Risk is different from uncertainty, which is unquantifiable. It is more of an educated gamble based on the odds. Taking such educated punts has become easier, thanks mostly to two factors.

The first is information technology, which has made it easier for people to study many past risks in the hope of learning from them. For example, life-insurance companies have looked back at records of births and deaths to estimate lifespans, create actuarial tables and set insurance premiums. Thanks to computer models, the odds on a freakish storm or earthquake are better known, epidemiologists are more successful at tracking diseases, and even man-made crises such as banking debacles and stockmarket crashes can be catalogued and studied to produce better (though, as we shall see, still far from perfect) forecasts. Such technology is also providing better information on the costs of such mishaps when they do occur.

The second factor that has made it easier to quantify risks is the growing use of markets. Markets are especially good at shifting risks from a party that does not want to bear them to one that does. Insurance, for example, can move the cost of a house burning down from a home owner to the insurance company and its shareholders. A stockmarket listing can shift business risks from a single family to thousands of investors worldwide. Risks, though, are not as easy to trade as bananas or cars. People vary in their view of risk, and of how to value it.

Quantum Finance is a new field that seeks to resolve problems that are experienced with the Standard Model, ( i.e. money is real, and takes the form of cash and assets ).

Interestingly the whole endeavour arose as a result of a discussion between a CERN experimental physicist and his private banker in Geneva. This lead to a collaboration between CERN and a select group of Swiss bankers, who between them created the discrete GW* Forum, the papers of which this summary is based on.

The motives of the CERN researchers was a combination of simple pure pursuit of knowledge, and the hope that a successfully predictive theory would solve their perennial funding problems. The Bankers were suffering from their twin emotions of fear and greed. Fear that they stood to lose if Quantum Finance worked, and they were ignorant of it, and greed in that they hoped for an edge.

In this overview I shall explore the following concepts and thought experiments. ( Many areas are of course incomplete and in need of much more research, but I present results and ideas to date in the hope of stimulating further discussion ).

• 1) Quantum Cash and the non existence of “real” money, and monetary duality.
• 2) Estate Agents Uncertainty Principle
• 3) Schrodingers Bank Account
• 4) Black Scholes
• 5) Relativistic effects and Financial Mass, ( inc Hype Drives, current technology )
• 6) The Law of Cash/Energy Conservation, ( and Feynman cashflow diagrams ).
• 7) Virtual Economic Particles and the Inflationary Universe

However first of all a History of Classical Financial Mechanics.

Cash was originally believed to have been invented by the Ancient Greeks, on the grounds that Aristotle is quoted as saying ” all investment advisers are sophists “. More recent studies have concluded that the Greeks got their ideas from the Ancient Egyptians, who, until then, had only been given credit for inventing Pyramid selling.

For years cash was used in ignorance of its true nature and economic activity was slow, with take-over technique being limited to your basic rape and pillage, and rampant protectionism that was little more than a protection racket ( Danegeld ).

This period ended with the development of Banks, who managed to identify some fundamental monetary laws , and develop some sophisticated tools for financial analysis comparable with the development of Logs in the field of mathematics. Indeed armed with profit/loss/cashflows and interest the foundations of classical monetary theory were laid down and codified ( or exploited ) by Adam Smith ,Venice, and the Lombards, eventually leading to the creation of the Gold Standard. Another group, for the first time noting the relationship between maths and money, invented actuarial studies and then insurance.

This edifice lasted until the 1970’s when its growing complexity ( analogous to building bigger particle accelerators ) started to make clear the holes in the classical theory, though at the time no one noticed.

The key areas were the OPEC price hikes and subsequent recycling of petrodollars into the third world in the belief that no country could go bust. This proved to be an illusion that only be dealt with by applying a quantum approach to money. The other feature of this period is the appearance of derivatives ( swaps, futures, options ) which seemed to obey rules all of their own and had even less relationship to actual cash than was normal.

Finally people realised that the worlds assets were a lot less than the worlds money supply and that most money did not relate to property, gold, goods, services or any other clear source, but to an intangible called “confidence”, which, it is considered, may be a relative of the Higgs Boson.

Once this had been grasped it was clear that only a Quantum and Relativistic Theory could explain the reality as probed by modern financial markets.

Quantum Cash and the existence of non-money or duality

Although everyday concepts like Cash, Profit and Loss apply in the ordinary world, they break down at the extremes, ( which is why apparently healthy institutions like Barings or Orange County can suffer such sudden collapse ). In reality the true elements of money can never be seen, but only traced by their effects or symbols.

Duality. Coin op machines demonstrate the particle nature of money, but any financial institution will tell you that cash flows in waves of profit and loss.

2) Estate Agents Uncertainty Principle

You can never know both the ownership of an asset and its value. ( If you know who owns it then you do not know its value. You only know its value at the time of sale, i.e. when it is between owners).

3) Schrodingers Bank Account

Schrodinger, as well as having a cat, ( either dead or alive ), also had a bank account, about which he was equally uncertain. The reason is that a Bank is nothing more than a financial probability wave, and he could only know that his money was safe when he asked for it back. At this point the wave collapses into “solvent”, or “insolvent” and he can withdraw his money, or not. ( Of course once he held cash he was scarcely any happier as the value of cash was a function of the countries probability waveform.)

Bill, Schrodingers brother, is believed to have gone bust after borrowing money on the basis that the waveform had to collapse as “insolvent” eventually, leaving him with no creditor. He was of course right in his fundamental understanding, but wrong in his probability computations.

4) Black Scholes

Black Scholes are very complex areas of the financial continuum. They twist it around themselves and the largest ones form singularities surrounded by a Bankruptcy Event Horizon, and anything that falls in vanishes for ever.

They used to be hidden from view but in the last couple of decades a number of more adventurous financial engineers have been exploring them, ( sometimes getting too close ). The reason for this interest is simple, dropping small amounts of loose change into a Black Schole can release vast amounts of profitable energy.

People often ask what happens when something falls into a Black Schole, and the answer depends on the relative position of the observer.

To the outside observer all is going well, and then suddenly the object, ( normally a financially massive institution ), falls in, going ever faster until it crosses the BEH and disappears from view.

To the person closest to the BS everything is fine, and stays that way. It’s the rest of the Universe that goes haywire, and “it’s not my fault”.

Fortunately Black Scholes tend to be either clearly signposted if large, and rapidly evaporate if small.

5) Relativistic effects and Financial Mass, ( inc Hype Drives, current technology )

Most of the time we inhabit a classical financial universe of profit, loss, and cash.

Cashflow = Money times acceleration

but

Cashflow =Money times speed of light squared and also = Money times velocity squared / 2

Without going into detail this means that there are two ways to build up a financially massive institution or company; the slow organic growth and take-over route, or by moving at a relativistic speed and hoping to hold onto the extra mass when you slow down.

In attempting to get rich quick it is therefore almost always worth trying to attain a relativistic speed in order thereby to increase your financial mass relative to the rest of the (classical) universe.

This is commonly done by means of Hype Drives, and although none have yet been shown to be reliable, many types have been tried over the years.

The earliest Hype Drives had a tendency to crash and burn, ( see the 2nd Crusade, South Sea Bubble and Tulip Fever for details ), while the next generation ( based on the concept of New Territory) tended to turn on their creators and stop producing income, ( see American War of Independence ).

In more recent time a typical Hype Drive has involved the incessant talking up of vapourware, backed by spin doctoring, until enough hype is built up to really go places. The early Biotech floatations were of this type, and while promising, they have not managed , on the whole, to deliver. Apologists always say that they need just a little more speed to create just a little more cash.

After a lull we have seen a whole new approach tried for the first time by Netscape, who have used the rocket theory. Simple and effective it has pushed them from $100M to $3000M in three days, or 0 to $3000M in 16 months, depending upon your choice of starting point.

The rocket theory is based on the simple note that since F=ma and Ke=mv^2/2 if you throw enough stuff out of the back at high enough speed, you go forwards and accelerate. By chucking out over 6,000,000 copies of their program they built up a highly relativistic speed, and time will tell if they can maintain their mass while coming back to earth.

6) The Law of Cash/Energy Conservation, ( and Feynman cashflow diagrams ).

It has been postulated that there is a law of Cash/Energy conservation. If true then the Green argument that we are simply borrowing from the future will be proven and a huge bill will absorb net profits to date.

In support of their position the greens draw upon Feynman diagrams that show time as neutral. ( It is rumoured that Feynman developed these diagrams as a way of demonstrating to his bank manager that positive and negative credits were interchangeable, as were current spending and future lump sums. While his bank manager could not see the importance of this nobel prize winning work, and was indeed needlessly rude at the time, these diagrams have become a valuable tool in cash flow analysis).

7) Virtual Economic Particles and the Inflationary Universe

The continued expansion of the economic universe is forever creating Virtual Economic Particles, which take the form of quantum collapses that exist as thoughts of the “now there’s an idea” type, ( See R. Penrose, The Emperors New Mind ). A few such particles are energetic enough to actually become real businesses.

The other side of this coin is of course Inflation, and the question as to whether inflation will continue for ever, be halted in a steady state, or collapse. The jury is out simply because at this macro economic scale the data is missing, ( the so called “missing cash” question). Until much better measurements are made the Inflation outlook will always be guesswork, and controlling it even more so.

Arguments that Inflation is the supersymmetry for Entropy are also unresolved, but would, if true, disprove Cash/Energy Conservation and require Feynman Diagrams to be drawn in three dimensions.

Some people have used the recent UK Property market as a proxy for the Universe, ( and then argued for the steady state ), but others tend to argue that the system is too small, and that anyway the behaviour can be explained by either a massive Black Schole hidden from view by the blurring effect of MIG policies, or is the result of a market phase change brought on by movement relative to the markets strange attractor.

Summary

As can be seen there remains a lot of work to be done in this area, but it may well be that physicists, mathematicians and, ahem, economists continue to probe the fundamentals of space and time both physics and finance will turn out to be nothing more than interchangeable explanations of mathematical reality, and money will indeed be shown to be that which makes the world go around.

It was quite interesting to analyse the business underpinnings of the move by NYC to allow wireless transmitters atop traffic signals, lampposts… First is the gradual shift away from

big antennas atop buildings. Second is the coming-of-age Internet based telephone service (i.e., VoIP). Third is the ever pervading nature of networks (away from centralized networks to a more distributed system).

But the biggest curiosity from my perspective was how this whole “space”

is valued: $6000 per month leasing for a few square feet. So, a square

feet of this antenna should generate enough business every month to

repay this cost, plus the fixed infrastructure expense, plus

depreciation of both technology and assets……I wonder how one did the

valuation and what is the geographic distribution of these antennas. It will be an

interesting business problem to study and decide how many of these

antennas a company should bid for and the valuations for each antenna….

At more than $6,000 a month for a few square feet, it may be the

most expensive real estate in New York.

The thin sliver of space on top of lampposts, traffic signals and

highway signs is where the city plans to allow telecommunications

companies to put cellphone antennas and Internet transmitters.

The plan, which will add about $21.3 million to city coffers, will

improve spotty cellphone reception – and turn many intersections

into wireless Internet “hot spots.” But, city officials say, it will

also help those who cannot afford regular telephone service, by

providing a cheaper option, through wireless Internet-based access,

in neighborhoods with the fewest connections to the phone network.

Opponents of the plan say that the only thing the antennas will

bring is an increased health risk. “We have no idea what dangers are

posed by the concentration of these devices,” said Councilman Peter

F. Vallone Jr. of Queens, explaining that the city does not keep

records of the numbers or locations of the antennas already in the

city. “They keep saying that these things are less dangerous than

microwave ovens,” Mr. Vallone said, “but no one has a microwave

running 24/7, right next to their bedroom window.”

City officials say the plan is needed to keep pace with the rapidly

growing use of cellphones and wireless Internet connections. The

antennas and Internet relay boxes will start appearing on city poles

before the end of the summer, said Gino P. Menchini, the city’s

commissioner of information technology and telecommunications. About

18,000 spots will be leased.

The pole-mounted antennas will allow the city to shift away from the

larger cellular base stations that emit higher radiation and are

located on many rooftops, Mr. Menchini explained. And since one of

the franchise companies will install universal antennas, which can

be used by all cellphone providers, the new setup will actually

lower the overall number of antennas needed.

“We see this as a win-win situation,” Mr. Menchini said.

Evie Hantzopoulos of the Astoria Neighborhood Coalition, which

opposes the unchecked spread of antennas in the city, sees it

otherwise.

“There has been a complete lack of public input on this and the city

has given the telecommunications industry carte blanche access,” Ms.

Hantzopoulos said. “It’s not just dangerous, it’s irresponsible.”

While there has been widespread concern about radiation from

cellphone towers posing a risk of cancer and infertility, most

scientific studies have not found a link.

The six companies granted access to the poles include two cellular

providers, Nextel and T-Mobile, and three non-cellular companies,

ClearLinx Network Corp., Crown Castle Solutions and Dianet

Communications. The sixth company, IDT Business Services, will offer

telephone service via the Internet. Each company will be allowed to

use a maximum of 3,000 poles citywide for a term of 15 years.

The current plan offers access to poles in three separate zones for

different prices. Zone A includes Manhattan south of 96th Street.

Zone B is everywhere in the city not included in the other two

zones. Zone C consists of a patchwork of neighborhoods in Brooklyn,

Manhattan and the Bronx where five percent or more of the houses do

not have telephone service.

Agostino Cangemi, deputy commissioner of information technology and

telecommunications, said a big advantage of the franchise plan is

that it will provide phone access via the Internet in Zone C, areas

typically home to lower-income and immigrant families that rely on

public pay phones and high-priced phone cards.

IDT Business Services, a company based in Newark, will provide

customers in Zone C Internet phone devices and accounts to which

they can add pre-paid minutes, Mr. Cangemi said. The Internet phones

will cost less than most cellphones, and there will be no credit

checks, he said

Covered widely
recently
Blinkx
“…uses
self-learning algorithms to analyze the content of the documents a
computer user is viewing and scout for related information on the
Internet or on the user’s PC. The product is available for download from
the company’s Web site ,
which also offers an animated demo of the tool…it continually reviews
what is being displayed on the computer’s monitor–documents, e-mails,
Web sites, even videos–and finds links related to that material. The
tool also monitors what the user is typing…”

The decision has been made. I will be bidding for Google’s share during the IPO auction. I have arrived at a ballpark figure for the number of shares I will purchase/bid….

I should’ve noticed. Neither was I able to check GMail, nor was I able to run standard queries in the morning on Google. A virus that queries search engines?…Well….interesting…BBC has a report on it…

Net search engine Google appeared to resume normal service in the UK around 2000BST after a virus crippled its search engine. Net security firms reported that the havoc seemed to have been caused by a new variant of the MyDoom virus. Google confirmed a number of users in the UK and some US and French users were experiencing problems. The search engine is one of the most popular on the net, dealing with 200 million global queries a day. Huge index First reports of the problems with the UK service started emerging at around 1530 GMT (1630 BST). Instead of getting a page of results, some users in the UK, US and France were confronted with a server error instead. Other net users have reported no problems. In a statement Google said on Monday night: “The Google search engine experienced slowness for a short period of time earlier today because of the MyDoom virus, which flooded major search engines with automated searches. “A small number of users and networks that have the MyDoom virus have been affected for a longer period of time.

Wired writes about the Messenger mission to Mercury. I am a Mechanical Engineer by training and studied ‘heat sinks’ and ceramic housing of electronic circuits to protect them from heat. I was amused by some very creative implementation in Messenger…

CAPE CANAVERAL, Fla. – NASA is about to embark on its hottest mission ever, to Mercury. The Messenger spacecraft, to be launched next week, will be blasted by up to 700-degree heat as it orbits the tiny planet closest to the sun — so close that it would be as though 11 suns were beating down on Earth.

Remarkably, the only thing between the probe’s room-temperature science instruments and the blistering sun and pizza-oven heat will be a handmade ceramic-cloth quilt just one-quarter of an inch thick.

Bachtell used X-Acto blades to cut the 3M Nextel fabric and then — relying on sewing tips from his mother — used an industrial sewing machine to stitch the off-white pieces together into an 8-by-9-foot quilt, using Teflon-coated fiberglass thread. It was a nasty job; the itchy, ceramic-fiber cloth sheds and is bad to inhale.

Diode heat pipes burrowed into the extraordinarily insulated spacecraft will radiate internal heat from all the electronics.

NY Times has gone ballistic today with more stories on sensors…

THE expression “road rage” usually refers to infuriated drivers who lose control of their temper and lash out at other motorists. But what if a car could also express anger, crouching low on its wheel base and glowering with red headlights like a lion about to pounce?

Four inventors working for Toyota in Japan have won a patent for a car that they say can help drivers communicate better by glaring angrily at another car cutting through traffic as well as appear to cry, laugh, wink, or just look around.

NY Times writes about Wireless Sensor Networks. The geeks amongst us have already been anticipating this for almost a decade now. Atleast I did when I was in IIT Bombay. Though I am sure much of this will pan out in the years to come, the tricky thing is to hone down on a plausible timeframe…..

For years it was mostly the stuff of science fiction. But now communications technology has advanced to the point where sensors, machines and computers are beginning to talk to each other wirelessly in ways that could dwarf traffic between familiar devices like cellphones

Stephen Hawking retracts his earlier theory….From Time Magazine

Before an array of TV cameras and hundreds of colleagues at the ordinarily obscure International Conference of General Relativity and Gravitation, Hawking declared that he had solved what he called “a major problem in theoretical physics.” Black holes, he said, do not forever annihilate all traces of what falls into them.

In making that announcement, Hawking recanted a position he had held for nearly 30 years. He also pulled the rug out from under a generation of science-fiction fans, declaring dead a favorite plot device. “There is no possibility of using black holes to travel to other universes,” he said, with evident regret. And, finally, he conceded defeat in a long-standing bet with Caltech astrophysicist John Preskill, who thought there wasn’t a problem in the first place.

The bottom line is that Hawking may or may not have solved a problem that may or may not have been a problem to begin with. You might well wonder why his announcement generated so much excitement. But when the subject is black holes and you’re the world’s most famous physicist — Hawking is not only a best-selling author but has also guest-starred on both Star Trek and The Simpsons — the usual rules don’t apply

I had always admired Southwest Airlines’ founder Herb Kelleher. S+B has an interview with him. Here are some insights into business strategy that I noted.

Southwest’s achievements are widely attributed to its relentless focus. From the start, Southwest’s strategy has been to draw travelers not from other airlines, but from cars, buses, and trains, by providing them the least expensive and fastest service available. To support the strategy, the company determined to fly only one type of airplane, the Boeing 737, and to substitute linear flying for the hub-and-spoke model that has prevailed in the industry.

But at the center of Southwest’s success are its culture and employees. “Your spirit,” says Mr. Kelleher, a man fabled for his willingness to party hard with his staff, is “the most powerful thing of all.”

HERB KELLEHER: Because you can’t really be disciplined in what you do unless you are humble and open-minded. Humility breeds open-mindednessâ€�

S+B: You’re being honored today as a “lifetime strategist.” Did you have a vision for the whole thing? Thirty-five years ago, did you write, “We’re going to become the largest airline with the lowest cost”?

KELLEHER: Oh, no. We didn’t write it down because when you write things down you confine yourself. That’s why we have never used the fancy titles for empowerment, total quality, etc. Every time you talk jargon you find that people assume that they have the same thing in mind when they really don’t. We don’t apply labels to things because they prevent you from thinking expansively.

Strategy+Business writes about scale in business…

“There are many cases when a late entrant has captured the market even with a product that is inferior to that of pioneers. This is because colonizers, passionate about functionality, often overengineer a product or service, adding features that customers do not need, sinking costs into unnecessary research and development, and missing mass-market price targets. Consolidators can steal the market away by creating a product that might not be as good as the pioneers’, but is “good enough.â€� When this is combined with a much lower price, the mass market will switch to the consolidator’s “inferiorâ€� product.

The story of how Palm conquered the handheld computer market illustrates this point. Apple Computer Inc. created the market by introducing the Newton in August 1993. Palm Inc. followed three months later with the Zoomer. Both products flopped; they had poor handwriting-recognition software, and were expensive, heavy, and overburdened with PC functions (such as spreadsheets) that slowed their performance.

In 1995, Palm was acquired by U.S. Robotics, a larger firm with financial and marketing clout. The following year, the company introduced the Palm Pilot. By just about any technical performance measure, the Palm Pilot was far less sophisticated than Apple’s Newton. But that proved to be the foundation of its success; whereas the Newton was a sort of junior PC, the Pilot was conceived as an accessory to the PC — an organizer with connectivity. It was also simple and fast and, more important, cheap — $299, compared with $700 for the Zoomer and almost $1,000 for the Newton.

By 2000, Palm controlled more than 70 percent of the market for what became known as personal digital assistants, which had subsumed the existing market for portable organizers that had been dominated by Philips, Casio, and others. In the years that followed the Palm Pilot’s introduction, Microsoft developed its own operating system for handheld computers, Windows CE. Yet Microsoft’s attempts to make inroads in this market by adding more features and more memory have failed thus far. Microsoft’s motto of “more is betterâ€� has come up against Palm’s “smaller, faster, cheaper.â€� So far, Palm is winning.”

I read about Material Handling Systems as part of my M.Tech in Mechanical Engineering. This one seems pretty much similar but applied to a different problem….

BBC reports on robotics researchers in Spain, who have developed a prototype which can retrieve books from library shelves while patrons are present. ‘When it receives a request for a book, its voice recognition software matches the titles with the book’s classification code to identify which bookshelf stack to go to. The robot navigates its way to the bookshelf, using its infrared and laser guidance system, and scans books within a four-metre radius. Once the book is located, it has to grasp it and take it off the bookshelf, which is not a simple as it might seem. For this, the team had to develop special fingertips like nails, with one nail longer than the other. ‘For me that was the hardest part. All the other things were current state of the art technology,’ said Professor Pobil.’ The article also discusses using robots to assist in digitizing library materials.

In Slashdot today…

“Remember ‘Does IT Matter?‘ a while ago? Nicholas Carr is back with an editorial in today’s New York Times following Microsoft’s decision to dramatically reduce its cash stash. Carr’s take: Microsoft is admitting it can’t find better uses for its cash, due to the growing maturation of the software industry. No mention of open source, although Apple’s consumer-targeted model of free iTunes driving iPod demand is one listed alternative.

A superb article from Economist’s new publication, Intelligent Life. I
was greatly impressed by the depth and simplicity of this way of
looking at life. I was essentially coming to the same conclusions
because of the experience of the last few years of my life. It was
refreshing to find the same thing being expressed in such lucid terms.

Enough is enough

Alain de Botton
From Intelligent Life, Summer 2004, print edition

Alain de Botton on how we can have so much, yet still feel so lacking

If you go into any large American bookshop and study the contents of
the self-help shelves, you’re likely to be able to group the titles on
offer into two broad categories. First, books that tell you how to
make a lot of money quickly. And second, books on how to cope with low
self-esteem.

This combination isn’t a coincidence. The two genres seem like
necessary, almost inevitable, bedfellows. Societies that insist that
opportunities for success are unlimited and universal unwittingly
consign their less-successful members to a feeling that they have only
themselves to blame for their failures. Those at the bottom of
meritocratic, opportunity-filled societies end up not only poor but
also ashamed.

One of the more enduring paradoxes of modern life is how societies
that are richer than ever before could have failed so dismally at the
business of being happier than ever before. A possible answer lies in
the psychology behind the way we decide what is enough. Our sense of
an appropriate limit to status and wealth is never decided
independently. It is decided by comparing our condition with that of a
reference group, usually people we consider to be our equals. We
cannot appreciate what we have in isolation. Nor can we judge our
lives against the lives of our medieval forebears. We cannot be
impressed by how prosperous we are in historical terms. We will only
take ourselves to be fortunate when we have as much as, or more than,
the people we grow up with, work alongside, have as friends and
identify with in the public realm.

The new reference points
The rigid hierarchical system that had held in place in almost every
western society until the 18th century, and had denied all hope of
social movement except in rare cases, was unjust in a thousand all too
obvious ways. But it offered those on the lowest rungs one notable
freedom: the freedom not to have to take the achievements of quite so
many people in society as reference points—and thereby find themselves
severely wanting in status and importance as a result.

It was a freedom because, of course, it remained highly unlikely that
one would ever reach the pinnacle of society. It is perhaps as
unlikely that we could today become as successful as Bill Gates as
that we could in the 17th century have become as powerful as Louis
XIV. Unfortunately though, it no longer feels unlikely.

One of the few ambitions shared by politicians across the
party-political spectrum is that of creating a fully meritocratic
society. That is to say, a society in which all those who make it to
the top do so only because of their own talents and abilities—rather
than thanks to unfair privilege, such as having upper-class parents or
a friendship with the boss. This meritocratic ideal has brought
opportunity to millions. Gifted individuals who for centuries were
held down within an immobile, caste-like hierarchy are now free to
express their talents on a more or less level playing field.

Inevitably, however, there is a darker side to the idea of
meritocracy. If we really believe that we’ve created (or could even
one day create) a world where the successful truly merited all their
success, it necessarily follows that we have to hold the failures
exclusively responsible for their failures. In a meritocratic age, an
element of justice enters into the distribution of not only wealth,
but also of poverty. Low status then comes to seem not merely
regrettable, but also deserved.

A solution to spiralling desires and expectations perhaps lies in the
recognition that wealth does not involve having many things. It
involves having what we long for. Wealth is not an absolute. It is
relative to desire. Every time we seek something we cannot afford, we
grow poorer, whatever our resources. And every time we feel satisfied
with what we have, we can be counted as rich, however little we may
actually own.

Achieve more, desire less
There are two ways to make people richer: give them more money or
restrain their desires. Modern societies have succeeded spectacularly
at the first option but, by inflaming appetites continuously, they
have at the same time helped to negate a share of their most
impressive achievements. The most effective way to feel wealthy may
not be to try to make more money. It can be to distance
ourselves—practically and emotionally—from anyone whom we consider to
be our equal and who has become richer than we have.

In so far as advanced societies provide us with historically elevated
incomes, they appear to make us richer. But in truth, the net effect
of these societies may be to impoverish us because, by fostering
unlimited expectations, they keep open a permanent gap between what we
want and what we can afford, who we are, and who we might be.

The price we have paid for expecting to be so much more than our
ancestors is the permanent feeling that we are far from being all we
might be.

Alain de Botton, a Swiss-born author, essayist and philosopher, has
spent his life writing books about questions of everyday life. His
latest bestseller is “Status Anxiety”.

From New York Times:

Published: April 12, 2004

ANGALORE, India – Trekking along the dusty rural roads of Shamsabad, a village near Hyderabad, a technology hub in southern India, Vinod Khosla, one of the most successful venture capitalists in the United States, was as far removed from his Silicon Valley office as he could get.

Mr. Khosla was in Shamsabad one afternoon in February listening to rural women recount how the tiny loans they had received from a microfinance program run by Share Microfin had helped them start home-grown businesses, transformed their poverty-striken lives and made better education possible for their children.

Microfinance is a long way from the world of venture capital where Mr. Khosla, a partner at Kleiner Perkins Caulfield & Byers, a venture capital business, and a co-founder of Sun MicrosysteBms, has earned a formidable reputation as the man with the Midas touch. But in February he said he would start working part time at his company to spend more time with his family and on his passion: supporting microcredit initiatives for impoverished regions.

The Share program, or Society for Helping and Awakening Rural Poor Through Education, was founded in 1991 by M. Udaia Kumar, who had been involved in providing training programs to poor rural entrepreneurs. The program has reached 300,000 needy families with loans totaling $75 million.

“I was completely blown as I listened to the stories of these tenacious women,” Mr. Khosla said. “I started crying.” In his view, the microfinance initiatives he visited in India and Bangladesh in February ran more efficiently than most Silicon Valley organizations. “They have sophisticated credit algorithms,” he said. “Does the woman own a buffalo? Some chickens? Does she have a toilet in her home? What kind of roofing material does her home have? Does she bring a shawl to the village meeting?”

In India, microloans are usually disbursed to poor women whose total family assets are less than 20,000 rupees ($459) and whose monthly income is smaller than 350 rupees. Yet microfinance initiatives have a phenomenal repayment rate averaging more than 95 percent, better than the best commercial banks in the world. Many of the programs are highly profitable, Mr. Khosla said, adding that “microfinance is one of the most important economic phenomena in the world in the last 50 years.”

His favorite story is that of Sivamma, a 35-year-old woman from the Guntur district of Andhra Pradesh who goes by one name. Four years ago, she took a loan of 2,000 rupees ($45) from Spandana, a microfinance initiative based there and built a successful business by employing 250 women to collect human hair. When the women travel to the nearby villages with the small toys that she buys for them, small children greet them and exchange handfuls of hair for the toys.

The hair is collected and sold to a leading Indian hair exporter in Madras, from where it eventually finds its way to the United States and other Western countries to be used for wigs and hairpieces. Sivamma’s return on investment has been more than a hundredfold.

Sivamma’s pride is the $3,000 home she built from the profits, the $700 motorbike she bought for her husband and her $1,000 savings.

Mr. Khosla said he intended to invest some of his own wealth as well as time in microfinance projects. Though he declined to give specifics about how he will allocate his time and money, Mr. Khosla said that he would continue to make investments with Kleiner Perkins’s new $400 million fund for technology and life sciences start-ups. “I’ve just made the fund’s first investment,” he said.

For the next four or five years, Mr. Khosla said, his time commitment to venture capital activities would “be more like 75 percent.”

Having a successful, high-profile venture capitalist with hundreds of millions of dollars in personal wealth devote attention to microfinance initiatives is invigorating for the fledgling industry.

“Vinod Khosla has a reputation as a visionary and as a person who is able to identify industry trends well before others,” said Maggie Nielson, vice president for strategic development of Unitus, an organization based in Redmond, Wash., that helps provide capital financing and strategic help to microfinance initiatives. “Having someone with his credibility endorse this relatively unknown industry brings significant attention.”

An estimated 3,000 microfinance initiatives serve the world’s poor but a scarcity of money has limited their expansion. More than 70 percent of them serve fewer than 2,500 borrowers each.

Only 30 microfinance initiatives have grown to serve more than 100,000 poor borrowers. One of them, the pioneering Grameen Bank in Bangladesh, reaches more than three million borrowers. A total of $4 billion has been disbursed since Grameen started making loans in 1976 with seed loans starting as small as $35.

The majority of the microfinance initiatives struggle to find grant financing and to stay in business. The money they do receive is often in small grants of $5,000 to $50,000. The ventures are typically viewed as risky propositions for loans from commercial banks.

But advocates hope Mr. Khosla’s evangelism for the initiatives will help them increase support from mainstream institutions.

Some microfinance projects are tapping into commercial financial institutions. In India, the Grameen Foundation is starting a company called Grameen Capital India in partnership with Citigroup and India’s leading ICICI Bank to help microfinance initiatives get guarantees for financing.

And business leaders and entrepreneurs are increasingly seeking to support microfinance organizations because of their financial soundness and broad social impact, said Julie Stahl, program officer of the Grameen Foundation USA.

“We are seeing a groundswell of support coming from leaders in the high-tech and venture capital worlds,” Ms. Stahl said. Bob Gay, managing director of Bain Capital; Mike Murray, a former vice president at Microsoft; Rob Glaser, founder of RealNetworks; and Craig McCaw, a pioneer in the wireless industry, for example, have all been involved with microfinance projects.

It was heartening, Mr. Khosla said, to see that the entrepreneurial principles of Silicon Valley applied just as well in rural India and Bangladesh. “Granted, they are not as profitable as Google, but they have the same level of social impact.”

Subway systems of the world, presented on the same scale….

You see a gorgeous girl at a party.
You go up to her and say, “I am very rich.Marry me!”
That’s Direct Marketing.

You’re at a party with a bunch of friends and see a gorgeous girl.
One of your friends goes up to her and pointing at you says,
“He’s very rich.Marry him.”
That’s Advertising.

You see a gorgeous girl at a party.
You go up to her and get her telephone number.
The next day youb call and say “Hi,I’m very rich.Marry me.”
That’s Telemarketing.

You’re at a party and see a gorgeous girl.
You get up and straighten your tie, you walk up to her and pour
her a drink. You open the door for her, pick up her bag after she
drops it,
offer her a ride, and then say, “By the way, I’m very rich. Will you
marry me?”
That’s Public Relations.

You’re at a party and see a gorgeous girl.
She walks up to you and says, “You are very rich..”
That’s Brand Recognition.

You see a gorgeous girl at a party.
You go up to her and say, “I’m rich.Marry me”
She gives you a nice hard slap on your face.
That’s Customer Feedback !!!!!

You see a gorgeous girl at a party.
You go up to her and say, “I am very rich. Marry me!”
And she introduces you to her husband.
That’s Demand and supply gap.

You see a gorgeous girl at a party.
You go up to her and before you say, “I am very rich. Marry me!”
she turns her face towards you ———— she is your wife !
That’s competition eating into your market share.

I just calculated the amount of work I have been putting in over the past many months. On an average, I have been spending 11-12 hours everyday on work (without counting the commute time and lunch). Thats a *very* hectic few months in my life. I should say one of the most hectic ever. Factor in the more than daily 50 miles of commute in heavy and slow-moving Washington DC traffic, and the weekly trip to Richmond (300 miles round trip),and I am working and moving like crazy.

Maybe I should slow down, move away from the fast lane in life, smell some roses,….else the whole thing is a recipe for a fast burnout….