[Warning: Long post]
How do people make money? From a wide number of activities, activities we may not even have a miniscule idea of.
But the most basic form of money-making is by selling - selling what you have to offer - for the other to re-sell or to consume to his/her satisfaction. I feel this satisfaction is the primal reason we have an activity called buying and selling, and with that - the money - money being just a form or means of achieving the satisfaction; just increases the efficiency, doesn't it? (imagine the barter days!).
Satisfaction of eating to your hearts content, even if the money is earned by, say, grabbing it from others or exploiting people's sentiments (for example, stock markets, product promotion in games, sports - Marlboro in the Ferrari F1 team is a case in point here). Satisfaction of buying something expensive, thus increasing your social value. (you won't resist from showing it off, will you; or your 'so-called' modesty may prompt you to call it incidental rather than intentional). Satisfaction of achieving academic or research goals, which would help you earn money, either by working for someone to facilitate what he/she is selling or by doing the same thing yourself, if you are so entrepreneurial. This, in turn, would enable you to get more satisfaction by buying what you like, doing what you like, which may or may not consist of enhancing your social value.
Selling is the 'key' word here. Everything is saleable, even human beings are, their bodies are- as every adult, if not a kid, knows. In short, this game of buying and selling may seem a virtuous circle or even a vicious circle, depending on the way one perceives.
Why do we build cities, institutions, infrastructure? What is the ultimate purpose? (I may sound like an instructor in the 'art of living' sessions now) Sorry for being so dramatic, but this game of buying and selling shows itself everywhere, no matter what you are, where you are. Take a mall for example. In a great departure from the mom-and-pop stores we find near localities, a mall is totally novel idea of providing this comfort factor to a shopper, this feel-good factor taking over you. Thus, in a super-market like Big Bazaar, you tend to shop more than what you'd do if it were a nearby kirana shop. The companies may like to call it convenience, everything you need or not need is right there in front of your eyes. But the real deal is, it increases the average spending per consumer, compensating for the huge investment corporations incur in more forms than one. Then there's in-store advertising in super-market which prod you to shop till you drop, citing dirt-cheap prices and freebies. What we don't get is that nothing, and let me emphasize, NOTHING is for free in this world. Even 'Google' is not for free, it carries a cost. (more on that in some other post!) It's a fact that corporations, institutions are here to make themselves more appealing to you and me, to be able to sell more products and services, thus making another set of people happy; the owners, the shareholders. Remember the virtuous circle?!
The force of selling what you have to offer - regardless of the other person's intention to consume - is so strong that whole new businesses, and gigantic ones at that, have sprung up to ensure that the consumer's penchant for goods remains strong at the least, if not increase.
Consultants work to solve a company's troubles, let it be any department; the final objective being an increase in efficiency, thereby an increase in sales and profits. Trading is a zero-sum game, as we know. One person's profit is another's loss. Bankers, traders work to grab money from others. Traders work to maximize others' losses and their profits. It's a game of outdoing each other and money is the biggest incentive of all. Just earning money is not all. Businesses offer you to manage your money, making it grow without much effort by you, all for a little fee of course. There are corporations and individuals claiminfg to be 'in the business of business'.
Take the virtual world secondlife.com as an example. Philip Rosedale (the founder of Linden Labs, the maker of secondlife.com) modelled it as a gateway to another world. A world in which people may be able to do what they can't do in the actual world; find solace, play, entertain themselves, build communities, socialize and what not, all virtually. The name secondlife was aptly given so. To make secondlife as close to reality as possible, the concept of money - called Linden dollars - was introduced. (This would give you a more closer view of the all-pervasive character of money and its close association with human life, even in a virtual world.) Coming back to the point, this currency enabled users to buy stuff on second life, which was usually made by other users, just like in the real world. You could get Linden dollars either by paying money by your credit card,or by simply selling something you have to offer in second life to its other users. Corporations entered secondlife to give themselves more visibility among its users. You could buy a company's products from this virtual world as well. Thus, everyone including Linden labs and the sellers of goods and services in second life made money. What a business model! (Though of late, the popularity of secondlife.com is on the decline amid stagnation in the number of users, but thats a different issue altogether.) What I am trying to emphasize in this whole case are the novel ways and ideas through which individuals and companies make money. Totally out of the blue!
In another case, Philip Morris tobacco (Marlboro) puts $600-million into Ferrari and they can only run their branding on the car for THREE races! Can you imagine how much money that accounts for per race. Or count it as per hour. Doesn't it sound mind-boggling? Well, it does make economic sense for Philip Morris as you will see.
Marlboro, in particular, is one of the oldest sponsors in the sport. You have to believe they benefit even in these days of anti-smoking legislations world-wide.The global audience for Formula One is something like 300-million people. It takes a very small percentage of that audience to start buying the product or service of a sponsor before the money is made. Take Marlboro. If 2% of the audience (6-million people) per year smoke one pack of Marlboro per week, on average, that is 312-million packs per year just from the F1 audience! What is a pack of smokes retailing for in USD these days - $4? Do the math. That is over $1.2-billion in sales, even if they get only half the retail price (and the vendor gets the other half), they've made money.
So how best can you alternatively describe F1 as a sport? It's an organization which exploits people's liking for adventure and fast racing cars to tempt them to first watch the sport (on the track as well as on television), and then use this same emotional connect to lure them to buy the product of an advertiser or sponsor. And in this process, making an insane amount of money. Neat, isn't it?!
I could give examples and analyses ad infinitum on this whole game of buying and selling. How this whole universe is connected to this huge money-making grid. How people find unimaginable and unprecedented ways of making money in this crazy world. But I guess this 5771 character post has more or less served its purpose now and I have made my point.
-Sumeet Seth (sumeets29@gmail.com)
Monday, September 28, 2009
Thursday, September 24, 2009
IKEA and its India connection
Ingvar Kamprad is the 5th richest man in the world with a $22 billion fortune. The seed-bearer of such wealth? The INGKA foundation. At worth $36 billion, it is estimated to be the wealthiest foundation in the world (beating the Bill and Melinda Gates foundation) and is also the owner of IKEA.
Cite IKEA on any street in the US, Europe, Canada or Australia and chances are that you will barely find anyone unaware of this brand. It is a household name across the major markets where it operates. What does it do? Well, it sells furniture.
But its popularity lies somewhere else; in its USP. IKEA sells self-assembling furniture, which means that you have to put together the various parts of your furniture that it supplies in a dismantled form. This kind of business model makes the furniture cheap, reduces packaging costs and saves fuel consumption associated with shipping assembled furniture. As IKEA folks say, 'we don't like to ship air!'
IKEA publishes a yearly catalogue which depicts all its designs of household items across the board, from built-up kitchens to dining rooms, bedrooms; you name it! And the best part is, you can walk into a store and access the catalogue or even browse it online; IKEA makes good use of its catalogue as a marketing tool. It is due to this contemporary set of designs, combined with its rock-bottom prices, that IKEA and its publications have developed a cult-like following among people. And from this cult-like following comes its India connection.
Although IKEA stores have yet to arrive in India, its catalogues are sold by street hawkers and bookstores in many major cities across the country. With this, the Great Indian Mind starts working. Mighty impressed by IKEA's minimalist style, people enjoy the Swedish company's designs by hiring locals to make knockoffs. And that too at a fraction of its cost in the West. IKEA is aware of such infringement in many countries, but it cannot do much anyway.
There was a ray of hope for IKEA fans in 2006, when the company announced plans to open its first store in India by 2011. But as seen recently, talks with the government fell through over relaxations in FDI norms for single-brand retailers, thereby forcing IKEA to indefinitely postpone its India plans.
Meanwhile, locally made knockoffs of IKEA furniture continue to grow incessantly in many Indian households.
-Sumeet Seth (sumeets29@gmail.com)
Cite IKEA on any street in the US, Europe, Canada or Australia and chances are that you will barely find anyone unaware of this brand. It is a household name across the major markets where it operates. What does it do? Well, it sells furniture.
But its popularity lies somewhere else; in its USP. IKEA sells self-assembling furniture, which means that you have to put together the various parts of your furniture that it supplies in a dismantled form. This kind of business model makes the furniture cheap, reduces packaging costs and saves fuel consumption associated with shipping assembled furniture. As IKEA folks say, 'we don't like to ship air!'
IKEA publishes a yearly catalogue which depicts all its designs of household items across the board, from built-up kitchens to dining rooms, bedrooms; you name it! And the best part is, you can walk into a store and access the catalogue or even browse it online; IKEA makes good use of its catalogue as a marketing tool. It is due to this contemporary set of designs, combined with its rock-bottom prices, that IKEA and its publications have developed a cult-like following among people. And from this cult-like following comes its India connection.
Although IKEA stores have yet to arrive in India, its catalogues are sold by street hawkers and bookstores in many major cities across the country. With this, the Great Indian Mind starts working. Mighty impressed by IKEA's minimalist style, people enjoy the Swedish company's designs by hiring locals to make knockoffs. And that too at a fraction of its cost in the West. IKEA is aware of such infringement in many countries, but it cannot do much anyway.
There was a ray of hope for IKEA fans in 2006, when the company announced plans to open its first store in India by 2011. But as seen recently, talks with the government fell through over relaxations in FDI norms for single-brand retailers, thereby forcing IKEA to indefinitely postpone its India plans.
Meanwhile, locally made knockoffs of IKEA furniture continue to grow incessantly in many Indian households.
-Sumeet Seth (sumeets29@gmail.com)
Wednesday, September 23, 2009
purported holiday and dal-baati-churma
I didn't go to any class today. Why?
My instinct. It told me to take a day off. And this was in spite of the fact that I was up and roaring to go at 8 in the morning. I was not lethargic, not even restless. This holiday came out of nowhere.
While my batch-mates were tugging their asses to L-6 (that's our classroom), I was coming back from Reliance Fresh; savouring the delicious kiwifruit I caught hold of over there. I could not help but held out a 'I-empathize-with-you' look, accompanied with a slight smirk. 'How bad on my part!', I tried to compel myself to think; but to no avail. I was enjoying thoroughly :D
Skipping lunch, I had this elaborate fruit-eating session - sort of a fruit meal - with Mangal and Prakash helping me - and themselves as well. It felt wonderful after this brunch, the kind you might feel on a bungee jump if you were so adventurous.
But the heightened energy levels were waning. Those bursts of energy you get after a fruit meal, it seemed to decrease in magnitude; and fast. The hunger returned, and the feeling was shared among all 3 of us. So, after umpteen deliberations on having mess food vis-a-vis dal-bati-churma, it was decided to hit the Thali House at Sindhi camp in Jaipur.
I was a first-timer to the place, unlike Mangal and Prakash. Also present were Anoop and Javed, who joined us on our way. The thali arrived. Unable to control myself, I gulped some churma at once. It was awesome to finally eat something. Dal, bati, curry, chillies, chutney and sliced onions followed. The entire setting was so neat, with a variety of stuff on offer. One after the other, the bati was consumed at a brisk pace. The server was obliged to serve more courtesy the unlimited thali - a grossly cheap deal compared to the quality of food on offer.
We enjoyed and ate - thoroughly. The feeling defied any expression. We looked at each other and smiled.
This couldn't get any better.
-Sumeet Seth (sumeets29@gmail.com)
My instinct. It told me to take a day off. And this was in spite of the fact that I was up and roaring to go at 8 in the morning. I was not lethargic, not even restless. This holiday came out of nowhere.
While my batch-mates were tugging their asses to L-6 (that's our classroom), I was coming back from Reliance Fresh; savouring the delicious kiwifruit I caught hold of over there. I could not help but held out a 'I-empathize-with-you' look, accompanied with a slight smirk. 'How bad on my part!', I tried to compel myself to think; but to no avail. I was enjoying thoroughly :D
Skipping lunch, I had this elaborate fruit-eating session - sort of a fruit meal - with Mangal and Prakash helping me - and themselves as well. It felt wonderful after this brunch, the kind you might feel on a bungee jump if you were so adventurous.
But the heightened energy levels were waning. Those bursts of energy you get after a fruit meal, it seemed to decrease in magnitude; and fast. The hunger returned, and the feeling was shared among all 3 of us. So, after umpteen deliberations on having mess food vis-a-vis dal-bati-churma, it was decided to hit the Thali House at Sindhi camp in Jaipur.
I was a first-timer to the place, unlike Mangal and Prakash. Also present were Anoop and Javed, who joined us on our way. The thali arrived. Unable to control myself, I gulped some churma at once. It was awesome to finally eat something. Dal, bati, curry, chillies, chutney and sliced onions followed. The entire setting was so neat, with a variety of stuff on offer. One after the other, the bati was consumed at a brisk pace. The server was obliged to serve more courtesy the unlimited thali - a grossly cheap deal compared to the quality of food on offer.
We enjoyed and ate - thoroughly. The feeling defied any expression. We looked at each other and smiled.
This couldn't get any better.
-Sumeet Seth (sumeets29@gmail.com)
Monday, September 21, 2009
high-frequency trading
One of the many things that continue to intrigue me is high-frequency trading or algo trading, as it is more popularly known.
Fundamentally, algo trading is automated trading wherein computers are used to enter trading orders, sometimes totally without human intervention. A bigger rationale behind this form of trading – apart from the speed advantage due to computer usage – is that it spreads risk for the institution by executing a large number (to the order of millions!) of low value trades. So even if the markets were to swing heavily on a particular day, algo trading is designed to minimize that impact. How beautiful!
High frequency traders use computers that execute trades in milliseconds; this was some years back. “The execution period has come down to microseconds these days and the latency (professional jargon!) will continue to go down as algorithms get more sophisticated and more powerful computer systems emerge”, says a friend of mine who works with a US-based hedge fund in Gurgaon.
Ultrafast stock trading relies upon computer programs that take years to develop and are closely guarded secrets. Typically spending millions and millions of dollars, companies pay hefty bonuses to their top algorithm makers. A piece of this top-secret software can be worth millions, may be billions in case the whole software is out on sale. This is best illustrated by the recent Sergey Aleynikov – Goldman Sachs (GS) case.
Sergey Aleynikov, who worked in the software unit of GS, allegedly copied 32 MB of their 1600 MB top-secret trading software and uploaded it on a server based in Germany. This was some days before he quit his $400,000 a year job to join a rival paying 3x that amount. How fishy does this sound? Very! Alarm bells ringed all across GS as the theft was discovered and Mr. Sergey was arrested by the FBI in no time. The ensuing battle continues till date.
This is a glimpse of the high-stakes game of high-frequency trading!
-Sumeet Seth (sumeets29@gmail.com)
Fundamentally, algo trading is automated trading wherein computers are used to enter trading orders, sometimes totally without human intervention. A bigger rationale behind this form of trading – apart from the speed advantage due to computer usage – is that it spreads risk for the institution by executing a large number (to the order of millions!) of low value trades. So even if the markets were to swing heavily on a particular day, algo trading is designed to minimize that impact. How beautiful!
High frequency traders use computers that execute trades in milliseconds; this was some years back. “The execution period has come down to microseconds these days and the latency (professional jargon!) will continue to go down as algorithms get more sophisticated and more powerful computer systems emerge”, says a friend of mine who works with a US-based hedge fund in Gurgaon.
Ultrafast stock trading relies upon computer programs that take years to develop and are closely guarded secrets. Typically spending millions and millions of dollars, companies pay hefty bonuses to their top algorithm makers. A piece of this top-secret software can be worth millions, may be billions in case the whole software is out on sale. This is best illustrated by the recent Sergey Aleynikov – Goldman Sachs (GS) case.
Sergey Aleynikov, who worked in the software unit of GS, allegedly copied 32 MB of their 1600 MB top-secret trading software and uploaded it on a server based in Germany. This was some days before he quit his $400,000 a year job to join a rival paying 3x that amount. How fishy does this sound? Very! Alarm bells ringed all across GS as the theft was discovered and Mr. Sergey was arrested by the FBI in no time. The ensuing battle continues till date.
This is a glimpse of the high-stakes game of high-frequency trading!
-Sumeet Seth (sumeets29@gmail.com)
Sunday, September 20, 2009
papa talks
I think the sad part about life is the unconscious effort on the part of your family to make it difficult for you. They tell you to keep your cool, never succumb to pressure (all in good faith, and I really appreciate), while applying enormous pressure on you at the same time, this burden of expectation looming on you. At times, it's unbearable.
To give an example, here is a hypothetical conversation with my dad over sometime in these days:
my cellphone rings. I'm happy to see my younger brother Harsh's number on the screen. I pick it up instantaneously.
Me: oye harshi bhi, kaisa hai?
Papa: chunmun... (thats my nickname :D )
To give an example, here is a hypothetical conversation with my dad over sometime in these days:
my cellphone rings. I'm happy to see my younger brother Harsh's number on the screen. I pick it up instantaneously.
Me: oye harshi bhi, kaisa hai?
Papa: chunmun... (thats my nickname :D )
I get startled and realize.
Me: oh... papa, pranam! sab kaise hain?
Papa: yahan sab theek hain. tum kya kar rahe ho?
Me: (fiddling with my computer) main toh padh raha tha. (and that would be my email)
Papa: yahan sab theek hain. tum kya kar rahe ho?
Me: (fiddling with my computer) main toh padh raha tha. (and that would be my email)
Papa: padhai theek chal rahi hai na?
Me: haan papa, theek hai.
Papa: exams kab se hain?
Me: abhi next Monday se hain 2nd mid term
Papa: accha, toh 1st midterm ke number kaise aaye?
Me: woh papa, (trying to evade; without success!) usmein number theek nahi aaye, yeh semester bahut tough ho hai. Exam paper bhee tough tha. Aur main CAT par jyaada dhyan de raha hun (evasion tactics part 2)
Papa: kuch na kuch bahana hota hai tumhare paas hamesha. Padhai par dhyan do, idhar udhar ki baatein bhool jao beta. Padhai sabse pehle hai.
Me: haan papa.
Papa: aur koi companies aayi campus mein?
Me: haan, abhi toh core hi aayi hain, mera interest nahi hai usmein (duh!! :P) mechanical se 16 students place ho gaye.
Papa: 16 mein tumhara number nahi aaya? Sharm aani chahiye tumhein.. kisi company ne offer hi nahi diya?
Pressure builds up on me. I have no clue what to say.
Me: papa, aur companies ayengi January ke baad. Aur waise bhee main CAT ki preparation….(interruption)
Papa: CAT ki tayari ho gayi poori?
Huh? I am stumped.
Me: nahi papa, academic pressure kaafi hai na is baar, isiliye dheere ho rahi hai preparation.
Papa: hmm…beta, koi job offer toh le lo, haath mein ek job rehna chahiye, fir chahe tum join karo ya na karo. Samjhe?
I wish I could understand, rather ‘take’ a job in my hands.
Me: haan papa. (I sound tensed now.)
Papa: aur haan, tension kabhi mat lena. Bina tension ke kaam karna chahiye. Ekdum coolheaded approach.
Me: haan papa. (what else to say?)
Phew! I feel lightheaded now…
Papa: accha, lo tumhari mummy se baat karo…..
Conversation continues in other directions.
-Sumeet Seth (sumeets29@gmail.com)
Saturday, September 19, 2009
mechanical engineering and life
It seemed to consume my life.
What is it? It is engineering. mechanical engineering, to be precise.
A part of me wanted to run off MNIT jaipur, leave engineering, do something I really loved to do.
The other wanted a balance (read sacrifice) between things; after all I had to respect my own decision, no matter how woefully regrettable.
In the first 3 years here, the first part dominated; with little success though, irrevocably ruining my academic performance.
Fourth year brought hopes of a free ride. I am in 'final year' after all; and the baap - rather grand or even grand grand baap - for all juniors. Academic torture was assumed to have a hard landing.
Meanwhile, the mechanical engineering department had other plans. Come 23rd july and all hell broke loose and continues to do so with full vigour, till date. The implications were overwhelming. With all this, MNIT jaipur did seem to consume my life. The deliberate shunning of social life, the locking-myself-up symptoms, the helpless body language - you name it.
The other part seemed helpless, crushed badly inside me. This one wanted a balance, wanted to show the path out, even as I consciously stunted its voice.
Of late, the other part seems to be coming to the fore.
-Sumeet Seth (sumeets29@gmail.com)
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