The Q's and NQ's of Life.
Life, can be sometimes complicated as it can be simple. All throughout our life we are subject to evaluations. Though not so much of a fashion during our times, even kids of today are interviewed before they can secure an admission to the kinder garden class. There begins the unavoidable cycle of evaluation. For the next 10 gruellling years the kid is subject to constant evaluations named term tests and half year exams. These evaluations sort of seal the fate of the child as it places him in a particular bracket of good and not so good students, of which a very few are able to free themselves and migrate to the next orbit. Then the kid goes to junior college and then to a professional college. After passing out from a professional college begins his journey into the real world where this, not a kid anymore, has to find a way of earning for himself. And here again, he is subject to evaluations and is rated according to the scores that he gets.
But on what basis is this evaluation carried out. This is one of the most important lesson that I have learnt in my life based on my recent experience.
Evaluations can be carried on two basis.
One, on the basis of quantifiable parameters and the other on the basis of non-quantifiable parameters.
What are quantifiable parameters? Simply stating, these are parameters that can be quantified, given a particular value. Exam score is the simplest possible quantifiable parameter. All men are always evaluated on the basis of these quantifiable parameters. Though not completely fair, this is the rule of the world.
Then we have the non-quantifiable parameters. Though it can be forcibly quantified, it really makes no sense to do so. I mean, can you quantify the actual intelligence of a person. You can always use vague ideas like superb, brilliant or genius to try and quantify them, but it really doesn’t make fair justice to fit these into a set of values. Moreover, the person may have diverse intrests making the task all the more difficult.
But the essence of this writing is to understand as to when will a particular parameter be considered.
Quantifiable parameters are considered at every stage in life, just as we saw for the kid in the example above. Non-quantifiable parameters will be considered once your quantified parameters are within the acceptable bands of the said environment.
However, there are instances when the non quantifiable parameters have had greater importance over the quantifiable ones. When that happens, a genius is made, a great person is gifted to the world. Bill Gates was a college drop out, yet he created a software industry. He brought the PC to everyone’s desk. His contribution to the industry and to the entire mankind as a whole is unquantifiable. But these are exceptional circumstances, hence I say that when this happens a great person is given to the world and great people are not born always.
However good your non-quantifiable parameters be, just because they are non-quantifiable and because that it takes a really great person to rightly quantify the non-quantifiable parameters, it would be in your own good to somehow keep the quantifiable parameters in the acceptable range and then outsmart within the equals with the help of your non-quantifiable parameters.
If you are able to do this, life will really be easy for you. Those people whose non-quantifiable parameters are very good and who manage to keep their quantifiable parameters among the best in the group generally become the become the best performers in the group. The best of the best then land up in places like IIT’s and the IIM’s. My final wordings here. Because the world around may not be as smart as you, keep the quantifiable parameters at a level where the people can differentiate between you and the ordinary and then take it forward with the non-quantifiable parameters.
What is happening in the financial world?
Probably all of you must have heard of what is happening in the financial world, or atleast you would know that something is happening. Here is a small attempt to simplify some of the things for you.
Baer Sterns is the, sorry, was the 5th largest Investment Firm operating in the US and around the world with 14,000 employees on its payroll. Some time ago the sub-prime crisis took place in America.
What is this sub prime crisis? Sub-prime means below average. American Banks have a fascination to give out loans to people who do not hold the capacity to repay them. What the banks do is that they take as guarantee the Homes or other assets of the person and give him a loan. This person now goes and spends out the money given to him and keeps paying the money back to the bank. All goes well, till it goes well. Now what happened in America is that the home rates started crashing rapidly. Hence the banks began to demand other assets from the person, which he didn’t have. So the banks took over the homes of these people and began to sell them irrespective of the price of that they got. This increased the supply in the market and the prices crashed further and became a self feeding loop. Investment Firms and Banks that had given loans to these people had to incur these losses themselves. This coupled with the crash in the stock market was much more that what the banks could handle.
This firm Baer Sterns was badly hit by this sub-prime crisis. Last year the stock of the company had rocketed to $171 a piece hitting an all time high. As this crisis began to unfold, the stock began to crash. There was another firm named Carlyle Capital in which Baer Sterns had a 15% stake. Last month Carlyle Capital went Bankrupt and Baer Sterns lost a lot of money in that.
Friday – 7th March Morning 9:00 AM American Time.
Baer Sterns is now trading at $30. One-fifth of is all time high. As soon as the market opens the stock crashes to $15 in a matter of minutes.
Saturday – 8th March.
The management of Baer Sterns now knows that there is no other way to bail out their firm than to file for Bankruptcy. The rush to the Federal Reserve which is like what Reserve Bank of India is for us. The Fed immediately understands that if they do not bail out this firm, this firm will tumble and will take along with it the whole of the American Financial System. It called up JPMorgan Chase, another top American firm and asked if they would like to buy Baer Sterns. They came, they saw, and they quoted a price. A price that was one-tenth of its actual value. By Sunday evening the deal was done. JPMorgan announced that they would buy each share of Baer Sterns that was trading at $15 for $2. Just for 2 dollars. Imagine the erosion of wealth for the investors there. The 14,000 employees of Baer Sterns had got paid in stock and not cash so they have lost all of their salary for the past few months. Obviously, only a few of them would be still having their jobs by now. Millions of share holders who had the stock lost all their money. A billionaire on Friday became a measly millionaire on Monday. This is America and this is what happens there. Do not look at this as 14,000 employees loosing jobs. See the 14000 families that have lost a livelihood and the other dependent families like the maid servants and all who would be out on street very soon.
What could happen next…?
There are still many firms on the verge of bankruptcy just in line and they are not small firms- they are among the top investments banks of the world, who have stood out for 100 years or so. The American Financial System is facing a crisis of a life time and there seems to be no way and no one to bail it out this time.
Implications for us…
Satyam had a $10 million contract with Baer Sterns per year. Now only memories of Baer Sterns remains and so does the paper contract. A 1000 employees at Satyam wait for their Pink Slips (bye-bye letters) just in case their management finds them to costly to maintain. The axe supposedly has begun to fall…