Sunday, April 26, 2015

Is Life and Commerce - a Casino?

GMAT is a popular exam that most MBA aspirants appear for. And the sample tests available online throw up a very interesting food for thought. If one is just hovering around being an average or just
above average (Joe Bloggs) in academics he/she would score about 550-570 out of a total of 800 ie 65 percentile (approx) if that person were to mark the entire exam randomly as per ones gut, the score would still be still 550-570

This i figured out when i was preparing for my GMAT in 2007. The trick is to achieve 99 percentile.

The business world

MBA to me is seemingly the most irrelevant education one can ever acquire because it makes you aware of your surroundings a bit more than everyone else. The case studies based on thousands of successes and failures over the last 100 years makes you terribly aware of too many things and you lose your chance to take that risk. Because we fail to forget that its an efficient marketplace.

The more i deal with educated and allegedly experienced professionals the more sceptical i get. Analysis analysis and more analysis. The sum total of all monetary risk is as follows. Every fund every source of money could be parked in AAA rated securities (absolute safety), and as businessmen start taking risks and start leveraging the base equity, the returns start rising. (Risk reward ratio – directly proportional)

In India you can easily park money at 11-12% in almost AAA rated securities or bonds and Warren Buffet’s life performance is about 21% CAGR (and i consider him the epitome of financial performance), so put it simply - the entire economic activity on this planet, the entire analysis, the entire risk reward, the entire funding of start-ups, etc etc is to inch from 12 % CAGR to 21% CAGR.

And yet

Statistically only 8-10% companies have survived beyond 33 years of existence
Only 8-10% of start-ups ever make any money
Only 8-10% of return is guaranteed over a long period of time
And in a casino if one analyses the top 4 games that are played 95% of the time, you have a fairly good 8% chance of winning.

If Ambani (india’s leading businessman) had analysed his pro and cons even an iota more, his children would still be filling fuel in the petrol bunks of Yemen. Thank Goodness he didn’t know what IRR was.
If Bill Gates or Jobs had calculated their IRR on their investment what would they be doing today is anyone’s guess.

Life is about the leap of faith and an uncanny and a very scarce ability to go with ones gut to invest/start/embark on the journies of life. After all you only have an 8 % chance over short to medium term and we are all dead in the long term.

The business of life

Life sucks – I know a dear friend who courted for 9 yrs before getting married and the marriage lasted just a little over nine months. And there are people who didn’t see their potential spouses, went thru an arranged married ( 2/3rd s of the world doesn’t even know what an arranged marriage is) and they have been married for ages some for decades and many I know for over half a century.

Carrying your heart on your sleeve is the best virtue a human being can have. You win some. You lose some. Whether its life, love, casino or business.

Go by your gut and pursue your dreams. If you win you become rich, if you lose you become wiser.

There is no failure in life – only feedback


And life is just one big casino.

13 comments:

  1. Manu truth is many of my experiences in life (and business) resonate strongly with your article - the "ups" and "downs" in life are truly characteristic of one's chances in a casino!

    Good read - well written! Thanks!
    JK

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  2. Very well related.
    Reminds me of a saying " life is just 10% of what happens to you and 90% of how you respond to it "

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  3. Gurvinder S WaliaApril 27, 2015 at 3:26 AM

    Great ANALYSIS Manu. Very well presented, now I do believe in Luck & destiny as well. Failures are inevitable when you take risks. Your faith keeps you anchored and gives the strength to attempt again.

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  4. Very well said Manu! I feel should have been more text, it definitely leaves you longing for more!

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  5. nicely put up Manu.. am reading the previous blog also now..Bhanu

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  6. Well written. The Branson approach of #screwitjustdoit is most applicable. Yet planning and forecasting is key to any analysis/venture etc...

    What are ur thoughts on Investment in India?

    Rishad

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    Replies
    1. I firmly believe that we are over priced in every asset class. and much against the brouhaha of Modi and India Shining, a serious correction is round the corner that would make the 2008 crash seem like a walk in the park. Whether that happens in next 12 months or 3 yrs - not sure. but that no one can predict.

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  7. Having been on both side (corporate job with over emphasis on "analysis" & running a small business & following my gut & taking chances most of the times) I can't agree more with you. Apple I feel is a great example of this: They did great early on (just following their dream & taking chances, I guess) & the moment they brought in John Sculley from Pepsico who was an analysis guy, he almost bankrupted the company. Steve jobs came back and turned it into World's largest company (by market cap) & obviously we all know Steve Jobs was no analysis guy.

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  8. Good one Manu and I like it that you have taking the 'go with the gut' to every realm of life. Love, Business and Gamble. I had read a very intensive article on 'relying on hunches' and it was all about this. Yet if life is a game /race/ play / opera.... it has to be played with equal measure of pluck and spontaneity, industry and intelligence. B schools can only contribute so much.

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  9. Rubbish....go for the MBA....any day
    How else can you make an educated guess ??
    ...
    Fire burn and cauldron bubble

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  10. Wonderful how are you a great writer

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  11. Just one question - did you think about & analyse before writing this article, or did you go with your gut & write with the flow?
    (not (completely) in jest - think about it)

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Your comment is immensely appreciated and will be published for a discussion - soonest. Thanks. manu

 
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