Gambling in Atlantic City

This Sunday, I went to Atlantic city with a friend of mine. People say your visit to US is incomplete without a visit to Las Vegas. :) I do not think I will get time to go to Vegas. So instead decided to visit a poor cousin of it in New jersey. It is apparently organized by the same casino owners and has a similar structure.

It is really worth visiting one of the gambling den. Thousands of small machines and other stuff decorated nicely using a theme. I played (my friend paid for it:)) and we lost about 50% of the money. I think I can teach risk better in a class.

There are two types of people who visit a gambling den. In the first category, you find people who go for fun. Most of the visitors will fall in this category. They have a target amount to lose. If you win anything, it gets added to the total playing amount and hence most poeple end up losing that also.

In the second category, you find the compulsive gamblers. They come to win and I think lose everything. In another road, almost parallel to the sea beach (where all the casinos are located), I found many shops that give cash against gold. Atlantic city is a small city and the number of such shops is large compared to that. These shops are probably catering to the demands of these second category of gamblers.

Anyway, it is a nice experience. As long as somebody else pays for it.

When Man Deviates away from God

While reading the paper on Overvalued Equity and Agency Costs by Prof. Jensen, I suddenly got a feeling that what Prof. Jensen has written (can be downloaded from SSRN.com) is true in general in human life.

When a man succeeds in the beginning, he attributes a large part of the success to God. Here, success may be doing well in examination, making money in the stock market, making money from real estate in Dubai, doing well in job, etc.

Then he keeps succeeding. (Like a momentum factor). After each succeeding success, he attributes a large part of the success to himself and a much smaller part to God. Each success takes him a bit away from God. His bloated ego stands in the way of his understanding the real cause of his success.

Slowly he starts thinking that he is doing well in examinations because he is a good student, or he makes money in the stock market because he can actually predict the overall market movement, (and that his success in real estate or stock market has nothing to do with luck), etc.

This arrogance (or hubris or whatever you call it) slowly takes him away from God. And that ultimately becomes the main reason of his failure. The less grounded one remains while succeeding, the easier (and faster) becomes his fall.

Research shows that companies that make the biggest blunder in mergers and acquisitions are not the ones who always make mistakes. In fact their prior mergers have generated excess returns for the investors. But as one starts succeeding, one starts believing that all this is happening because of him (as if he is indispensable). And that ultimately leads to his failure.

I remember one story from Mahabharat. When Arjun returned to Hastinapur after Krishna left this world, he could not even fight with very ordinary people on the street (some miscreants who were misbehaving). Then he realized that all the power he had was all because of Krishna.

I have seen many examples where good people behave arrogantly (who were not like that before). It is just a matter of time before God shows them who is the boss.

I give a small example.

X starts a small software company in India. X is hardworking. His company does well. He starts making a decent amount of profit. He believes in God and attributes all this to God. He genuinely believes so.

Then his company starts generating 100% growth in sales and profit. People start praising X. All this goes to X's head. He thinks he (and not HE) is responsible for all this success.

And then he starts making mistakes. He does not realize it because he believes that he will never fail, that he is born to succeed, ...