The Opinions and Views mentioned in this Blog are my personal opinions and views and does not reflect the views of the organization that I am working for.



30 November 2014

My trave(ai)ls with Spicejet....

Talk of Divine Retributions !!!
My family stays in Bangalore and I work out of Mumbai. Since I have holiday on the second and the fourth Saturday of a month, I fly down to Bangalore on Friday evening and return to Mumbai on Monday morning.
I have been doing this for the last 30 months. Like a clockwork.
Recently Spicejet announced some low fares and I decided to take advantage of those fares and booked tickets by Spicejet for the week of 21st November and on 29th November. It was not that I went through the mad rush of booking those lower fares. When I checked in a Travel Website, Spicejet tickets were cheaper than the rest. So I purchased them.
My booking for 21st November was as follows.
Friday 21st of November: Spicejet Flight leaving Mumbai at 7.05 PM and reaching Bangalore at 8.45 PM
Monday 24th of November: Spicejet Flight leaving Bangalore at 9.05 AM and reaching Mumbai at 10.45 AM. 
Travel time from Airport to my office is about an hour. So I was expecting to reach my office by about 11.30 - 11.45 AM
I had booked this ticket about two weeks in advance. On Monday, 17th of November, my boss scheduled a meeting at 11.00 AM on 24th. Since I won't be able to reach office at that time with my current booking, I was planning to cancel my booking, lose out 1500 rupees, and pay the extra fare (which normally works out to about 2000 rupees, a total cost of 3500 including cancellation charges) book by an earlier flight that leaves Bangalore at 6.55 AM, getting me to my office comfortably in time for the meeting. 
I was sad about losing that money but couldn't see any other options.
That was when Spicejet God intervened. They cancelled my morning flight from Bangalore and gave me their customer care number to reschedule my flight.
Reaching Spicejet Call Center number can be a daunting experience. It is my case that it is easier to reach President Obama on the phone,( in Air Force One, high above the high seas, during a Nuclear Crisis) sooner than you can reach Spicejet call center. I somehow managed to reach their call center and got my ticket rescheduled to 6.55 AM Flight at no extra cost.
This was what the doctor ordered....
Only personal cost was that I had to get up at about 4.00 AM to take the 4.50 Airport Bus from my area. A small price to pay. 
I felt like a winner. I crowed about my good luck to all who cared to listen.
Little did I know....
Remember I had mentioned previously that I had another booking by Spicejet on 29th November? You might have forgotten, but Spicejet remembered. 
As a punishment for crowing about my good luck, Spicejet cancelled both legs of my BOM - BLR flights. Both the bloody legs !!!. They cancelled my BOM - BLR flight leaving BOM at 5.15 PM on 29th November and the BLR-BOM flight leaving at 9.05 AM on 2nd December.
While they transferred my ticket to 6.55 AM flight on 2nd December, they wanted me to call their call center and get my flight rescheduled. Remember, they had a Bangalore flight at 7.05 PM on the same day, they could have rescheduled the same as they did for my return leg. But they did not do it.
May be because I am not a corporate account. Or may be they are uniformly unprofessional and did not do this for any passenger. I don't know.
I again did the pilgrimage of calling their Call Center and after about 100 attempts (I am joking, it was about 150), I managed to get someone on line.
"Can I get my flight rescheduled for the same day evening?" I queried. This was a courtesy question. I was very sure that they will. After all, don't they pride themselves on their on-time guarantee and all that?
No, he informed me, the inventory for BOM-BLR flights for 29th is full. He can accommodate me in a circuitous route, BOM-DEL-BLR. Will it be ok?
It was not ok. Who wants to fly half the country at night on a weekend when you could be with your family? But he informed me that there were no other options currently, so I reluctantly agreed to this labyrinthine route.
I was surprised that BOM-DEL route was available. It is the most congested route in the country. 
I need not have been surprised. He had not booked me in a direct flight to Delhi. He conveniently forgot to mention that I will be flying to Delhi via Jabalpur with a 30 minute stopover at Jabalpur..
I came to know of this only when I printed my Boarding Pass. I found that I had been booked in the BOM-Jabalpur-DEL-BLR route. Effectively, I was flying from West of India to East, then to North and finally to South.By that time it was too late to do anything.
'Bharat Darshan', as it were.
He also informed me that I can checkout about last minute cancellations at the airport.
I reached Mumbai airport at about 3.15 and immediately checked at the counter if they can accommodate me in a Bangalore flight later that evening. One lady, Dimpi (Sorry Dimpi, yours is the only name that I remember in this whole unsavory incident) assured me that she will accommodate me in the evening flight to Bangalore.
I was very relieved and impressed by the helpful nature of the staff.
I waited till 4.00 PM. My Jabalpur flight was scheduled to start at 4.20 PM. At 4.00 PM, Dimpi, transferred my case to another lady, who checked and informed me that Sorry, there are no seats available in the Bangalore flight. 
Highly unprofessional.The least they could have done was to have a separate counter for passengers of Cancelled Flights. And need not have made me wait.
I rushed to board the Jabalpur flight. A very small propeller aircraft. They still have them.
I reached Delhi at 8.30 PM (Ahead of Scheduled arrival, informed the steward). At Delhi, they informed me that my BLR flight is rescheduled to 11.15 PM.
Fortunately, that flight left on time and I finally landed in Bangalore at about 2.00 AM. 
Airport Buses do not ply at that time. I had an option to wait till 5.00 AM or take a taxi
I took a taxi. It costed me 1100, thereby  erasing any cost benefits that I may have had in booking Spicejet.
What other aspect was unprofessional about the whole experience? 
Since they had boarded me on a long circuitous route, the least they could have done is to offer me some light refreshments, some kind words, dinner, some recognition that they have caused significant discomfort to a frequently flying passenger. Some old fashioned courtesy, you know. 
Nothing. Absolutely unprofessional and discourteous.  I was left to fend for myself, which I am perfectly capable of, of course. 
Another unprofessional aspect. There was no one from Spicejet at Mumbai Airport who was ready to help me. My case was pushed from one disinterested Spicejet employee to another.
I am an experienced traveller. I can handle it the cancellation, rescheduling and rerouting part. But what about infrequent travellers, especially old people and those not from Cities? How will they be able to handle this impassivity? this indifference to Passenger concerns, of passengers who have been put on so much of trouble for no fault of theirs? Don't Spicejet have no responsibility other than just sending those emotionless SMSs? Shouldn't someone be promptly calling the passengers, the airline has all the contact details, and helping them with selecting the best option? 
Now the final clincher. Since my DEL-BLR flight was delayed, as a part of their 'On Time Guarantee', they sent me a voucher for Rs.500 which I can redeem in my next flight with Spicejet.
Nothing, not even acknowledgement,  for all my travails...
I don't think that voucher is going to be redeemed.
Spicejet Team, if you are reading this:
My name is Ramaswamy Krishnamurti and my PNR Number is XDGH4H

21 September 2014

Movie Review: Finding Fanny

I have no idea why I went to watch a movie named 'Finding Fanny'. It must have been the review. The movie felt different and refreshing in the review. 
Still, there were aspects of this movie that made me hesitate about watching it. Its name for instance. I don't know if the producer checked the dictionary meaning of the word 'Fanny' before naming the movie. My guess is he did and knew that it was naughty.
Since I rarely watch any movies, at the movie theatre, I had to decide which movie to watch. The choices were between Mary Kom and Finding Fanny. Both the movies had good reviews. In the end I decided to bestow my patronage on Deepika Padukone.
So I went to watch FF.
Big mistake.
Every movie should have a raison d'etre. It should have an interesting story line and it should have a basis for asking people to pay their hard earned money to watch it.  I have no idea what is the basis of this movie. I can imagine the following dialogue between Producer(P) and Director(D).
P: Boss, I want to make a movie.
D: Ok, what's the story
P: No story. I want a few people to drive around in car through Goa. Government is giving some subsidies for promoting tourism.
D: You want people to just drive around?
P: Yes, just drive. Around.
D: For what? 
P: Why should people drive around? Searching for something or someone. Make up a story. It is your job.
D: (Chastised) Shall we make the movie about an old man searching for his childhood love? We can call it 'Searching for Sarah'.
P: OK, what is the love angle? 
D: Fernandez (Ferdie) is looking for his childhood sweetheart can be the love angle. He can go driving through Goa looking for Sarah.
P: But by the time Fernandez finds Sarah, the movie will be over. Who will want to watch an old man seeking love?
D: Oh (rubbing his chin in deep thought)
D: (Suddenly energized), why can't he have some local lady to help him in search for Sarah? We can also get a local young man to drive them around. They can fall in love.
P: Good idea. We could easily insert a few kisses here and there. That will give'em.
D: Ok, We have the overall plot. We have an old man Ferdie, who is in search for his childhood sweetheart, Sarah. Why should Ferdie be looking for his sweetheart all of a sudden?.
P: (mutters in his breath so that I can claim the Goa Government Subsidy). (saying aloud), lets say that he got back his proposal that he sent to Sarah 40 years ago. He finds that it was not delivered to her. So he wants to find Sarah and profess his love for her.
D: 46
P: What? 
D: Let us say that he sent the letter to her 46 years ago. 40 is a round number. It doesn't grip the audience. 46 will stay in their minds. Other thing is with the word 'Search'. It is better to use simple word 'Find'. Let us call our movie 'Finding Sarah'. 
P: That do not rhyme. Also Sarah is not a Goan name. 
D: Why not Finding Flora? No? Finding Frances? No again? Finding Franny? No? OK. What about Finding Fanny? It has a nice rhyme to it
P: That is good. But isn't 'Fanny' a bit naughty?. 
D: Yes, but its ok. Indian audience will not even know. Even if they know, they won't care. All the men want is a pretty actress and a few kisses and all the women want is a handsome hunk and a few kisses. 
P: I have an idea? Lets have Deepika Padukone.
D: Why? She is hardly Goanese, if you see what I mean. We should have someone like Sunny Leone.
P: Our film is a low budget film and we need audience to see so that we can make money. I read somewhere that Deepika has about one Crore Twitter followers. All of them will come to watch the movie. Throw in Ranveer Singh also. With news about their real life hot romance all over the media, a few of his followers will also come to watch. This, coupled with Goan Subsidy, will payback my investment quickly.  
D: Boss, you are a genius. So our movie is called 'Finding Fanny'. I have one more question.
P: What?
D: Assume that they find Fanny. Chances are that she is dead already. Then what? All this drive through Goa for nothing. Audience will throw shoes...
P: (thinking), add 'Six Months Later'. Make something to happen after Six Months. Like lovers getting married or some such stuff.
D: Boss, I say again. You are a genius.
Director leaves
6 months later, Director and Producer meet again.
D: The movie is ready. Deepika is playing a girl who is taking Ferdie through Goa in search of Stephanie (Fanny) who was his childhood sweetheart. To bring in Ranveer Singh, I gave him a cameo and got him married to Deepika in the beginning of the movie and had him choke to death on his wedding cake 10 minutes later. That should bring the Ranveer fans.
In their journey to find Fanny, Ferdie (Nasseruddin Shah) is accompanied by Angie (Deepika), Savio (Arjun Kapur), Angie's mother-in-law Rosie (Dimple Kapadia)  and Pedro (Pankaj Kapur) a painter who is fascinated by Rosie and her backside (Fanny). They go through the villages of Goa in Savio's dilapidated car which had been bought by Pedro. I have beautifully picturized the amazing lure of Goan Inlands, so you should have no problems in getting that money from Goan Government. It is a boring journey, but I have tried to embellish it with some kisses between Angie and Savio. At the end of the journey, I used 'Six months later' and got Ferdie married to Rosie and Angie to Savio and neatly tied up the movie.
P: Brilliant. I can't wait to see the movie.
D: But I had a couple of challenges. I handled them somehow. I hope you will approve my approach.
P: Challenges like? 
D: First challenge was how they will actually Find Fanny. After all the movie is about Finding Fanny and we will look stupid if they did not find her after all this road trip. In my enthusiasm and focus on the road trip, I did not give much thought to how, when and where they will find Fanny. So I took the easy way out. Somewhere in their trip, they come across a funeral procession. Conveniently Fanny had died that morning and it was her funeral procession. No jamela of kahan, kab aur kaise (where, when and how).
P: Beautiful. 
D: In one of the scenes, these people run out of Petrol. I send Ferdie with a white petrol can. But when he came back he brought a Navy Blue Can. No explanations. It is like he got an exchange offer on the can or something. I hope the audience do not notice.
P: What is the time difference between these two scenes?
D: About 30 minutes.
P: Have you inserted some kissing scenes in this 30 minutes? 
D: Yes, I have got scenes of Angie kissing Savio, Pedro feeding Brandy to Rosie, I have shown a sexy Rosie lying down....
P: Then no problem. Audience will not notice. In general, kisses act as amnesiacs. Audience forget what happened before that.
D: The next challenge is that they recognize that they are low on Fuel but still do not take any steps to fill petrol. If I am travelling, as soon as my petrol tank becomes half empty, I become frantic. In this movie despite knowing that they are about to run off the fuel and that they are in some god forsaken village in Goa, they are not making any effort to fill petrol before tank runs empty or to keep some in the can. Won't audience note this anomaly?
P: Kisses?
D: Yes.
P: Then no problem.
D: Another anomaly is the answer to the question, how did Ferdie get the letter from Stephanie that started the whole movie. Since he is the Post master of the village post office, the easiest way for him to get the letter is by post. But I wanted a twist. I got someone (who turns out to be Savio, whose father was a post master. Apparently all elders in the village are post masters) to drop the letter through the door at night and then vanish. Audience may wonder why Savio did not hand it over to him in the day time or why Savio vanished after pushing the letter thru the door (after all it is not some letter bomb or something, it is a 46 year old letter) or why Ferdie did not get it since he was the post master.
P: Kisses after this?
D: Plenty
P: Then no problem. No one will ask any questions....
The Director leaves, a happy man
And finally, what is with the' relieving' guys? Whenever director do not know what to do next, he buys time by asking you guys to relieve yourselves. Then and there. There is a scene where Savio is talking to Angie and suddenly he turns around and viola ! he lets it go. (to say Angie was surprised and nonplussed like a 'dear caught in the headlights' is an understatement. Imagine you talking to someone and he just turns around and starts going off in just the same spot? No warning, no control, nothing. It is like talking to the rain god frantic about the delayed monsoon. Dashed embarrassing), 

Careful dude. A lady is standing next to you. Have some shame.

Same is the case with Pedro and Rosie. Pedro is drinking brandy with Rosie and suddenly Ferdie butts in. Pedro is pissed off (literally !), moves a few meters and starts going off. 

With all that flat land extending miles around them, these dudes have to relive themselves just meters (in case of Savio, one meter away) from where the ladies are standing. Why can't they move off about 50 meters or so? It is not like they have some great urgency to attend the UN General Assembly session or something, These dudes have nowhere to go and got nothing to do but wait for the movie to end. 

I cringed while watching these scenes. 

The final challenge that the Director faced was how to handle the extra person. There were two ladies and three men. 'Six Months Later' four of them can be hitched to each other,  who should be the fifth person and how he should be disposed off ? 

Director decided that Pedro is the best person to be disposed off since he is a foreigner who is a tourist in Goa. Normally in Hindi cinema, there are two ways of disposing off a character. One is to send him to 'Foreign Country' (Mein Pardes Ja Raha Hoon) or the other simple option is to bump him off.

Since they were in the middle of (nowhere) Goa, sending Pedro to Pardes would have incurred expenses, hence the best course of action was to bump him off. But it is difficult for a couple of women and old men to bump off someone especially when bumping off was not in the original agenda. Bumping off someone needs a weapon and an occasion, there should be no witnesses, and if there are witnesses,  it should look like and accident....

Its complicated, this bumping off business. Especially in the middle of nowhere.

Director gets a bored Rosie to open the box in the dashboard. And lo and behold ! a gun ! (Coincidence 1), it is loaded ! (Coincidence 2) and it accidentally fires and kills Pedro (Coincidence 3!). 

To ensure that no one in the car sees that Pedro is dead, the car suddenly goes into a tailspin, the rear door miraculously opens and the car is near the sea (It is Goa, remember?) and Pedro is thrown off into the Sea. Conveniently he was sitting on the side where the door gave way.

And no one saw this happening.

And '6 Months Later' the marriage.

Everyone lived happily thereafter.

There my friends, you have the best of Hindi Cinema.

02 September 2014

The power of compounding in Life

This an article that I posted in LinkedIn Pulse. You can either read it here, or if you prefer, you can read it from the horse's mouth
I am currently in a self-created project of reading 50 books on Finance, Investment and Wealth creation and writing their reviews in my blog. So far I have covered twelve books.
You can read the reviews HERE
One of the biggest benefits of this exercise for me has been the knowledge and the value add that I am gaining. Since the field of Finance deals with money and money influences behaviour, a good book on Finance can add a lot of life lessons to your repertoire. Especially if they are based on the lessons learned by highly successful investors.
My LinkedIn post on 'Sitting Tight' was based on one such lesson that I had learned from the Book 'Reminiscences of a Stock Operator'
This post is about another lesson that I learned from a book that I just completedreview. It is about the power of compounding and the opportunity cost of inconsistency.
To set the tone, let us start off with some math on Investing.
Assume that you started off with three portfolios A, B and C investing 10000 in each. Your holding period for all the three portfolios is 30 years and they are expected to return 10% annually. Portfolio A gives you consistent 10% returns over your holding period, portfolio B gives you Zero returns in the years 10, 20 and 30. Portfolio C gives you negative 10% returns in years 10, 20 and 30.
At the end of 30 years, you would have;
About 171000 in Portfolio A
About 131000 in Portfolio B and
About 96000 in Portfolio C.
Even though your absolute loss is about 17000 in Portfolio C, the power of compounding has ensured that your holding period loss is about 76000. While each of the losses in Portfolio C were meagre, about 2000 in year 10 for example, the cumulative effect is humongous.
Lesson? Consistency pays. In finance.
And in life...
In my school and college days, my performance was inconsistent with a big I. I will perform exceptionally well in one year and exceptionally bad in another year. For example, till class 10, I was very poor academically and in Class 10, I did exceptionally well, then did very badly in Class 11 and performed exceptionally well in Class 12....
Each of those years when I performed poorly, were all non-evaluation years. The examinations were perfunctory. For example, Class 11 exams did not mean much, but Class 12 exams decided your career direction. So I lost focus in class 11 and regained focus in class 12.
What I am saying is that I considered the cost of each of my poor performance to be very low. I could always make up if I want to, I justified my inconsistency to myself. I was like Portfolio C in the above example, doing well sometimes, and doing badly at other times.
That pattern has been followed in most of my adult life. Give me a challenging job, I do well. But I go through the routine work at a very slow pace. I love working on projects since they are time bound and are filled with a lot of intellectual and interpersonal challenges. However, I don't do that well when it comes to routine activities, which are also very important.
Another example. My weight fluctuates between 80 and 87 Kilos. Every time it touches 87, I go to gym, I diet, I walk a lot.... Past experience has shown me that these strategies will be successful and my weight will ultimately reduce to 80, which it does. The problem is that once it touch 80, I stop the activities. Though I don't binge and all that, I go slow on all those strategies that helped reduce my weight from 87 to 80.
If you are a reader of one of MY BLOGs, you will see this inconsistency in action. My month-wise number of blog posts reads like Virat Kohli's test match scores in England ("Kohli's scores in the past 11 innings including Wednesday's blip read, 1, 8, 25, 0, 39, 28, 0, 7, 6, 20 and 0"). In some months I have written more than 30 posts and in others Zero.
This pattern is as regular as a clockwork. How is this inconsistency affecting me in the long-term? I have never even tried to analyse.
After reading the above math, I have come to realize the tremendous cost of my inconsistency. They (inconsistencies) pile up, they compound and I am sure that they have cost me huge opportunity costs over the long-term.
It is said that awareness is the step before change. While I was always aware of my inconsistent behaviour, the above example helped me become aware that I may be paying significant opportunity costs for the inconsistency.
I am sure that I am not alone. Many of us perform with inconsistency, and still may be successful in what we do. We get lazy, we are not in the mood, we lose our mojo, we procrastinate....reasons abound. This post is to help all of us see how better we can perform, how huge our returns will be, if only we were to add consistency to our recipe.
Wish you a consistent life.

11 August 2014

Work Life Balance? Tell that to a Class X Student in India...

Countless are the number of articles that I have read and the number of videos that I have watched which relates to the topic of 'Work Life' Balance.

Most of them talk about the rampant intrusion of technology into their personal lives and how it has made it possible for their bosses to be in their bedroom. The theme of all those articles is that we should strive to achieve a balance between our 'Work' and our 'Life outside of work'. The implicit assumption is that we can easily bifurcate our time, that there is a line of separation, between our 'Work Time' and 'Other Time'.

As per all those articles, 'Work Life Balance' is good and is necessary.

Tell that to a kid studying in Class X in India...

Here is the story of a typical Class X student. For the purpose of this article, let us say it is a boy.

Currently he is studying in 10th Standard in a school here in India. The school follows CBSE Syllabus. The syllabus has three parts. Part 1 is the Scholastic Skills. Part 2 and Part 3 are what are known as Co-scholastic skills, which were recently introduced by CBSE, with the ostensible objective of making Indian children all rounders and Jack of all trades.

The Scholastic part of the course, though tough, is manageable. The challenge is when you mix Co-scholastic activities with the scholastic activities. He has the following co-scholastic activities.

1. Life skills: This deals with the psychological and emotional development of the child. The school conducts something called ECUBE with mandatory attendance
2. IAYP: I forgot the expansion of the abbreviation, but this deals with the development of Social consciousness in the child. As a part of IAYP, he is expected to spend 24 hours in a year on voluntary social activity. This typical Indian kid has taken up teaching disabled kids one hour every week as the activity
3. Arts and crafts: This included performance arts. This boy is studying Carnatic Music as a part of this program. The teacher is very demanding. Since the teacher is very busy, he announces the classes just about 2 hours in advance leaving the boy's schedule into disarray
4. Sports activities including Yoga classes
5. First aid lessons,,.

All of the above have their own attached homework and he is expected to maintain regular records.

In addition, as  a part of his regular scholastic work, he has to do at least 8 Formative Assessments and 2 Summative Assessments every year for each subject. With 7 subjects, including 2 languages, this works out 70 assessments in a year of about 9 academic months, which works out to almost 8 assessments in a month.

Add to that the fact that he is now in Class X and like the typical Indian kid, he is expected to join either Engineering or Medicine in some leading institute in India. To supplement his regular studies, he has enrolled for special studies in an Institute which trains him on clearing the highly competitive Engineering and Medicine entrance examinations (these Institutes have their own entrance examinations !), which conducts parallel classes and assessments on the main subjects of Physics, Chemistry and Mathematics. The classes are held in the school on all days of the week including Saturday after class hours. 

And of course, these Institutes have their own classwork and homework which are more demanding than the regular school classwork and homework.

The typical Indian kid, leaves for school at 7 AM and returns at around 6.00 PM. Immediately afterwords he starts on his homework. After that he is expected to do regular studies. He is expected to study till about 10 PM. (the key word is 'expected', which is different from 'actual) On Saturdays he attends the special classes held by the training institute in the mornings and music sessions in the evening with weekend homework thrown in for good measure !.

On Sundays, he goes for the Social Work and comes back and continues on his pending homework.

Recently, I attended a parent-teacher session conducted by the school where they exhorted the kids to take their annual vacation in the summer of 2015 and for next two years focus only on their studies !

As I mentioned, I hear a lot of people talking about 'Work Life Balance'. People complain about their work having invaded their entire life leaving them little time for their personal life.

Well, try telling that to a kid studying in Class X in India...

12 June 2014

Book Review: The Millionaire Next Door: Authors:Thomas J. Stanley & William D. Danko

Please Note: This is the first book review in my very ambitious project of Reviewing 50 Books on Finance and posting the review in my blog. l have consolidated the book reviews and moved the same to my Investment Blog. You can read other reviews HERE

Who do you think is richer? A neighbourhood garage owner who seem to be busy all the time, always in a Khaki pants and a Sweat shirt and drives a 4 year old Maruti Swift, or the neighbourhood doctor, who lives in a swanky apartment, has a six figure annual income, wears the latest Armani, sports the 50000 rupee mobile phone and drives around in an Audi...

Ok, I guess I gave away the surprise.

It is the doctor, right? 

Wrong. Chances are that your neighbourhood small business owner is richer than the doc who has substantially high income. 

That is the surprising conclusion that the book 'The millionaire next door' comes up with. As per the book, there are various reasons why a doctor is not as wealthy as he should be.

1. Doctors normally start earning late in their lives. The garage owner probably has a 10-12 year headstart over the doctor when comes to earning the income. This is applicable to many educated folks who spends a lot of time studying prior to entering the workforce.

2. Doctor has to live a 'high class' lifestyle. The profession of the doctor calls for a high class style of life. Since they are exposed to people all the time and are being judged regularly, the pressure to live up to your income is high in case of a doctor. They live in high end localities, wears expensive dresses, drives expensive cars all of which eats into their income leaving little as savings

3. Doctors have bad investment habits. They do not spend enough time on understanding wealth creation, do no learn about investing, are not consistent in investing and finally, tend to choose bad investment consultants and lawyers. 

The book is not about doctors, it is about millionaires. It is about how to become one. It is about the behavioural traits of wealthy people. The book is about what to do and what not to do to become wealthy. 

'Frugal' is a word that you see a lot in this book. The wealthy people are frugal. They live in inexpensive neighbourhood, stay in a 3 bedroom apartment for the last 20 years, most of them are self-employed (Two thirds of them), most have been married to and living with the same woman for over 20 years, they are very good at financial planning and their wives are better at financial management than they themselves are.

And they are frugal. They have conservative tastes, drives second hand cars and their spending on dress is only 33% of their more ostentatious neighbours.

The first question that the authors try to answer is 'What is Wealthy'? How do you define wealth?. The authors maintain that your wealth, which includes all your assets (House, Investments) less all your liabilities (Mortgage, Credit Card Debt) should be at least equal to your annual income multiplied by your age divided by 10. 

A person earning Rs.20 Lakhs per year and aged 40 years should have a wealth (also called 'Net Worth') of 20 Lakhs X 40 / 10 = 80 Lakhs. The authors call those who have wealth above this value as 'Prodigious Accumulators of Wealth (PAW) and those who have wealth below this as 'Under Accumulators of Wealth (UAW)'. What do you call those whose wealth is around this number? 

They are called 'Average Accumulators of Wealth (AAW)'

Authors argue that PAW share different behavioral traits from UAWs. We mentioned some of them above. In addition to the above, one fundamental difference between PAWs and UAWs lies in the nature of their income. Authors divide the income into two types. One is the unrealized income. These are incomes which keep accumulating but are not realized by the investor. These are in the nature of incomes which are due to appreciation in the value of their investments including investments in Stocks and Bonds. The characteristic of unrealized income is that since the income is not realized, you don't have to pay tax on the income. 

The other type of income is the realized income. This is the the income that you earn and which is credited in your bank account. Income from Salary is a good example. The moment the income is realized, it becomes eligible to be taxed at the personal income tax rate which in most countries is about 30%. 

Your total income is your realized income plus your unrealized income. 

Authors point out that PAWs usually pay between 2 to 3% of their wealth as income tax whereas a UAW will pay anywhere between 8-15% of their wealth as taxes in a year. That is because most of the income for a PAW is 'Unrealized' while that for a UAW is more 'Realized' in nature. 

Authors use an earthy Texan phrase for a person who looks and acts rich as 'All hat no cattle'. 

Other than being frugal, what else do PAWs do right? According to the authors these are the seven habits of wealthy individuals.

1. They live well below their means
2. They allocate their time, money and energy efficiently, in ways conducive to building wealth
3. They believe that financial independence is more important than displaying high social status
4. Their parents did not provide Economic Outpatient Care
5. Their adult children are economically self sufficient. 
6. They are proficient in targeting market opportunities
7. They choose the right occupation.

The wealthy people are very good at planning and budgeting. They have a clear idea of how much in a year they spent in Food, Clothing, entertainment etc. They also have clear financial goals and plans to meet those goals. 

In addition they spend a lot of time (Almost double that of the time spend by UAWs) in identifying the right professionals who can help them to generate unrealized income. They choose their lawyers and investment advisers very carefully. They own their investment decisions. They are consistent with their investments unlike the UAWs who are very inconsistent with their investment decisions. PAWs have investment plans and do not renege on their plans under any circumstance. UAWs invest in fits and starts. They are the targets of unscrupulous investment advisers. 

The average annual realized income of a wealthy person is about 6.7 percent of their wealth and they pay a tax of less than 2 percent of their wealth.

One interesting concept that the authors bring out is that of 'Economic Outpatient Care'. This is the phenomena where the adult children of UAWs are themselves UAWs and despite reaching their earning age, are still dependent on the support provided by their parents. Authors point out that since the behaviour of UAWs are responsible for their status as UAW, their children tend to inculcate their spending behaviour and themselves become UAWs.

Sometimes the opposite can happen. The book provides the example of a gentleman who grew up very poor. He was motivated to overcome his impoverished circumstances and studied very hard and reached a very successful position earning annual income in six figures. However, he was hellbent on trying to become 'Better Off' than when he was a child. He has a fleet of value depreciating assets. 

PAWs are also good at taking calculated risks. Where they see opportunities, they will invest in those opportunities. When it comes to UAWs they ignore opportunities. The authors discuss the case of multiple UAWs who despite working in blue chip companies like Microsoft or Walmart, do not own a single share of the company.

After reading this review you may wonder if you have it in you to become wealthy. The authors want you to answer the following four questions.

1. Does your household operate on an annual budget?
2. Do you know how much your family spends each year on food, clothing and shelter?
3. Do you have a clearly defined set of daily, weekly, monthly, yearly and long-term goals?
4. Do you spend a lot of time planning your financial future?

If your answer to the above questions is 'Yes' or 'Mostly Yes', then you are one of the lucky few to have what it takes to generate wealth.

Part of the book is tedious. For example, the authors spend considerable time on how much time UAWs spend on purchasing a car. Another complaint is that many of the points discussed in the book are not applicable to young people. Mind you, young people will benefit a lot by reading this book. The habits expostulated in this book are universal and are not age specific. But to expect a young person, barely into their working career to have a net worth calculated by the formula?

I mean, come on !

There is one area where I want to caution the readers. It is mentioned that wealthy takes calculated risks. This is an advice that I am very much worried about. The question is which came first, the wealth or the risk taking. One can say that wealthy can afford to take risks BECAUSE they are wealthy. In my opinion, by following a consistent savings and investment habit, one can build a very comfortable nest egg without taking too many risks. 

The authors have one advice for the youngsters who are at the beginning of their working life. "Start Investing Early". Perhaps, the same advice, removing the word 'Early' is applicable to all of us. 

07 June 2014

Is passion overrated?...

Internet is crammed with articles on helping you find your passion. I searched Google for 'Find your passion' and it came up with,
About 11,10,00,000 results (0.33 seconds) 
I searched for 'finding your passion is overrated' and came up with
About 2,42,000 results (0.30 seconds) 
So when I start a topic like above, I am already in a huge minority. 
There are a few reasons why I think that 'Finding your passion' is overrated. In the Linkedin Tradition of numbered points, here are my reasons for arguing that as a whole this 'Passion' business is overrated.
1. Is the idea of 'Finding your passion' a middle class fad?
Poor people are so busy living their daily grind that they don't have time to think about anything other than their work. If you are a daily wage earner and if you do not do your work because 'it is not your passion', you and your family will stay hungry that night. What about Super Rich? Did they become Super Rich because they found something passionate. My gut is that if you ask them, most of the Super rich will tell you that they started doing something, they became interested in that, they did the job well, they took some smart decisions and here they are !. That is not passion. That is doing your job well.

But when it comes to us, the middle class, most of the motivational books and speakers exhort us to find our passion, to find our potential, to be the best that we can be. We get carried away by this rhetoric and spend our lifetime trying to find our passion.

All the while....
2. 'Your passion' is in your perspective of your current situation...
Most of us have heard the story of three Stone Cutters. One of them is just cutting the stones, another is building a building and the third is building a residence for god. Guess who is more passionate about his work?
There is a janitor who works in my company. He is always happy and enjoys his job. I asked him how he is so happy with the work when his job is to clean the toilets. His response was an eye opener. 'Sir, this is the place where you come to wash your face and spend a few seconds relaxing, before you go back to your work. If this place is dirty, you will feel irritated as you leave and that will affect your work. Once it affects your work, it will affect the performance of the company that I work for. So, it is important that I keep the place clean so that you are happy to do your work better and that makes my company performance better.'
He is passionate about his work because of his perspective. He sees a higher purpose in what he is doing now.

  • How do you see your work?
  • Do you look forward to the day with anticipation or a sense of drudgery?
  • Do you think that you are performing a higher purpose or are you an intelligent pen pusher?
  • Can you redefine your work in your mind so that it meets a higher purpose? I am sure most of the work that you do has a higher purpose like the case of the janitor above. The trick is to analyse your work to find the higher purpose behind it. 
Most of the time, you can find the higher purpose by identifying your customers and see how your work helps them. Sometimes you can find your higher purpose if you have the knowledge of the context in which you are working. 
3. Which comes first? Passion or hard work.
I think that many of us have got that equation on the reverse. We spend our time trying to 'Find our passion' and ignore our current work. When we do that we get negative feedback from other stakeholders. Since we do not want to accept blame for our poor work, we put our blame on some esoteric stuff named 'Passion' which is somewhere 'out there' and which we have to be 'Constantly in Search of'. We spend our whole life living in the future, trying to find our 'Passion'.
Maybe we should focus on the 'Now'. Rather than living in the future, we should put our heart and soul into our current work and accumulate positive feedback. That will start the virtuous cycle of hard work --> Positive Feedback --> Passion. If you are a traffic constable (I guess you are not) you should try to be the best traffic constable in the Universe. 
Let me tell you the example of a neighborhood traffic constable. Anyone who know India will tell you that it is very, very hot in this country in the summer. There is this old traffic constable, who should be close to his 60s, who mans traffic near my house. It is pleasure watching him do his task. He is always smiling, has kind words for passers by, very enthusiastic about his work. Watching him man traffic is like watching an expert dancer dancing to the tune of the traffic. He has everything under control. I have seen him work in the morning, noon and evening. I have seen him work in Summer, Rains or Winter. His demeanor is always the same, pleasant and enthusiastic.
That is passion. Doing your current job extremely well is passion. Passion is an outcome of doing a good work. It is not the means to do good work. 
So the question is, are you doing your current work exceptionally well? Or are you waiting for your passion.
In Indian philosophy, 'Yoga' is a word used to for anything that will help you find yourself. Many of us conflate Yoga with Meditation. That is only one type of Yoga. In Indian philosophy, there are many ways to find out about yourself. One of them is called 'Karma yoga' loosely translated to 'Realizing yourself through your work'. As per this philosophy, if you do your work passionately (?), you will attain self realization. 
Isn't that the whole purpose of searching for 'Passion'? To know what you are capable of achieving. To realize your full potential.
4. What is 'Passion' anyway?
How do you define 'Passion'? 
Many people equate 'Passion' to liking. Instead of saying 'I like writing', the 'Passionistas' will say 'I am passionate about writing'. No you are not. You 'Like' to write. You enjoy writing. Doing something which you like or enjoy is not passion. It is a hobby. 
I am not immune from this habit. Recently I attended a Blogger's conference. In the registration form I had two write a response to the question 'Why do you blog?'. I sort of pompously wrote 'Blogging is my passion'. 
No it is not. I like blogging. But it is not my passion. 
If blogging were my passion, I would,
1. Make plans and act on making blogging as a full time career.
2. I will eat and sleep blogging. My mind will be continuously brimming with ideas on how to improve my blog.
3. I will become a full time blogger. I will write and post at least one blogpost a day for the rest of my life
4. I will network with other bloggers. Share ideas on how to change society / future through blogging.

5. I should be able to earn money to feed my family from blogging.
The problem is that while I will continue to blog, I know that Blogging is not going to be my career. Once it becomes a career, it becomes my 'Work'. I have to get ideas to blog, I have to find publishers who will buy my work. I have to feel guilty for not meeting my writing targets. I have to do mundane stuff like editing and polishing my work. I have to 'Sell' my work to readers..
Once it becomes my work, it no longer remains my passion. 
Viola, I am again in the market, searching for my 'Passion'. 
5. Finally, Searching for your passion and doing your current work well are not mutually exclusive.
I want to end this post by pointing out that finding your passion is a process. You are not going to get up one day and miraculously find your passion. While continuing to do your current work well, you could experiment with other ideas, other areas of work. You could experiment with blogging, photography, dancing....Anything. But be clear if you just 'Like' doing the stuff or are you ready to undertake major sacrifices to enter into the field that you are 'Passionate' about. 
If you can't make those sacrifices, then try finding a higher purpose behind what you are currently doing. I am sure that whatever you do will help someone else do their work better. That itself is a higher purpose.
We all feel happy when we are of service to others. So if you find the 'Receiver' of your service and find out how you are helping  them do their work, you will feel happy with what you are doing and that may translate into passion.
Here is wishing that all of you find work that you enjoy and are passionate about. 

06 June 2014

Are you an idiot?....

At any time when you feel that you are smart and other person is stupid, then follow,

Byron Katie's method of self inquiry. 

Ask yourself the following for questions: 

1. Is it true that Joe Smoe is an idiot? 

2. Is it absolutely true that Joe Smoe is an idiot? 

3. Who would I be without that thought? 

4. How is the opposite of the statement true? Ex. How is Joe Smoe smart? How am I an idiot? 

 Then come up with examples of how Joe is smart and think of the stupid things you yourself have done. You will be surprised to find that our judgments of others is really about ourselves.

04 June 2014

Schumacher is right: Small is beautiful (In Stock Investing)...

In another article in this blog, I argued just the reverse

In that article, I argued that one of the mistakes that retail investors make is to focus on Number of Shares they own instead of focusing on Return on their investment. My point in that article was that for the same amount of investment, Large Caps provide higher returns to a retail investor than small and midcaps. 

In this article, I am going to argue the reverse. With a BIG CAVEAT.

If you are willing to hold on for long term (5 years to 30 years), if you are able to identify the good midcap, if you are willing to ride the storm of ups and downs in the share price, all the time staying invested to your convictions.....

If you do all that,

Then small is beautiful.

Let us take some examples.

If you had invested Rs.3500 in ICICI Bank in 1998 (which I did) and stayed with the stock till today (which I didn't, I am  a retail investor remember?) that investment would be worth Rs.140000 today.

If you had invested Rs.5000 in SBI in 2000 and stayed with it, that investment would be worth Rs.270000 today.

If you had invested about 10000 in WIPRO in 1980 and stayed with it, that investment would be worth  Rs.480 Crores today !!

An investment in Infosys of Rs.9500 in early 90s would be worth about 12 Crores today !!

Huge returns are possible in stock market if,

You identify the right companies
You buy early
You stay with it for long term across market cycles


If you are plain lucky Like Sridhar's Father in Law

Sridhar is an advertising professional in Bangalore. He is a friend of Nandan Nilekeni. In early 90's when Infosys came out with IPO, Nandan asked Sridhar to invest in Infosys. While he is not into stocks, Sridhar invested Rs.95000 in the stock to purchase 1000 shares of Infosys since he was not able to say no to Mr.Nilekeni.

Those were the days of physical certificates. Sridhar was fully allocated the shares and he got 10 gleaming Share Certificates each for 100 Shares.

That was the time he had got married. He wanted to impress his wife by gifting something to his Father-in-law (men do such stupid stuff all the time). Sridhar gifted his FIL with 500 shares of Infosys. 

Since the shares were in physical form and share transaction costs were high and there was not much demand for Infosys shares early in the 90's and also as a courtesy to Nandan Nilekeni,  the FIL did not sell the shares.

That investment of 47500 (0.05 Million Indian Rupees) is worth 60 Crores (600 Million Indian Rupees) today !

His Father In Law thinks that Sridhar is the smartest Son-in-Law in the universe.

Sridhar, on the other hand, feels that he is the stupidest Son-in-Law in the universe.

Coming back to the topic, the question is, do you have the courage of your convictions?

I don't. When I buy a share at a low price, I have very modest expectations. If the price goes up by about 50% I sell. I make profit all right, but I don't build wealth.

But you should have. 

So here is my advice. A new bull market is starting in Indian stock market. There are going to be huge opportunities if you are ready to buy good and wait. This is the right time to enter. Once you enter, stay. Do your due diligence (Can you see the product of the company, have you used the product, what others are saying about the product, is the firm making profits....) and buy. Once you buy do stay for at least 3 years. You will make huge profits, I can assure.

This is the best time to buy low and sell high...

Like Schumacher said, small is beautiful in stock investing.

03 June 2014

Schumacher is wrong, small is not beautiful (In Stock Investing)...

While investing in stock market, there is a rookie mistake that retail investors make. 

Number of shares is given more importance than the return on your investment.

Let us say that you have Rs.5000 to invest. You have a choice between two stocks. One, that of ABC Ltd is trading at Rs.50 per share. The other of XYZ Ltd is trading at Rs.2500 per share. 

Which company shares will you buy?

If you  are like what I was about 3 years ago, you will do a calculation as follows.

If I buy ABC Limited, I will get 100 shares and in case of XYZ company, I will get only 2 shares. 100>2 ergo, I will buy shares of ABC Company. 

Another logic that you will use, like I used to do, is that if the company declares 10% dividend, you will get Rs.100 in case of ABC Company and Rs.2 in case of XYZ Company.

There are many fallacies here that I have learned over the course of having made losses multiple times. 

1. There is a reason that ABC and XYZ are trading at the respective prices. ABC is a novice, it is just testing the waters. XYZ is tried and tested. It has a history of giving good returns on Investment to the share holders. Many people want to buy that stock and that is why it is trading at a higher price. You must at least analyse why the respective shares are trading at their prices. 

One reason may by that ABC is in an industry undergoing recession. For example, if ABC is a company in commodities, its share price will be low during Commodity Downturn.

Another important reason the share price of ABC is low may be due the large quantity of floating shares available in the market. Due to the sheer number of shares, the price per share will tend to be very low. The share price will find it very difficult to climb upwards since for every rise in share price there will be many people who may want to offload their shares. 

2. What about the dividend calculation, you may ask. As per my math, you may say, ABC will give me Rs.100 while XYZ will give me only Rs.2. To you my counter question is, have you checked the dividend history of XYZ before you did the math? Chances are that it will give dividends much in excess of 10%. Total dividend from XYZ may turnout to be much higher than Rs.100.

Anyway, you are not buying stocks only for dividend. Most of the return that you expect from a stock is through capital appreciation. 

Which brings me to my next point.

3. Look for the expected Return On Investment, not on the number of shares that you have.

As an investor, you are investing Rs.5000 and you are looking to maximize your ROI. Since most of the ROI in stock investing will come from Capital Appreciation, you have to look at how fast your investment is expected to increase. For example, if you are looking at a return of 50% on your investment, the price of a share of ABC purchased at Rs.50 has to increase to Rs.75, while the price of XYZ purchased at Rs.2500 has to increase to 3750. Since there is more demand for the shares of XYZ, the chances are that the price of XYZ will touch 3750 quicker than price of ABC touching 75. 

I learned these lessons about three years ago. While looking at my portfolio, I found that absolute value of my returns, for the same amount invested, was significantly and consistently high for the shares of companies like XYZ, (Large Caps, as they are called) than for the shares of companies like ABC (Small and Midcaps). To get a good absolute return in ABC Company, I have to invest significantly high amount of money in those companies and that was leading to increase in my Risk Profile. 

I also found that over a multi-year, large caps have given me positive returns irrespective of at what price I purchased the shares. I remember that I had purchased shares of a company at 1100 about 3 Diwalis ago, and price having gone down to 300 in the interim, it has climbed back to my purchase price.

And I received good dividends and one bonus in those three years !.

So friends, here is my advice. While investing in stocks, always focus on Return On Investment and never focus on the number of shares that you are buying.

Despite what Schumacher says, small is not beautiful when it comes to investing in stock market.

01 June 2014

Why Mrs.Preethi Malhotra will not make money in Stock Market?

Mrs.Preeti Malhotra (PM in Short) is my neighbour in my apartment complex. What with my work taking me away from home early in the morn and dropping me back close to naptime, I hardly get to meet my neighbors. However, the news has gone around that I know a bit about investing and is enthusiastic about giving free advice.
So I have somehow become the neighborhood investment consultant.
I hardly get to meet PM. The other day, I met her in the market.
"Hello Ram, good to see you here", says PM, "I was planning to meet you. Needed some advice on investment. I have about 3 Lakhs (300,000) to invest. I was wondering where I can invest.. What are my options?"
"Why don't you invest in Stock Market?", I ask an innocent question.
"Baap re baap, no, no. no...I don't want to invest in Stock Market. Last time I invested, I lost some money. I invested in a stock of Wipro at 700 and soon after it came down to 500. I sold it off and cut my losses", came the emphatic reply.
('Baap re baap' is the ultimate emotional statement of dislike for an Indian Lady. It loosely translate to 'Oh My God', and is normally followed by a negative statement.)
"But now the price of Wipro is 1500", I pointed out.
"Yes, but I lost money no?" came the irrefutable statement. Who can argue with that?
"Let me ask you something. What are you going to buy in this market?", I enquired, pointing around.
"I came to buy some vegetables-you know tomatoes, onions and other vegetables", she responded.
"How much do you think is the fair value of a Kilo of Tomato?" I asked.
"I don't know, may be around 20 bucks", she replied
"What if you find that the price is 10 bucks per Kilo? ", I asked
"Then I will buy 2 or 3 Kilos. It is difficult to get good tomatoes even at 20 rupees. So 10 bucks per kilo will be a flea market bargain", she responded
"What if the price is 50 rupees per Kilo?"
"Then I will cut down on tomatoes. May be buy a quarter Kilo", said PM.
"Now let us look at Stocks. What do you think is the fair price of the stock of ABC Company?" I asked.
"Considering their last quarter earning and the earning potential, I think 200 rupees is a fair value for the Stock,", PM replied.
"Suppose today you open the paper and see that the stock price of ABC Company is Rs 100, will you buy the share?"
"Of course not", PM replied, "I don't know why the price fell. May be there are some bad news about the fortunes of the company that is floating around that is bringing down the stock price. I will wait for the price to turnaround."
"Assume that it has bounced back from 100 to 200 (your fair value), will you buy now?" I queried.
"No, I won't. I think that I should have purchased it at 100, I feel that all the profit potential has been factored in. I will wait for it to come back to 100". She replied.
"What if it didn't come to 100? Instead it went up to 500, will you buy?" I persisted.
"I think I will take an interest in it. When it has come from 100 to 500, there should be some news about it that I don't know of. I will buy it. Definitely", PM responded
"And you will sell if, after you purchase, the price come down to say 400. This is what you did with Wipro." I pointed out.
"True, I will assume that I made a mistake and get out of the stock", she was categorical.
You see, right there, you have the reason why Mrs.Preeti Malhotra will not make money in stock market. When she buys a food item like Tomato, she has a fair value in mind and if the price is less than the fair value she will buy more of the same and if the price is high she will buy less. This is the typical Demand Curve.
The demand curve based transactions have been tested and perfected over 5000 years. It is the most effective way to buy anything.
Except, for some people, when it comes to buying stocks.
When the price falls lower than the fair value, they get afraid and do not buy the stock. Or they buy less. And when the price have gone through the roof, when everyone and their mother in law has made money in Stock Market, people like Mrs.Preeti Malhotra become greedy and will venture into the world of stock market.
It is the cycle of fear - greed - fear.
Smart people in the market are waiting for people like her to enter the market. Her entry into the stock market is a cue for them to exit the market. Their exit leads to market downfall, bringing down the price of PM's shares as well.
So PM lose her money in the stock market. This reinforces her perception that she is not good at investing in stock market.
Let us summarize our purchase experience of buying Tomatoes vs buying Stocks.
In case of Tomatoes, if the market price is less than fair price, buy more.
In case of stocks, if the market price is less than fair price, wonder what you are missing, become skeptical and fearful and stay out of market. After all who can tell when a crash is impending?
In case of Tomatoes, if the market price is higher than fair price, buy less.
In case of Stocks, if the market price is higher than fair price, wait for it to correct. However if the price still keeps going up, become greedy and buy at a high price.
And when the price falls soon after you buy the stock, sell it and book a loss. And congratulate yourself on having got out of market with minimal losses. Vow to never invest in stock market again. Become an 'Anti Stock Market Propagandist'.  After all you are the living proof that investment in stock market is a gamble and that the game is rigged and that you can't win the game.
What about people who made money? 
They must have rigged the market. Or have insider information. Or they may be just lucky.
"So PM, where are you going to invest your three lakhs?" I asked.
"I think I will invest in some Bank Fixed Deposit", replied the lady.
There is no way Mrs.Preeti Malhotra will make money in stock market !!.