwala or Haldiram!! (I have some friends who actually look for a brand in Pani Puri too!!)

Now here is a list of the brands I am using now. In case of emergencies, I might use others, but ususally, it is from these only :

Cell Phonemotorola1








Cell phone service providerairtel


Search (Thanks Sergie & Brin)google-logo

MP3 Playercreative

Gillette – For everything related to facial hairgillette

Car – Mercedez Benz 🙂 Amenbenz

 and I can go on and on…there will be more and more and more brands.
So am I a branded slave?

I still don’t have an answer.

Earlier generations including our parents , their parents did not have so many brands. But still, they could get their jobs done. Can’t we do the same. Of course we can. It is just a matter of convinience. Brans have become the equivalent of convinience for ur. So has consumerism really changed our lives for the better?

I feel it is too early for me to answer such a question.

Don’t know what more can I say on this. But as far as slavery is concerned, I think that practically everyone is slave to their choices, some consciously and some out of need. But when I say slavery, I mean a moderate one.

Btw, I don’t own a Benz. 😉

Update : I got an award for this post …


So…even slavery has its ‘tangy‘ fruits !!

Ram Naam ‘Satyam’ Hai – What a start to 2009

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All of us had put the year 2008 (Read – The year that should not be ‘named’) behind us when we welcomed 2009. After having lost more than 50% in the stocks in a year, who wouldn’t??

And just then, at the very start of the year, Mr. Raju of Satyam makes a shattering disclosure that he was fooling the entire IT industry and everyone else in the world, for the last 7 years or so! The company had almost nothing at all in bank balances and assets except its workforce of 55,000. What happened to the stock was not surprising. It lost more than 75% in a single session.


And what does Mr. Raju have to say at the end of it all –


“It was like riding a tiger, not knowing how to get off without being eaten.”


The tiger being the company, with him riding under the fear of his past misdeeds getting back to him.

An awesome analogy to say the least.


But shouldn’t we sympathize with Mr. Raju’s courage to come out and admit his mistakes? After all, it takes a lot of guts to do the same.


I don’t think so.


It is quite simple. Just the fact that a person admits to have lied for several years is reason enough for anyone to suspect that what he might be putting forward as the real truth, might just be another piece of lie!

Maybe he found this the best way to get out of the soup. Maybe there are more unpleasant surprises for all of us in store.

Mr. Raju says that he never took a single rupee for himself or his family. Now that is crap. How the hell is it possible that an IT major which has been competing with other international organizations was not profitable? How the profit margins were just 3% and not anywhere near the industrial average of 25-30%? He even went on to say that they have not sold a single share of the company for the last 8 years. But it has been made publicly known that the promoters have reduced their stake from 22% to around 7% now. So, who is lying again…you get the pattern??

We have just been around 2 weeks into the New Year and still have another 50 to go. God know what shall happen next.

Something somewhere went horribly wrong with America

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Stephen Roach, the chairman of Morgan Stanley Asia refers to the Americans as “the most over extended consumers in world history.


And he was not wrong.


  • The low interest rates in the US, gave Americans the money to keep buying stuffs that they could otherwise have never afforded. (Read LCDs, SUVs, Houses etc.) Now they borrowed against these houses to consume even more. And all the time, they never had any to pay all of it off. Because there was absolutely no rise in income.

They enjoyed their rising wealth without any rise in incomes.

Now that is what you call being stupid!


  • Fuel prices in US were too low for too long. Nothing seems wrong in this. Isn’t it? This allowed companies like GMs to continue churning out gas guzzling SUVs with little interest in developing newer and efficient cars. With easy credit available, these idiots kept on buying these cars.

Now that is what you call being blindly stupid!!


  • And to top it all, people started making money out of nowhere! Engineers and scientists joined the financial sector and gave devised “Complex & exotic (Read: Toxic)” financial instruments to make money out of money. So what is wrong? These instruments had underlying securities that had almost no value in them at all in the real sense!!

And this had to end somewhere. And what a way it did 😉

Common sense says that finance is best left to those of economics and not scientists and engineers. The latter should be involved in ‘real’ engineering rather than ‘financial’ engineering.

Now that is what you call being stupid in every sense of that word!!!


And most of us would recognize the magical cards below…


 Credit Cards - The New Weapons of Mass Destruction!!



Yeah…these are really magical!!!

You can buy anything in the world you want with these. Even if you don’t have the damn ability to pay for it.

These are the real “Weapons of Mass Destruction.

& these have actually killed the American Economy (Most probably for a really long time to come.)


Its not just simple economic meltdown that’s happening in America. It is something far more dark and serious.

The entire root system of the American TREE has been uprooted. And mind you, this cannot be put back in soil just like that. It is dead!!

Now Americans need to replant themselves with NEW seeds to economically get back to where they were.


They need the seed of saving more.


They need the seed of consuming less.


They need the seed of investing in themselves rather than the stock markets.


Yes. It is really that simple.

Gujarati Of The Year 2008

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Unanimously, the Gujarati Of The Year 2008 Award goes to Mamata Banarjee.

For single handedly bringing the mother plant of TATA’s NANO to Gujarat.

Mamta Banerjee Talking to the media

Apart from the cash incentives, she will also receive a customized TATA NANO as a tribute, from Mr. Ratan Tata.

Tata Nano



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Written by Dev

November 5, 2008 at 9:46 am

How an asset bubble builds up & what are its consequences?

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Here’s a very interesting anecdote that describes how an “asset bubble builds up and what are its consequences.”

The Bubble


Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was 2 dollar as there were only two pieces of 1 dollar coins circulating around.

1) There were 3 citizens living on this island country. A owned the land. B and C each owned 1 dollar.


2) B decided to purchase the land from A for 1 dollar. So, A and C now each own 1 dollar while B owned a piece of land that is worth 1 dollar.


3) C thought that since there is only one piece of land in the country and land is non produceable asset, its value must definitely go up. So, he borrowed 1 dollar from A and together with his own 1 dollar, he bought the land from B for 2 dollar.

A has a loan to C of 1 dollar, so his net asset is 1 dollar.

B sold his land and got 2 dollar, so his net asset is 2 dollar.

C owned the piece of land worth 2 dollar but with his 1 dollar debt to A, his net asset is 1 dollar.

The net asset of the country = 4 dollar.


4) A saw that the land he once owned has risen in value. He regretted selling it. Luckily, he has a 1 dollar loan to C. He then borrowed 2 dollar from B and and acquired the land back from C for 3 dollar. The payment is by 2 dollar cash (which he borrowed) and cancellation of the 1 dollar loan to C.

As a result, A now owned a piece of land that is worth 3 dollar. But since he owed B 2 dollar, his net asset is 1 dollar.

B loaned 2 dollar to A. So his net asset is 2 dollar.

C now has the 2 coins. His net asset is also 2 dollar.

The net asset of the country = 5 dollar. A bubble is building up.


(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for 4 dollar.

The payment is by borrowing 2 dollar from C and cancellation of his 2 dollar loan to A.

As a result, A has got his debt cleared and he got the 2 coins. His net asset is 2 dollar.

B owned a piece of land that is worth 4 dollar but since he has a debt of 2 dollar with C, his net Asset is 2 dollar.

C loaned 2 dollar to B, so his net asset is 2 dollar.

The net asset of the country = 6 dollar.

Even though, the country has only one piece of land and 2 Dollar in circulation.


(6) Everybody has made money and everybody felt happy and prosperous.


(7) One day an evil wind blowed. An evil thought came to C’s mind. “Hey, what if the land price stop going up, how could B repay my loan. There is only 2 dollar in circulation, I think after all the land that B owns is worth at most 1 dollar only.”

A also thought the same.


(8) Nobody wanted to buy land anymore. In the end, A owns the 2 dollar coins, his net asset is 2 dollar. B owed C 2 dollar and the land he owned which he thought worth 4 dollar is now 1 dollar. His net asset become –1 dollar.

C has a loan of 2 dollar to B. But it is a bad debt. Although his net asset is still 2 dollar, his Heart is palpitating.
The net asset of the country = 3 dollar again.

Who has stolen the 3 dollar from the country ?

Of course, before the bubble burst B thought his land worth 4 dollar. Actually, right before the collapse, the net asset of the country was 6 dollar in paper. his net asset is still 2 dollar, his heart is palpitating.

The net asset of the country = 3 dollar again.


(9) B had no choice but to declare bankruptcy. C as to relinquish his 2 dollar bad debt to B but in return he acquired the land which is worth 1 dollar now.

A owns the 2 coins, his net asset is 2 dollar. B is bankrupt, his net asset is 0 dollar. ( B lost everything ) C got no choice but end up with a land worth only 1 dollar (C lost one dollar) The net asset of the country = 3 dollar.

There is however a redistribution of wealth.

A is the winner, B is the loser, C is lucky that he is spared.



A few points worth noting –

  • When a bubble is building up, the debt of individual in a country to one another is also building up.
  • This story of the island is a close system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island’s own currency. Hence, there is no net loss.
  • An overdamped system is assumed when the bubble burst, meaning the land’s value did not go down to below 1 dollar.
  • When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the loser. The asset could shrink or in worst case, they go bankrupt.
  • If there is another citizen D either holding a dollar or another piece of land but refrain to take part in the game. At the end of the day, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw..
  • When the bubble was in the growing phase, everybody made money..
  • If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A ) and take part in the game. But you must know when you should change everything back to cash.
  • Instead of land, the above applies to stocks as well.
  • The actual worth of land or stocks depend largely on psychology.

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Written by Dev

October 20, 2008 at 3:16 pm

A Dummies’ (Cow’s) Guide to The End of American Economy

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If I say that, a simple cow can teach you how to compare, the old and the present American economy, then you will me take me for an idiot. So, why not give me a chance?

Cow Teaches About US Economy

It is not a long and complicated logic , so you can easily read on…

You had two cows.
You sold one and bought a bull.
Your herd multiplied, and the economy grew.
You sold them and retired on the income.

You have two cows.
You force one of them to produce the milk of four cows.

Later, you hire a consultant to analyze why the cow has dropped dead.

You sell the other cow, and start buying dead ‘bulls’ in the expectation that they will be reborn someday.

You can also read my earlier ramblings about the end of American Economy. And for a comprehensive coverage of economic matters you can read US Financial Mess. And if you have anything to add, let me know via comments.

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Written by Dev

October 9, 2008 at 4:03 pm