Many of us invest in capital market and each of us may follow different investment strategies. Some of us are long term investors and some are short term traders. But these are not discrete choices but two extremes of a continuum. Therefore most of us, on the basis of our risk aptitude, will lie somewhere in between. Whatever be our investment profile our primary reason for our investments is return.
When we invest, we carry out lot of research, fundamental or technical, friendly tips or even ‘insider news’, to maximize our return. Whatever type and extent of research we carry out, we know that all our investments will not give us positive return all the time. If we are good and/ or lucky a large chunk of assets in our portfolio will give us positive returns often enough or some of them will give us extraordinary return occasionally. It is this uncertainty that we try to address when we acquire a diversified portfolio of assets, which on aggregate has a higher probability for offering positive returns.
Some people don’t have the stomach to take this uncertainty and therefore they keep away from the world of investment. When they consciously keep away from the risk they also give away the potential return associated with it. There is no asset that can give total guarantee of return all the time and risk goes hand in hand with any asset.
In the same way our circle of friends or our network of contacts can also be seen as a portfolio of assets. Some of them are worth long-term investment some are worth short term; but, it definitely makes sense to have a diversified portfolio to be built and nurtured.
One may say that this is a very materialistic way of looking at relationships. It will be so only if we define returns in absolute material form. If we include everything that a friendship brings, whether material or spiritual or emotional or just plain cherishing of companionship into the ambit of our model, then this model is a good way to understand and appreciate our portfolio of friends and contacts.
We can seldom get friends or business partners who will always match with our thinking, preferences, beliefs or whims and fancies. There are times some of them will ‘let us down’ beyond our imagination.
What is our response to this? Do we take a position that ‘we cannot trust anybody’ and keep away from relationships as much as possible? If we do so, we will be losers. We miss the opportunity to experience and cherish a variety of wonderful people who may sometime share happiness, sadness and prosperity with us.
Sometimes we overreact to some incidences in which a person has behaved in an unfair/ unethical / disloyal fashion. Do we jump to conclusions on the basis of one/ few incidence (s)? If we do, it may not be a good idea or may not be fair. One missed dividend or one bad quarter cannot be a good enough reason to dump an asset.
It is the reality of life that we need to have a diversified portfolio, whether it is of people or whether it is of material possession. We need to develop a sensitiveness to judge the kind of assets we are comfortable with and what kind of portfolio we need to keep for different proposes; as friends to share our happiness and sorrow and as partners in our professional dealing to strengthen our collective offering.
One of the most critical qualities of people who make things happen and / or is at peace with themselves is their ability to nurture a strong portfolio of friends / contacts (the ‘end’ each of them seek is different; but. there is a commonality in ‘means’ from this point of view). Politically savvy may even have large ‘trading portfolio’ too (a portfolio they churn and trade :-) ).
We need to accept that at best we can expect 80% co-operation from 80% friends at any time. This is only 64% co-operation on a steady state, which is just more than half the time. We need to learn to build on this to go forward. Especially if we are involved in public service, then our skill in identifying areas of common interest with a wide cross section of people becomes a key determinant of success.
I agree, like in capital market, there may be some assets which may be better to shun. But mind you they are a minority, and often contextual and if you are smart and or lucky even they pay a dividend sometimes which may at worst a ‘lesson for life’
“No man is an island, entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less......” John Donne, 1620
Tuesday, January 26, 2010
Thursday, January 21, 2010
It pays to be nice; but you pay ?
My friends always used to make fun of me that very often I display a grumpy countenance. One day we were all on a tour and we chatted about this trait during dinner. So next day when I got up I decided that I am going to be show a pleasant face.
I was taking a flight back to Mumbai that day. I gave the taxi driver one of the most charming smiles that I could. He smiled back too. We had quite a lot of small talk on the way. When I finished my drive and was paying him, I smiled again. Suddenly with the best smile he could offer, he asked me. “Sir, this is the ‘bonny’ for the day, give me an extra 50”. After this exchange of smiles and pleasantries, how could I ruin it for Rs 50?
I was now in the airport, and after check-in I proceeded to the security. I smiled also at the policeman while being frisked. Initially he had a quizzical look at my attempt of bonhomie. Then after frisking was complete and as I was moving out, he coughed and muttered. “Sir, how about giving me something for a coffee?”
“It pays to be nice, but you pay..”
What does it mean? Does it mean that being nice, friendly and polite mean being weak?
Not necessarily, though very often people perceive it that way and many people try to take advantage of it. That is why sometimes people in power and in a position of being a ‘giver’ normally try to keep a very ‘aloof’ expression.
On the other hand this aloofness could be a mask to hide your inability to be assertive. Assertive about what is right, what is fair, what is due and so on. (The aloofness could also be a ploy for extracting something from the client, or satisfying ego trip or when the service provider doesn’t care and is only doing a job. This is out of scope of this discussion)
In my opinion this aloofness though an effective tool, it is not the best tool for overcoming your weakness in being assertive. Imagine how nice you feel if the doctor who treats you, the policeman who attend to your complaint and the bank teller who services you are also pleasant.
Once I was travelling from LA to Washington on a winter morning. Though it was Christmas season it was a gloomy day. The weather was bad and the aircraft was being tossed up and down. Many of the passengers including my daughter and I were feeling very sick and ready to throw up. The PA system came live and I expected either the monotone of a digital voice or a human being sounding digital making a safety announcement as per the federal regulations. But the captain came online. He had a terrific sense of humour and talked over the PA system for almost five minutes. Of course he made the safety announcement. But it was interspersed with humorous interludes on the season and the weather. It was really soothing and lifted up the mood of all the passengers who were down and moody in the gloomy weather.
I remember a similar experience in a difference context. I fainted in the office and was taken to the hospital. They wired me up and put me through a battery of tests. It was not a pleasant experience and I was generally tensed. The doctors were efficient going about their job with precision. But I was still on the edge, though they had given me a general clearance. I later visited another doctor for a second opinion. This doctor was a different kettle of fish. More than the second opinion and the treatment he suggested, his comforting chat made me feel much better, confident and helped me to recover faster.
But this is one aspect often forgotten; especially in public service. Even many organisations which try to ‘take care of’ this aspect in their client service department fail to address at many places. One of the areas many people fail very often is at the reception counter and with the secretaries of the big bosses. Their rude behaviour often makes the visitors feel so insulted and irritable and the guests are made as if they are being given a big favour (unless of course the guest is a VIP). Mostly the visitors will never mention this. But that doesn’t mean that they never felt bad.
A service, when laced with a smile and/ or a nice word, can double the value of what you offer at no extra cost. This may make the recipient feel respected and may even make his day. This is all the more important when we are serving the public at large. Then we have to accept that we are expected to serve and not just rule like the old feudal lords.
May be I am asking too much
I was taking a flight back to Mumbai that day. I gave the taxi driver one of the most charming smiles that I could. He smiled back too. We had quite a lot of small talk on the way. When I finished my drive and was paying him, I smiled again. Suddenly with the best smile he could offer, he asked me. “Sir, this is the ‘bonny’ for the day, give me an extra 50”. After this exchange of smiles and pleasantries, how could I ruin it for Rs 50?
I was now in the airport, and after check-in I proceeded to the security. I smiled also at the policeman while being frisked. Initially he had a quizzical look at my attempt of bonhomie. Then after frisking was complete and as I was moving out, he coughed and muttered. “Sir, how about giving me something for a coffee?”
“It pays to be nice, but you pay..”
What does it mean? Does it mean that being nice, friendly and polite mean being weak?
Not necessarily, though very often people perceive it that way and many people try to take advantage of it. That is why sometimes people in power and in a position of being a ‘giver’ normally try to keep a very ‘aloof’ expression.
On the other hand this aloofness could be a mask to hide your inability to be assertive. Assertive about what is right, what is fair, what is due and so on. (The aloofness could also be a ploy for extracting something from the client, or satisfying ego trip or when the service provider doesn’t care and is only doing a job. This is out of scope of this discussion)
In my opinion this aloofness though an effective tool, it is not the best tool for overcoming your weakness in being assertive. Imagine how nice you feel if the doctor who treats you, the policeman who attend to your complaint and the bank teller who services you are also pleasant.
Once I was travelling from LA to Washington on a winter morning. Though it was Christmas season it was a gloomy day. The weather was bad and the aircraft was being tossed up and down. Many of the passengers including my daughter and I were feeling very sick and ready to throw up. The PA system came live and I expected either the monotone of a digital voice or a human being sounding digital making a safety announcement as per the federal regulations. But the captain came online. He had a terrific sense of humour and talked over the PA system for almost five minutes. Of course he made the safety announcement. But it was interspersed with humorous interludes on the season and the weather. It was really soothing and lifted up the mood of all the passengers who were down and moody in the gloomy weather.
I remember a similar experience in a difference context. I fainted in the office and was taken to the hospital. They wired me up and put me through a battery of tests. It was not a pleasant experience and I was generally tensed. The doctors were efficient going about their job with precision. But I was still on the edge, though they had given me a general clearance. I later visited another doctor for a second opinion. This doctor was a different kettle of fish. More than the second opinion and the treatment he suggested, his comforting chat made me feel much better, confident and helped me to recover faster.
But this is one aspect often forgotten; especially in public service. Even many organisations which try to ‘take care of’ this aspect in their client service department fail to address at many places. One of the areas many people fail very often is at the reception counter and with the secretaries of the big bosses. Their rude behaviour often makes the visitors feel so insulted and irritable and the guests are made as if they are being given a big favour (unless of course the guest is a VIP). Mostly the visitors will never mention this. But that doesn’t mean that they never felt bad.
A service, when laced with a smile and/ or a nice word, can double the value of what you offer at no extra cost. This may make the recipient feel respected and may even make his day. This is all the more important when we are serving the public at large. Then we have to accept that we are expected to serve and not just rule like the old feudal lords.
May be I am asking too much
Sunday, January 10, 2010
Matter of Honour
“Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!” The Bible
What is the primary role of a Stock Exchange?
It is to provide liquidity for the stocks. It managed this liquidity by having processes in place that enabled thousands of transactions every hour which has now increased to millions per hour with the help of technology. To manage this rate of transactions, even the settlement of trade (fund against security sold and security against funds provided) is made an asynchronous activity (i.e. settled later).
When trading and settlement are asynchronous, there could be risk to both the buyer and the seller; the risk of counter party walking out of the transaction leaving you high and dry. When we have long chains of multiple transactions intertwined and interlinked, such counter party risk will have a domino effect and lead to market failure. This could dissuade many potential investors from participating in the market which ultimately affect liquidity. This used to be the case in Indian capital market before NSE was established with its sophisticated mechanisms for managing the risk. There is margin payment to take away incentive to default; there is a clearing corporation to provide counter party guarantee and so on and so forth.
These risk management measures have significantly contributed to market expansion. The level of trade has increased more than 100 times. Today Indian Capital Market is rated to be one of the best in the world in terms of institutional infrastructure on account of this strong risk management capability.
This is relevant and critical in every human interaction. Every day we deal with a number of people (costumers, suppliers, service providers, regulators, bankers etc) and we agree and commit on certain deliveries between us. Your supplier promises delivery of input materials based on which you have committed delivery to your client for next week. The finance manager has promised to complete the project review by today evening to help you submit the final report to the board tomorrow. The tailor has agreed to deliver the new dress you have ordered for your child. A number of deals and deliveries.
Like in the case of capital markets, the chain of commitments and deliverables are linked to multiple levels and any failure in any level could have cascading effects.
Some people are very reliable in their delivery and even if an unfortunate delay happens they give advance warning helping us to reschedule our plans and our deliverables in an orderly fashion. Some cannot ever honour their commitments. Very often people don’t appreciate the importance of this chain reaction and the need to be reliable.
Let us look at how this affects you and how you should manage this in your daily life.
One of the critical components of professional success is how reliable you are on your commitments. If you are not able to do deliver a promise you should not commit. If you commit and you are unable to meet it, please give advance warning.
When you reduce the risk of dealing with you, then there are more people willing and interested to deal with you. The demand for and liquidity of your offerings increases. On the other hand if you are not a reliable partner, then however capable you are or however useful your products or services are, the demand will be much less than the potential. This reliability factor is critical for your growth and as you go higher it becomes one of the key parameters on which your clients, subordinates and friends decide to deal with you.
On the other hand when you are at the receiving end you need to learn to judge the reliability of person you are dealing with. If you are not dealing with a person who is not reliable, then you need to have mechanisms to incentivise or force reliability.
In fact in your professional life your reliability and that of your partners (colleagues/ service providers / subordinates / bosses) is one of the most critical ingredients that will determine what you achieve.
Contracts, Service Level Agreements, Penalty Clauses etc are tools to manage reliability. As in the case of relationships, your market power (the power you can exert on the giver) can influence the reliability you will be able to command from your partners. But there is no substitute for the age old value of “Pride in Your Commitments”
What is the primary role of a Stock Exchange?
It is to provide liquidity for the stocks. It managed this liquidity by having processes in place that enabled thousands of transactions every hour which has now increased to millions per hour with the help of technology. To manage this rate of transactions, even the settlement of trade (fund against security sold and security against funds provided) is made an asynchronous activity (i.e. settled later).
When trading and settlement are asynchronous, there could be risk to both the buyer and the seller; the risk of counter party walking out of the transaction leaving you high and dry. When we have long chains of multiple transactions intertwined and interlinked, such counter party risk will have a domino effect and lead to market failure. This could dissuade many potential investors from participating in the market which ultimately affect liquidity. This used to be the case in Indian capital market before NSE was established with its sophisticated mechanisms for managing the risk. There is margin payment to take away incentive to default; there is a clearing corporation to provide counter party guarantee and so on and so forth.
These risk management measures have significantly contributed to market expansion. The level of trade has increased more than 100 times. Today Indian Capital Market is rated to be one of the best in the world in terms of institutional infrastructure on account of this strong risk management capability.
This is relevant and critical in every human interaction. Every day we deal with a number of people (costumers, suppliers, service providers, regulators, bankers etc) and we agree and commit on certain deliveries between us. Your supplier promises delivery of input materials based on which you have committed delivery to your client for next week. The finance manager has promised to complete the project review by today evening to help you submit the final report to the board tomorrow. The tailor has agreed to deliver the new dress you have ordered for your child. A number of deals and deliveries.
Like in the case of capital markets, the chain of commitments and deliverables are linked to multiple levels and any failure in any level could have cascading effects.
Some people are very reliable in their delivery and even if an unfortunate delay happens they give advance warning helping us to reschedule our plans and our deliverables in an orderly fashion. Some cannot ever honour their commitments. Very often people don’t appreciate the importance of this chain reaction and the need to be reliable.
Let us look at how this affects you and how you should manage this in your daily life.
One of the critical components of professional success is how reliable you are on your commitments. If you are not able to do deliver a promise you should not commit. If you commit and you are unable to meet it, please give advance warning.
When you reduce the risk of dealing with you, then there are more people willing and interested to deal with you. The demand for and liquidity of your offerings increases. On the other hand if you are not a reliable partner, then however capable you are or however useful your products or services are, the demand will be much less than the potential. This reliability factor is critical for your growth and as you go higher it becomes one of the key parameters on which your clients, subordinates and friends decide to deal with you.
On the other hand when you are at the receiving end you need to learn to judge the reliability of person you are dealing with. If you are not dealing with a person who is not reliable, then you need to have mechanisms to incentivise or force reliability.
In fact in your professional life your reliability and that of your partners (colleagues/ service providers / subordinates / bosses) is one of the most critical ingredients that will determine what you achieve.
Contracts, Service Level Agreements, Penalty Clauses etc are tools to manage reliability. As in the case of relationships, your market power (the power you can exert on the giver) can influence the reliability you will be able to command from your partners. But there is no substitute for the age old value of “Pride in Your Commitments”
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