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Re: Can anyone plan this?
SS writes : Let us take his Lesson No. 2 first .
Lesson No. 2
>Let the person who has the idea to start a business (i.e., the
>entrepreneur) hold most of the risk. Do not let bureaucrats and
>politicians who have no stake in any company sit and make a mess of
>nation. If you read about the level of demoralization in Russia
>you will realize that once non-market principles gain supremacy it
>well-nigh impossible to get out of that mode. Corruption and
>of the socialist times has not left Russia. Never will.
Govt. places its reps. on the board only when the concerned company
borrows money from Financial Institutions, which is directly or
indirectly public money with an intention to Prevent the founders
from "playing around" with finance so obtained. This has happened
time and again in the loosely supervised Indian business
environment. The latest example of this is in the context of Deposit
taking companies formed in India, in the last two years, most of
which have vanished from the scene. The role of Merchant bankers has
to be examined too who, in India, OK any firrm which pays enough
"advisory fees". This is the practical side of what actually happens
in the Corridors of finance.
To stop this stringent rules and punishment schedule needs to be
I do not agree with you about corruption and mafia-baazi of
socialist-time in Russia. The corruption and mafia-baazi started in
Russia after Gorbachev introduced Capitalism there. In Soviet
Russia, the mafia used to either get sent to Siberia or used to get
Shot. The same remark applies to Prostitution - no prostitution in
Soviet Russia, now Russian ladies of pleasure roam the world to make
their Two Ends Meet - thanks to capitalistic Reforms introduced to a
populace that did not know what "market" is.
Now to Lesson No. 2.
>If you have not read at least 2 books on Warren Buffet's style of
>investing, do not represent him. Markets are certainly not
>the EMH sense. Finance theorists have been quibbling about this for
>decades and still not agreed to anything. There are certain
>consistencies in human behavior that traders exploit to make a
>But many of them, indeed most of them fail. Short term trading is
>substitute for long term investment in well-researched companies.
>will be a foolish thing to jump into the stock market under the
>impression that anyone can go in and make gains there.
What about Peter Lynch of Magellan Fund ? What about Templeton ?
What about George Soros who made a billion dollars in currency
trading in a month's time ? Of course, he lost 600 million in
Yen-trade but that is only to be expected in his style of
investing - he forms a "hypothesis" and lets the market test it. If
he is right, he wins, if he is wrong, he takes his lumps. By no
other method he could have amassed 20 billion starting from 4
million. All these and many others are evidence of irrational
EMH and theories like Random Walk are Idiosyncrasies that have
nevertheless gained their original proponents Ph.Ds and Doctorates.
That does not make them right. Asset Allocation theory is another.
They all Try and Hope to get on the right swing of the economic
cycle and to make sure that they are not Thrown out of their jobs
ensure that they are in synch with the flavour of the day theory and
in company of other Luminaries of the trade - contributing to herd
mentality. Only those people succeed who really know their oats. If
this was not so then no one in his right mind would do an honest
day's work. So it is but natural that successful investors are few.
The fact that finance theorists have been quibbling about something
does not have anything to do with what is the right solution. (They
say if you let a monkey type on a keyboard for a hundred years, he
might produce a Shakespearean sonnet, so these theoreticians still
have a chance ! In the meantime let them earn their fabulous
research grants - it adds to GDP.)
Since, you argue that most investor's fail why don't you propagate
that Stock market investments are a sort of fixed time period
investments (which really serves the purpose of supplying capital to
the listed company ) and put a ban on speculative trading on the
Exchanges ? It certainly is not ethical to attract the public to
make stock market investments (in Thailand, Bank Mangers used to ask
all substantial clients to Invest in stock market and so partly
fuelled the boom) buying and selling which is likely to land them
BW 19 nov 1998 article:
The subject you touch upon is vast. Every case has to be examined on
its own merits. In Rajasthan they say, a man is Richer in proportion
to the number of times he has declared himself Insolvent i.e.
Bankrupt. If such geniuses were allowed to open and close companies
without some control, I am sure, we can beat US in no time flat on
that score ! And in the meantime, after having thrown out of work
thousands of workers, these geniuses would have gone laughing all
the way, to the Bank.
Don't you think it would have been better if only 4 lakh companies
were formed in the first place and 1 lakh out of that went
bankrupt - would have saved a lot of resources ? The Indian
administrators have erred on the side of caution and conservation of
Most of these malpractices can be stopped by changing the crime and
And what happened to the labour of the 26 lakh closed companies ?
Perhaps they found alternate jobs. But in India where employment
opportunities are not plentiful, uprooting such a large number of
people from whatever they were doing previously can have an
unsettling effect. This is a reason why hire and fire policies are
not appreciated in Indian industrial policy.
Indian bureaucrats are not totally inept as you seem to think. They
are generally quite bright in Theory, a lot of them are brilliant.
There is only one problem with a number of them - too much concern
with their own neck, and generally afraid to stick their neck out.
This is the reason they let the politicians dictate to them. This is
the reason why our politics has become criminalized. Because no one
raised a hue and cry, satisfied with what he was getting for his
silence - a pecuniary benefit, a better posting or some other
The purpose of economics is to mitigate social tension created by
disparity. In that sense, I welcome this debate although we seem to
be veering away from the needs of policy formation.
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