My Website

I always wanted to create a website, but could never create one for one reason or the other. I finally created a website. Since I am able to use that as a blog as well, I am not going to post any thing here henceforth.

Please visit the website and send me feedback on how to make it more useful to the students, alumni and in general anyone interested in learning Finance and Excel.

Returning back to India

After a little more than 8-months' stint in New York, I am finally returning back to India this week-end. I enjoyed my stay here at New York and will definitely miss New York and the US.

Will post about my experience later.

Excel 2007 shortcut keys

You can find the list of all shortcut keys in Excel 2007 here.

Behavioral Marketing

Amazon.com is releasing the international version of Kindle DX on January 19, 2010. I am sure there must be other reasons for releasing a larger e-book reader. (I find the smaller one good enough.) But one possible reason (may be this is just my guess) is consumers will find the smaller Kindle more attractive now that Kindle DX is available.

Psychologists say that consumers always compare the prices of products with prices of some related products. When new products are released into the market, consumers get confused as to whether to buy the product or not as consumers just do not know if the price is just right or not. (There are some tech-addicts who buy all new products anyway. I am not talking about them.) Will you pay $259 to buy the smaller Kindle? Is it too high? Just OK? Too less?

It is difficult to say. There is no comparable product available (other products do not have international 3G connectivity). Now that Kindle DX is available, there is a reference. The Kindle DX is priced at an exhorbitant $489.

Now that makes decision making easier. I do not know how much the ebook reader should cost. I do not know whether $259 is enough or not for a smaller ebook reader. But if I find two products, I know that $259 is cheaper than $489. May be people will buy smaller Kindle more now that Kindle DX is available.

I remember another instance where an American company started selling a biscuit making machine for the first time. The sales were low and the company appointed a marketing consultant. The consultant advised to sell a bigger biscuit making machine at the same time at a much higher price. Earlier consumers did not know how much to pay for a biscuit making machine. They did not even know whether they need one or not. But now that a reference price is available, it is easier to compare and take decisions. The company apparently realized an increase in the sales of the smaller biscuit making machine (which is exactly what it wanted).

Compare this situation with a hypothetical situation: You go to a new city for the first time. A taxi says "Pay me Rs.100 to go to a particular place." What do you do? It is very difficult to say yes or no as you have absolutely no idea as to whether the price is right or not. But suppose you find another auto driver says "pay me Rs.90 and I will drop you there." You know what to do. Decision making becomes easier when you have something to compare with.

I have absolutely no idea if this is in fact the reason why Amazon is going to release the international version of Kindle DX. But my guess is, it will increase the sales of the smaller Kindle now that people know it is cheaper to pay $259 to buy a smaller Kindle than to pay $489 and buy a larger one.

What do you think?

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, ...

Learning and Unlearning

There is no age of learning. You can learn at any age provided you are willing to unlearn and learn again. I am doing that now and the experience so far has been pretty rewarding.

I am attending classes on Equity Valuation (Prof. Damodaran), Financial Modeling (Prof. Dan Gode) and M&A (Prof. Amihud). In the Spring, I am planning to attend a PhD level course by Prof. Ohlson on Equity Valuation. I never studied valuation in a class room setting and it is really good to go through both an MBA and a PhD level course on Equity Valuation.

All the faculties are simply great and sometimes, I just do not realize that the class time is over.

I always thought of offering a 3-credit course on Valuation (without including Mergers and Acquisitions in that) and now I feel confident in doing that.