Re: strong economy, first - reply to Girish

[vamsi@siliconcorp.com]

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[Topics under debate]: GOOD GOVERNANCE
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Girish Nair wrote:

> Thank you Mr. Vamsi
> Surprising that you couldn't contact me on the email address. I guess
> your much touted software industry still has a few glitches to be ironed
>
> out.
> <Entreprenuers cannot do anything when they are shackled (even with a
> lot of time).  This is exactly the reason why we don't a Microsoft,
> Hewlett-Packard, etc. in India.>
> This is the second time you have written about the success of the IT
> industry (directly to me). Mr. Vamsi, what do you regard as success. Let
>
> me give you an example (I not sure but I think I'm quoting Fortune). The
>
> market value of Yahoo has grown to $27 billion and that is more than the
>
> entire US Steel Industry is worth. And you and I know what huge profits
> Yahoo makes! What happens when the bubble bursts?
> And I stand by what I say. You cannot just dump a system and replace it
> without compromising on time. Not in a democracy at least.
> Girish Nair
>

    I am amused by the primitive Mental Model (MM).  I want to abreviate MM
because I will come back to it again, I am sure.

    Where do you think that the money will go (in a stock market) when Yahoo
goes?  Into another industry!!  You see, the money is NOT lost!!  The stock
market is a mechanism to distribute wealth into the most efficient industries
over the long-term.  So when you say that Yahoo is bubbled beyond imagination,
I agree.  Whether Yahoo makes profits or not is irrelevant.  What is important
is that there is a vibrant Stock Market that allows Americans to transfer
wealth rapidly between industries.  If Yahoo dies then its wealth will merely
be shifted to another sector which is of some benefit to the population at the
moment in time.

    Such a friction-free mechanism to transfer wealth is not there in the
Indian Stock Market.  Let us say that our friends in the GoI have ensured that
we don't.  By shifting wealth from one sector (sick one) to another (healthy
one) quickly (important word is quickly), an economy can maintain healthy
growth and avoid recessions like the one plaguiging our economy!!  Once again,
we simply don't have the Mental Models to build a vibrant economy and a strong
country - we are doomed!!

    The flaw in your Mental Model is that you are looking at any individual
investor loosing money in Yahoo but you fail to see the broader picture of how
wealth is NOT lost in the stock market and that it is merely transfered from
the sick industries to the healthy ones.  This is the same kind of Mental
defficiency that has plagued the (short-sighted) members of GoI and they have
been ruining our lives with it since..... (you know when)!!

--
Sincerely,
Vamsi M.



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