RE: strong economy, first - reply to Girish

["Kulshreshta, Bhuwan" <Bhuwan.Kulshreshta@usa.xerox.com>]

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[Topics under debate]: GOOD GOVERNANCE
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Girish,

Please try to understand the basic fundamental. There is not a fixed
amount
of money in the world that is being diverted from " somewhere else" into

yahoo and will be therefore lost once yahoo goes. Wealth is dynamic, it
is
constantly being created by humans (and lost too). All the folks that
invested in yahoo are not idiots. A few years ago when people invested
in
Microsoft it would have appeared to some observers who were still not
into
the PC revolution very similar to what we see with Yahoo today. The
internet
is the biggest thing for the immediate future and a portal owner like
Yahoo
is going to be BIG, some of us might not be able to see it and you may
find
that there is NO bubble in there after all.

Microsoft has market capitalisation far in excess of general Motors but
has
not even 1000th the assets that does not mean Microsoft is a risk. IT is

just a different paradigm. Wealth is created by human creativity and
productivity it is not restricted by physical production and assets.
This is
what we in India do not realise at all.

Regards,

Bhuwan



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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