The Money Tree

Bank is a place for the safekeeping of one's money. In the olden days it was the mattress. One reason for this change in behaviour is inflation that chips into the value of money. The rich are now called Crorepatis. In the olden days they were the Lakhpatis. Money has lost value by a multiple of hundred in one generation. To retain its value money has to grow. This is done by banks through various credit schemes as offered to customers. In doing so, banks earn interests from loans given to businesses. There is a risk attached to each lending as per profile of the borrower. Hence, some caution is necessary. This is due diligence. In their eagerness to earn money banks at times take high risks. This is how the culture of default loans, in which some banks are now inundated, has been born. It is natural that there will be some not being able to honour the terms of lending. The worrying factor is the number of them. The larger the number is, the lesser the ability is of the bank to honour its commitment to customers. Greed is Good is a much quoted term of Gordon Gekko of the Wall Street. Too much greed can do the opposite as we are now learning in a painful manner.

Whatever is left out of risk taking by banks is complemented by non-banking financial institutions. This is where people willingly take risk seeking higher return from their money. Non-banking financial institutions may be regarded as a bridge between banks and the stock market, where the risk has no bound. Among the options offered by non-banking financial institutions, one is known as the Ponzi. Named after its creator Mr. Ponzi, investors are promised lucrative returns on their deposits. Customers are initially happy as they regularly receive the promised returns. The operators do it through using new money as more customers are lured in. And then, it stops suddenly and all hell breaks loose. There are other forms of deceits such as the MLM. These operate on a commission basis as per sale of goods. This has a pyramid structure where each layer feeds into the upper layer creating a compulsion on the investor to seek more buyers. At the other end of the spectrum is the stock market where risk taking is a staple. Altogether this is the money market where people make money and also lose them. Losing in general dominates the winning in our market.

I was talking to my grandson as we were having dinner at a restaurant. He is a school student preparing for the GCSE. I asked him what he wanted to be when he grew up. Without any hesitation, he said Fund Manager. In our days it was the Prime Minister. It is amazing how the values of life have changed in a period of less than two generations. Consequently, ethics is a compulsory subject in many areas of studies, Business in particular. But, it is of no avail. Like they say the thief does not listen to religious sermons. Greed has become a religion for the young. In this context, consider our universities that graduate so many each year. Yet we have a shortage in skilled manpower. The unemployment rate is high among university graduates in spite of enviable transcripts. This is symptomatic of a rot in the education system. Reasons are many. For example, consider universities where the same faculty, many with weak credentials, lectures, writes question papers and grades examination scripts. This is typical at all stages of education creating a cancerous situation. Cure, if any, is not in sight as the cancer gets bigger.

Human Resources is an area of discomfort in corporate management. Not long ago human was treated as costs in the corporate world, to be minimized. Technology played a major role in doing so. This was easy in the olden days by machines replacing people on the shop floor. But the situation now is different. Many of these people have turned into resources, human resources, through acquisition of skills and better ability. This is what some companies painfully found out during the housing crises that shook the western economy in early twenty-first century. The managers of the new age were uncomfortable. Their seniors would have done better having lived in similar situations in their time. But they were gone due to cost cutting through golden handshakes. Companies are known to have recalled some of them. The salary was higher than what would have been if they continued in their jobs. Management is not an exact Science. Some subjectivity is always there, more so when it relates to human employees. Efficiency is not always measurable in numbers such as the 1-2-3 machine responses to customer query. In a similar manner, consider advertising that uses different channels to promote goods and services. It is not possible to ascertain the outcome on a one-to-one basis. Many seemingly doubtful allocations are known to have done better than the preferred ones. Some corporate wastes are like body fats that can turn into life savers in crisis situations. The question is how to balance them.

chowdhury.igc@gmail.com