Making Money

[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)