The book delves into every known wealth destruction threat.
Gautam Chikermane
What affects your personal finances more: a downturn in the economy or a personal disability? Most likely, the latter. But if you see the number of people glued to their TVs, studying the streaming stock prices, you would think the economy is more important. So, a Sensex slide of 100 points seems more important than a change in law that makes dividends tax-free in your hands. In a well-researched book, Jarvis and Mandell take these contradictions head on: "People focus on the macro economy..., rather than paying proper attention to their own personal economy." As a result, "Many of us succumb to the uneasiness surrounding the volatility of the market, which... makes us feel powerless to change our own wealth protection situation."
‘Wealth protection’ is a new term in a country that’s only now learning to deal with wealth creation. It is such a vast and deep subject that one wonders if the personal economies of our future generations will be like those of complex mid-sized enterprises that manage more than Rs 100 crore. From tax-saving entities to forming trusts so that the inheritors of your wealth are not burdened, from using insurance as an estate planning tool to buy-sell agreements, the book delves into every known wealth destruction threat.
Book review in Outlook Money
Showing posts with label wealth. Show all posts
Showing posts with label wealth. Show all posts
Thursday, November 6, 2003
Thursday, August 15, 2002
Unearned income
It all boils down to a four-letter word called risk: find the inclination to court it, and you'll be on your way to riches.
Gautam Chikermane
WHY IS it that the rich keep getting richer and the poor poorer? What is it that prevents wealth from percolating down to the man of merit from the man of money? Why are the Bill Gates or Warren Buffetts, who have created immense wealth for themselves on their own steam, so few? In this age of knowledge, why is it that the knowledgeable person is found working for organisations either run or funded by the rich–why isn’t he wealthy? What is it that keeps money in the hands of the rich?
The answer: unearned income.
I owe this insight to a friend, who claims that the only way people become truly wealthy is when they don’t earn the money. What he is really saying is that people become rich only when they start making their money–rather than themselves–sweat for what they earn. Almost as if they had created an obedient, intelligent robot. When I examined this closely, I found myself nodding in agreement. This is a valuable lesson for us middle-class people, for whom the whole philosophy and process of wealth creation is relatively new, and one which has only recently got moral sanction. For decades we’ve lived in the belief that we have to earn our daily bread–daily.
Opinion in Outlook Money
Gautam Chikermane
WHY IS it that the rich keep getting richer and the poor poorer? What is it that prevents wealth from percolating down to the man of merit from the man of money? Why are the Bill Gates or Warren Buffetts, who have created immense wealth for themselves on their own steam, so few? In this age of knowledge, why is it that the knowledgeable person is found working for organisations either run or funded by the rich–why isn’t he wealthy? What is it that keeps money in the hands of the rich?
The answer: unearned income.
I owe this insight to a friend, who claims that the only way people become truly wealthy is when they don’t earn the money. What he is really saying is that people become rich only when they start making their money–rather than themselves–sweat for what they earn. Almost as if they had created an obedient, intelligent robot. When I examined this closely, I found myself nodding in agreement. This is a valuable lesson for us middle-class people, for whom the whole philosophy and process of wealth creation is relatively new, and one which has only recently got moral sanction. For decades we’ve lived in the belief that we have to earn our daily bread–daily.
Opinion in Outlook Money
Thursday, May 30, 2002
A date with death
If it's not going with me when I say my final farewell to the world, what's the big deal with wealth creation?
Gautam Chikermane
THE NURSE walks in. Pricks my vein with efficient ease. Pain. But I don’t have the energy to protest. Slowly, life starts flowing from the bottle, drop by drop, into my veins. As I stare at the white ceiling above, with no distractions other than the thought of a near-death experience barely an hour ago, I wonder what the whole business of life is about. That’s when I notice him, hovering immensely near the ceiling. Mighty, majestic, mysterious. "Who are you?" I ask. "The God of Death," he answers simply. As clinically detached from his answer as the doctor seemed from his patient when he introduced himself. The blood that has begun to course my veins again is suddenly turning cold. "What do you want?" I mutter, almost knowing–and dreading–the answer. "I’ve come to take you," the voice rumbles. Chilled by the certainty in his voice, I mumble: "But I’m not ready yet... is there any way I can get some more time...?" "Yes..." followed by a pregnant silence. What’s the ‘but’? I wonder. What is he not telling me? I am frantic, and in that fleeting moment, I wonder if I’d sell my soul to the devil if that was the price for staying on. And, then, "Answer these two questions."
* What do you leave behind when you die?
* What do you carry with you after death?
This couldn’t be happening, but it is. He couldn’t be there, but he certainly is. With no way out, and apparently nothing to lose, I decide to give it a go.
Opinion in Outlook Money
Gautam Chikermane
THE NURSE walks in. Pricks my vein with efficient ease. Pain. But I don’t have the energy to protest. Slowly, life starts flowing from the bottle, drop by drop, into my veins. As I stare at the white ceiling above, with no distractions other than the thought of a near-death experience barely an hour ago, I wonder what the whole business of life is about. That’s when I notice him, hovering immensely near the ceiling. Mighty, majestic, mysterious. "Who are you?" I ask. "The God of Death," he answers simply. As clinically detached from his answer as the doctor seemed from his patient when he introduced himself. The blood that has begun to course my veins again is suddenly turning cold. "What do you want?" I mutter, almost knowing–and dreading–the answer. "I’ve come to take you," the voice rumbles. Chilled by the certainty in his voice, I mumble: "But I’m not ready yet... is there any way I can get some more time...?" "Yes..." followed by a pregnant silence. What’s the ‘but’? I wonder. What is he not telling me? I am frantic, and in that fleeting moment, I wonder if I’d sell my soul to the devil if that was the price for staying on. And, then, "Answer these two questions."
* What do you leave behind when you die?
* What do you carry with you after death?
This couldn’t be happening, but it is. He couldn’t be there, but he certainly is. With no way out, and apparently nothing to lose, I decide to give it a go.
Opinion in Outlook Money
Tuesday, April 30, 2002
Don't kill your child's instinct to succeet
By giving our children everything they desire without any effort, we could be killing their instinct to succeed tomorrow.
Gautam Chikermane
THE FIVE children–two girls and three boys, age three to six–frolicked in the small, plastic pool. It was a delight to see them fight the early-summer heat by splashing water on one another, turning into mermaids, crocodiles and fish, as the colours of Holi turned the pool from yellow to red to green. It was also an experience that offered insights into the process of wealth creation. Four of the children were from well-off, even wealthy, homes. The fifth one–let’s call him Hari–was the son of a government clerk. What his family spent in a year would be about one to two months’ expenses of the others’. Hari did not have expensive toys like the other children did; he had never seen a home pool. The other children were completely unaware of the economic divide between him and them, and although Hari was conscious of the divide, the child in him rejected these artificial layers of separation that build walls between adults.
The quintet moved on, from the pool to the cycles to the lunch table to the mom-and-pop games. In all the activities, there was only one leader: Hari. He only had to see a toy being used once and he’d master it. He was the organiser of all kinds of games: making a ‘house’ with dining chairs for walls and bedsheets for a roof, teaching them to pedal more efficiently, hold their breaths underwater and blow bubbles, and generally creating magic out of the ordinary. Hari, I felt, characterised the spirit of enterprise: he had nothing, not even a knowledge of how the remote-controlled jeeps and the other gadgets worked. But he created conditions under which the other children became his followers, chanting "Hari bhaiya, Hari bhaiya", doing what he told them to and having a great time. If he keeps at it, he could end up very wealthy.
Column in Outlook Money
Gautam Chikermane
THE FIVE children–two girls and three boys, age three to six–frolicked in the small, plastic pool. It was a delight to see them fight the early-summer heat by splashing water on one another, turning into mermaids, crocodiles and fish, as the colours of Holi turned the pool from yellow to red to green. It was also an experience that offered insights into the process of wealth creation. Four of the children were from well-off, even wealthy, homes. The fifth one–let’s call him Hari–was the son of a government clerk. What his family spent in a year would be about one to two months’ expenses of the others’. Hari did not have expensive toys like the other children did; he had never seen a home pool. The other children were completely unaware of the economic divide between him and them, and although Hari was conscious of the divide, the child in him rejected these artificial layers of separation that build walls between adults.
The quintet moved on, from the pool to the cycles to the lunch table to the mom-and-pop games. In all the activities, there was only one leader: Hari. He only had to see a toy being used once and he’d master it. He was the organiser of all kinds of games: making a ‘house’ with dining chairs for walls and bedsheets for a roof, teaching them to pedal more efficiently, hold their breaths underwater and blow bubbles, and generally creating magic out of the ordinary. Hari, I felt, characterised the spirit of enterprise: he had nothing, not even a knowledge of how the remote-controlled jeeps and the other gadgets worked. But he created conditions under which the other children became his followers, chanting "Hari bhaiya, Hari bhaiya", doing what he told them to and having a great time. If he keeps at it, he could end up very wealthy.
Column in Outlook Money
Wednesday, January 30, 2002
We need our luxuries, if we can call them that
Our notion of 'basics' and luxuries' is not cast in stone. The big car that is a luxury today will seem to be necessary tomorrow.
Gautam Chikermane
IF BEYOND the basics, everything is a luxury, the question is: what are the basics? Quite like the definition of ‘terrorist’ (one man’s terrorist is another man’s freedom fighter), the definition of ‘basic needs’ varies–one man’s necessities are another man’s indulgence. The Random House dictionary defines ‘necessity’ as "something necessary or indispensable" and ‘luxury’ as "a material object, service, etc., conducive to sumptuous living, usually a delicacy, elegance, or refinement of living rather than a necessity". Unfortunately, in their application, these definitions take us nowhere–the possibilities of stretching them to suit our beliefs are so high that they might as well not exist.
What is necessary? At one level, just food, clothes, shelter, education and healthcare. But my definition is just as subjective as any other, even though for millions around us even two meals a day is a daily battle and shelter certainly a luxury. The point of this exercise is not to arrive at absolute definitions, but to underline the relativity of the various shades of meaning a word acquires in its context–the context, in this case, being our station in life, which must condition our perception of ‘basic needs’ and ‘luxuries’. When I was in college, I would, like all my friends, travel in a DTC bus. As we stood waiting at the bus stand, I would hope first, to be able to get on the crowded bus; then, get a corner to lean my backside on; then, to find someone who would be considerate enough to share his seat with me; then, get a seat to myself; then, have a pretty girl sitting next to me; and so on. How quickly luxuries become necessities! Everything we already have is a necessity (but of course), and the next thing we aspire to will become a necessity soon as we have it.
What is a luxury? Christopher J. Berry, professor of political theory at University of Glasgow, explores the meaning of luxury in his 1994 book, The Idea of Luxury: A Conceptual and Historical Analysis. He defines luxuries as objects of desire that provide positive pleasure (as against necessities, which are utilitarian objects that relieve an unpleasant state of discomfort). So, while we may get along fine without our car, our computer, our cellphone and so on, before we knew it, each of these things became a necessity in our lives. We can continue to survive on food, clothes and shelter, but that car is no longer a luxury. At what point did that happen?
Column in Outlook Money
Gautam Chikermane
IF BEYOND the basics, everything is a luxury, the question is: what are the basics? Quite like the definition of ‘terrorist’ (one man’s terrorist is another man’s freedom fighter), the definition of ‘basic needs’ varies–one man’s necessities are another man’s indulgence. The Random House dictionary defines ‘necessity’ as "something necessary or indispensable" and ‘luxury’ as "a material object, service, etc., conducive to sumptuous living, usually a delicacy, elegance, or refinement of living rather than a necessity". Unfortunately, in their application, these definitions take us nowhere–the possibilities of stretching them to suit our beliefs are so high that they might as well not exist.
What is necessary? At one level, just food, clothes, shelter, education and healthcare. But my definition is just as subjective as any other, even though for millions around us even two meals a day is a daily battle and shelter certainly a luxury. The point of this exercise is not to arrive at absolute definitions, but to underline the relativity of the various shades of meaning a word acquires in its context–the context, in this case, being our station in life, which must condition our perception of ‘basic needs’ and ‘luxuries’. When I was in college, I would, like all my friends, travel in a DTC bus. As we stood waiting at the bus stand, I would hope first, to be able to get on the crowded bus; then, get a corner to lean my backside on; then, to find someone who would be considerate enough to share his seat with me; then, get a seat to myself; then, have a pretty girl sitting next to me; and so on. How quickly luxuries become necessities! Everything we already have is a necessity (but of course), and the next thing we aspire to will become a necessity soon as we have it.
What is a luxury? Christopher J. Berry, professor of political theory at University of Glasgow, explores the meaning of luxury in his 1994 book, The Idea of Luxury: A Conceptual and Historical Analysis. He defines luxuries as objects of desire that provide positive pleasure (as against necessities, which are utilitarian objects that relieve an unpleasant state of discomfort). So, while we may get along fine without our car, our computer, our cellphone and so on, before we knew it, each of these things became a necessity in our lives. We can continue to survive on food, clothes and shelter, but that car is no longer a luxury. At what point did that happen?
Column in Outlook Money
Tuesday, May 15, 2001
In search of enough-II
We, as a civilisation, suffer from the never enough syndrome: the more we have, the more we want to have.
Gautam Chikermane
The one whose appetite is satisfied loathes honey, but to the hungry mouth every bitter thing is sweet. –Proverbs 27:7, Bible
Satish Patel from New Delhi has been one of our earliest, most regular and steadfast readers, encouraging us when we do good work and reprimanding us when we slip up. This time he’s pointed out something so basic, so simple and so obvious, that I wonder why I didn’t think of it before. In my previous column, I had explored the limits of wealth we want, and was wondering when we’ll ever have Enough of it. In response to which Patel writes: "There is a lot of truth in your musings (In Search of Enough, April 30). However, I believe that somewhere down the line the inexorable Law of Diminishing Returns would start to take effect. That’s when people face lifetime crises. And, perhaps, start contributing to others’ wealth–shrinks and doctors."
For those who are not students of economics, the law of diminishing returns is an economic principle that lays down that the application of additional units of any one factor of production– labour, land, capital–to fixed amounts of the other factors yields successively smaller increments in the total output. For instance, if more and more labourers are added to harvest a farm, at some point each additional labourer will add less output than his predecessor did, simply because he has less and less of the fixed amount of land to work on. A long-time characteristic of Indian agriculture, economists have called this ‘disguised unemployment’. First hinted at by sociologist-economist Thomas Robert Malthus in his 1798 paper, Essay on the Principle of Population, this principle was later accepted as an economic law underlying all productive enterprises.
Opinion in Outlook Money
Gautam Chikermane
The one whose appetite is satisfied loathes honey, but to the hungry mouth every bitter thing is sweet. –Proverbs 27:7, Bible
Satish Patel from New Delhi has been one of our earliest, most regular and steadfast readers, encouraging us when we do good work and reprimanding us when we slip up. This time he’s pointed out something so basic, so simple and so obvious, that I wonder why I didn’t think of it before. In my previous column, I had explored the limits of wealth we want, and was wondering when we’ll ever have Enough of it. In response to which Patel writes: "There is a lot of truth in your musings (In Search of Enough, April 30). However, I believe that somewhere down the line the inexorable Law of Diminishing Returns would start to take effect. That’s when people face lifetime crises. And, perhaps, start contributing to others’ wealth–shrinks and doctors."
For those who are not students of economics, the law of diminishing returns is an economic principle that lays down that the application of additional units of any one factor of production– labour, land, capital–to fixed amounts of the other factors yields successively smaller increments in the total output. For instance, if more and more labourers are added to harvest a farm, at some point each additional labourer will add less output than his predecessor did, simply because he has less and less of the fixed amount of land to work on. A long-time characteristic of Indian agriculture, economists have called this ‘disguised unemployment’. First hinted at by sociologist-economist Thomas Robert Malthus in his 1798 paper, Essay on the Principle of Population, this principle was later accepted as an economic law underlying all productive enterprises.
Opinion in Outlook Money
Monday, April 30, 2001
In search of enough
Reinvent yourself while pursuing new goals and you will move up.
Gautam Chikermane
He is the richest who is content with the least: Socrates
When I started my career, it was at a low-paid job in the low-paid profession of journalism. My first paycheque was for Rs 1,650. I would take a morning bus to office and an evening bus back home, watching with great delight the spring blossoms in Delhi. I would not eat out or buy too many things. I was happy, but... I thought if I made Rs 5,000 a month, I would be a rich man. When I did begin to earn Rs 5,000, I would sometimes take my wife out to a Chinese joint and splurge Rs 250 on a lavish lunch. I was happy, but... I thought Rs 8,000 was a salary to aspire for. And this aspiration has gone upwards in a spiral dance, making me prance from one foot to the other, in search of ‘Enough’.
I am not alone. So many people leave so many jobs everyday because they aren’t being paid Enough. When they look at their investments, it’s the same story: in the best case, their investment in Infosys has trebled, but they think that’s not Enough for them to sell–it could treble again, they feel. When they drove a bike, all they wanted was something, anything, on four wheels; now their Maruti 800 isn’t enough–it’s not big enough, it’s not cool enough, it’s not worthy of their status; it’s just not Enough.
Opinion in Outlook Money
Gautam Chikermane
He is the richest who is content with the least: Socrates
When I started my career, it was at a low-paid job in the low-paid profession of journalism. My first paycheque was for Rs 1,650. I would take a morning bus to office and an evening bus back home, watching with great delight the spring blossoms in Delhi. I would not eat out or buy too many things. I was happy, but... I thought if I made Rs 5,000 a month, I would be a rich man. When I did begin to earn Rs 5,000, I would sometimes take my wife out to a Chinese joint and splurge Rs 250 on a lavish lunch. I was happy, but... I thought Rs 8,000 was a salary to aspire for. And this aspiration has gone upwards in a spiral dance, making me prance from one foot to the other, in search of ‘Enough’.
I am not alone. So many people leave so many jobs everyday because they aren’t being paid Enough. When they look at their investments, it’s the same story: in the best case, their investment in Infosys has trebled, but they think that’s not Enough for them to sell–it could treble again, they feel. When they drove a bike, all they wanted was something, anything, on four wheels; now their Maruti 800 isn’t enough–it’s not big enough, it’s not cool enough, it’s not worthy of their status; it’s just not Enough.
Opinion in Outlook Money
Wednesday, February 28, 2001
For your child's sake?
There is only one way to put a great fortune to use: giving while you are alive to causes you think are important.
Gautam Chikermane
Poot kapoot to kyon dhan sanchay/ Poot sapoot to kyon dhan sanchay Why bequeath wealth to an unworthy son/ Why bequeath wealth to a worthy son
-–Sant Kabirdas (1398-1448)
One of the flimsiest and commonest excuses for not parting with the wealth one accumulates in one’s lifetime is that the wealth is being created for one’s children–their education, their security, their financial freedom. One has chosen to be an entrepreneur, struggled and created wealth against all odds so that one’s children can go ahead and become poets, if they should be so inclined. There should be nothing they want and not be able to get simply for lack of money. After all, society didn’t help me when I was in need; so, what moral grounds does the same community, government, nation have to expect this philanthropy from me, these people ask.
Ironically, the answer is: for the very same children on whose tiny shoulders they put the gun and shoot off this excuse. In June 1889, millionaire businessman Andrew Carnegie–whose millions could finance the US economy for much more than a month, unlike Bill Gates’ billions, which may be able to finance it for two days–wrote a beautiful article that extolled the rational virtues of charity and broke all the myths associated with the subject. His aim was to explore the options one had in respect of what to do with one’s wealth after one passes on. According to him, there were three modes in which surplus wealth can be disposed of: "It can be left to the families of the decedents; or it can be bequeathed for public purposes; or, finally, it can be administered during their lives by its possessors."
Opinion in Outlook Money
Gautam Chikermane
Poot kapoot to kyon dhan sanchay/ Poot sapoot to kyon dhan sanchay Why bequeath wealth to an unworthy son/ Why bequeath wealth to a worthy son
-–Sant Kabirdas (1398-1448)
One of the flimsiest and commonest excuses for not parting with the wealth one accumulates in one’s lifetime is that the wealth is being created for one’s children–their education, their security, their financial freedom. One has chosen to be an entrepreneur, struggled and created wealth against all odds so that one’s children can go ahead and become poets, if they should be so inclined. There should be nothing they want and not be able to get simply for lack of money. After all, society didn’t help me when I was in need; so, what moral grounds does the same community, government, nation have to expect this philanthropy from me, these people ask.
Ironically, the answer is: for the very same children on whose tiny shoulders they put the gun and shoot off this excuse. In June 1889, millionaire businessman Andrew Carnegie–whose millions could finance the US economy for much more than a month, unlike Bill Gates’ billions, which may be able to finance it for two days–wrote a beautiful article that extolled the rational virtues of charity and broke all the myths associated with the subject. His aim was to explore the options one had in respect of what to do with one’s wealth after one passes on. According to him, there were three modes in which surplus wealth can be disposed of: "It can be left to the families of the decedents; or it can be bequeathed for public purposes; or, finally, it can be administered during their lives by its possessors."
Opinion in Outlook Money
Wednesday, December 27, 2000
The spirit of enterprise
When you get in touch with the spirit, you will be able to take greater risk and turn resources into wealth.
Gautam Chikermane
Nainam chindanti sastrani; nainam dahati pavakah;
na cainam kledayantyapo; na sosayati marutah
No weapon can pierce the soul; no fire can burn it;
no water can moisten it; nor can any wind wither it.
–Bhagawad Gita, Chapter II, Verse 23
If it’s a comfortable retirement or a home in the hills you’re looking for, you could manage it with your monthly pay cheques. Invest money in diversified financial instruments, ranging from the plain-vanilla, risk-free schemes from the post office like public provident fund (it currently yields 11 per cent) to medium-risk instruments like an index fund (a mutual fund that mirrors a stock market index, like the Sensex or the Nifty, which could give you 18 per cent). You could also look at putting some of your money into high-risk sector funds or directly in stocks (25 to 30 per cent).
But if it’s wealth you want to create, the raw material is risk, the process is entrepreneurship. The highest investment and financial risk is taken by entrepreneurs, a breed of people that is virtually impossible to define (Peter Drucker’s 1993 masterpiece Innovation and Entrepreneurship: Practice and Principles is the best treatise on this subject). As a group, they use and optimise the physical, financial and human resources of a society. When they succeed, they become the leading wealth creators of a country. When they fail, they lose their investment–and that’s their risk: the risk of venturing into new, uncharted territory or looking at old businesses in new ways.
Opinion in Outlook Money
Gautam Chikermane
Nainam chindanti sastrani; nainam dahati pavakah;
na cainam kledayantyapo; na sosayati marutah
No weapon can pierce the soul; no fire can burn it;
no water can moisten it; nor can any wind wither it.
–Bhagawad Gita, Chapter II, Verse 23
If it’s a comfortable retirement or a home in the hills you’re looking for, you could manage it with your monthly pay cheques. Invest money in diversified financial instruments, ranging from the plain-vanilla, risk-free schemes from the post office like public provident fund (it currently yields 11 per cent) to medium-risk instruments like an index fund (a mutual fund that mirrors a stock market index, like the Sensex or the Nifty, which could give you 18 per cent). You could also look at putting some of your money into high-risk sector funds or directly in stocks (25 to 30 per cent).
But if it’s wealth you want to create, the raw material is risk, the process is entrepreneurship. The highest investment and financial risk is taken by entrepreneurs, a breed of people that is virtually impossible to define (Peter Drucker’s 1993 masterpiece Innovation and Entrepreneurship: Practice and Principles is the best treatise on this subject). As a group, they use and optimise the physical, financial and human resources of a society. When they succeed, they become the leading wealth creators of a country. When they fail, they lose their investment–and that’s their risk: the risk of venturing into new, uncharted territory or looking at old businesses in new ways.
Opinion in Outlook Money
Subscribe to:
Posts (Atom)
