Sportsperson or Entertainer?

Why a sportsperson becomes great? Is it just because he is very good at a sport or is it something else? Why is it that sportspersons earn more than most of our top notch executives? What is it that they are creating that’s worth millions of dollars?
A sportsperson is not just a player playing his sport to win but he is also an entertainer playing to entertain his crowd. Their job is to create entertainment and not to just play and win. That’s what they are worth. So when Ronaldo does a scissors trick, he is not just faking the player in front but he is creating entertainment. When Air Jordon dunked from the two- pointer line, it was not the addition of 2 point on scoreboard that made him great but it was the screaming crowd that made him great. In those mere 2 points he instantly created entertainment worth millions of dollars. A sportsperson doesn’t become great until and unless he doesn’t win the crowd’s, fan and critics alike, heart. This is the reason why some sportsperson become more famous than others because that sportsperson wins the heart of the crowd. So when you watch a soccer player running towards the corner line after scoring a goal, you know that it is not the joy but it is a tribute to all the people in stadium and the people in the stadium understands it. That’s why soccer has more fans than any other sports in the whole world. No sport can prosper without giving people what they want: Entertainment. That’s what dying sports like field hockey should aim to provide and not to change some rules here and there because it’s not just the rules but the players that makes or breaks a sport.
A player’s greatness is not made by the great statistics he has amassed in his lifetime but it is made by the great moments in the people’s minds that are imprinted forever. So when someone says Jordan, it’s not the statistics that comes to my mind but it is the last shot (famously known as “The Shot” taken when 3 seconds was left and 2 people were guarding him) in the 1989 playoffs that comes to my mind. And that’s why he is great and not because he averaged 33.4 points per game. This is something every sportsman should strive for and die for.

THE SHOT Video

Calvin Hobbes : Best of Dec 1985.

I am a big fan of Calvin and Hobbes. So if i am writing a blog then C & H should come into it. Anyways all technical details about the stock market was getting a little boring. So i thought i should mix some fun stuff also. If some one doesnot know about Calvin and Hobbes then here are few calrifications, which if you keep in your mind then you will enjoy the this strip all the more. Calvin is a pretty sarcastic kid who is infact quite sadistic, extremely creative, greedy and philosophical. Well, hobbes is his split personality which is more content, mentally stable, less mischievious but always helps his other personality. Bill Waterson came up with a amazing solution to depict the split personality of Calvin through the way Calvin most of the time see i.e. with Hobbes alive and talking to him and as his best friend. But Calvin doesnot have any idea of non-existence of Hobbes and yet you will see many shots of Hobbes as just a stuff toy. This is often to explain the audience what it will look to the normal people in the Calvin world and the alive Hobbes is what it looks to Calvin. That is the reason for all his unique personality. Remember, just don't read the sarcasm,pun, and fun dialogues but try to see the way the shots are presented. Most of the time you will realise the deeper meaning behind sudden switch between shots containg his monsters and real world people. Also remember when Calvin is talking to Hobbes then actually he is talking to himself i.e. he is only refuting and agreeing his own agreements. Like in one strip Calvin is abusing Susie, a new girl in his class and at the same time Hobbes is saying she is cute and asking him, does he like her.Remember these points and then read. You will enjoy more.

I am pretty sure that everyone will agree with me that never in the history of comic strips has been a work that was created as rich, deep, funny, philosophical and graphically pleasing as Calvin and Hobbes. Bill Waterson is awesome.

Ofcourse Calvin and Hobbes is copyrighted to Bill Waterson and I am here just to promote this Strip, nothing more. Hope you all are going to enjoy.

Fundamental analysis 101

You must be wondering why i am writing so many posts about money?You must also have noticed that my posts are jumbled up. I have done that on purpose. It may not be perfect but i always try to introduce a concept when it is relevent. Like i can't tell you the similarity between magic poker and stock market without telling you that money is created out of nothing in stock market just like in the magic poker. So before I wanted to start about stock market i wanted to divide companies into categories so that i can discuss their profitablity and future prospects. Those categories are given in the Money 5. Later we will slowly build on those categories and learn what we can as investors and enterpreneurs. But that will be later, first we will talk about valuing a company with an example. Something that is at the very heart of fundamental analysis.

Fundamental Analysis is about valuing a company according to its future growth prospects and by deeply studying the balance sheet, cash flow etc.
It lies more on the concept that when you buy a share, you buy it because of the company that share represent and not because you think it will rise in the next 6 days or your broker told you to buy or your uncle told that it is a good stock. We will unravel this as we go along. Lets start with an example.

A fictional example set in say 1990s: One day a boy working at a shop observes that there is a government office on the other side of the road. Being a government office, people have to wait very long for everything. In this he spots a perfect opportunity to sell coffee to these people. Since these people are waiting, they will go for a time pass.What is a better time pass that he could offer than a cup of coffee. Easy to make. Low investment. So this boy asks his owner to lend him some money and tells him his plan. The owner gets impressed and gives him the money. The boy buys a espresso coffee machine and gets to business. He starts to charge 3 ruppes for a cup, which costs him 2.5. So he is making 0.5 Rs on every cup. Suddenly his demand picks up and in no time he finds himself selling 100 cups everday i.e. 50 rupees profit. He works for few months and returns his loan to the owner and starts to save. One day I visit this office and finds the boy's business model very appealing. Now the question is, how much should I offer to buy his business. I calculate 50 profit * 300 days = 15000 Rs/ year.Then I predict that this business is not going to last more than 5 years because government offices will get computerized by then. No one will wait then.Since I liked the kids gusto, I thought I would give him 1/3 rd more so that he won't refuse. I offer that kid 15000 * 5 = 75,000 + 25000= 1,00,000 for his business. But to my surprise the smart kid refuses the offer. (Why? lets see).

The boy has more plans about his business. He hires another boy and starts to produce 150 cups of coffee and realizes that this is the average demand at that office. Then he starts to replicate his model at other government offices every 4 month. He uses his saving which he had accumulated from before to buy another coffee machine. After say one year he has 3 coffee shops producing average 150 cups per day. Since he is hiring people so say his profit reduces to 40 paise per cup. So he is earning Rs 60 per day, with 3 shops he is earning 180 per day. So now even if his business doesnot expand( since he can go inter city with his plan) he can earn 54,000 per year(300 working days) for the next 4 years( before the computerization takes place). That is 2,16,000.Well my 1,00,000 offer pales to this figure in comparison.

You see what I missed. I missed the growth prospect of the business.In stock market the price of shares is similiar to the worth of the company. So if you are buying a share in that company then you are actually valuing that company. And so the growth of a company becomes very important. Now lets assume his comapany has 100 shares. I offered

1,00,000 for 100, i.e 1000 per share. Based on his current daily earning I had calculated 15000 profit per year. i.e. 150 Rs per share.

So now i will introdoce one of the most important terms in fundamental analysis. P/E or PE ratio. This means price is to earning ratio, i.e. Price divided by earnings. Lets calculate the PE ratio of that boy's company based on your offer. Price of share according to your offer is 1000 and earning is 150. 1000/150 is 6.66. So according to your offer the PE of the company is 6.66. If I had offered 2,00,00, i.e. 2000/share then it will be 2000/150 = 13.33. Savvy.

So if next time you see PE ratio next to a share price then you can calculate the earning per share (EPS) ,equal to profit per share, by dividing share price by PE ratio. Try this if you are new to this.

Money 5

Now we will tackle the concept of creation and production. Both are neccessary to create money.It is easy to grasp, just read it carefully.
Lets start:--
Which product to produce/create that can be sold successfully and thus create money?

Read this slowly and watch for create and produce words. Only these words differentiate these various categories.

1) Produce something that people buy. What people buy: food & drinks, house, clothes? This is what Farmers, Real estate companies, Normal T-shirt Company (not Nike, they create clothes) do.

2) Create something that people buy. Example: Entertainment (Movies, Video Games, Internet stuff etc), Art, Recipes etc. Notice the difference between produce and create. Entertainment is created. Movies and video games have a story, direction, art… and do not grow on land from where it can be picked up and packaged like food grains. Coca Cola created the soft drink recipe. Nike creates styles in clothing and not just clothes.

Just ignore the “creates money for entity” in the following categories, it is there to assure you that in all these categories companies and individuals generate profits. These categories end up making one of the above products.

1) Produce to Produce: - Produce products that are involved in production of a product that “creates money for its entity”. Confusing statement? Look at the example then revisit the previous statement. Example, you can produce bottles for Coca Cola Company which in turn sells Coca Cola drink to people like us. You get profit by selling it to Coca Cola which needs bottle to market the product and thus buys it from you. Another one, produce cement, that is used to build houses, which is sold to consumers.

2) Create to produce:- Create products that will be involved in production of a product that “creates money for its entity”. Example- 3M invented sandpaper, used in polishing industry. Inventions are amalgamation of creation and production. Inventor uses his imagination to create something which didn’t exist before with things that existed. That’s creation. The patent of a product deals with the creation part(thats what this category's Create is about) and manufacturing of that product is production(thats what this category's Produce is about). So when I say Diesel engine is produced and not created whereas Diesel Engine blueprint/technology, that was patented, was created then I am right. Savvy. But remember, in this category, to create money you need to create for the purpose to produce. You can't keep a patent and create money without producing the real engine. Many important industries of previous era started under this category. Best example is Thomas Alva Edison’s General Electric.

3) Produce to Create:- Produce products that will be involved in creation of a product that “creates money for its entity”. Example: Maya software is produced (through CDs and packaged well) for sole purpose of creating animation. Thus used in special effects and animation in movies. Similarly, Pastels and water colors are produced to create Art.

4) Create to Create: - Create products that are involved in creation of a product that “creates money for its entity”. Example: Creator of Maya software created Maya for the movie animation. He must be taking royalty and sipping Pina Colada in his posh home. Maya was created and not produced like a bag of cement. You see the difference.

In this category these product saves time in producing/creating the final product which gives your profit?

5) Produce to Produce: - Produce a product which saves time (in other words produces time) in producing a product that “creates money for its entity”. Confusing? Like: a company starts to manufacture a machine that takes less time to produce same kind of T-Shirt than the previous machine.

6) Create to Produce: - Create a product which saves time (in other words produces time) while producing a product that “creates money for its entity”. Same as the above but notice produce is changed to create. Like: Create a blueprint of machine in the above example. That is what happens in patenting world.

7) Produce to Create: - Produce a product which saves time (in other words produces time) in creating a product that “creates money for its entity”.

8) Create to Create: - Create a product which saves time (in other words produces time) while creating a product that “creates money for its entity”. Now both produce & production is changed to create & creation. Example: Now this is what I am going to discuss in detail because both the companies that have changed our normal lives most exist in this category. Microsoft and Google. How? They both have products that were created. No doubt about it. Windows and Google search engine. What’s unique about them is they invariably produce time/save time in every field in which creation in involved. Example: Writer creates a masterpiece and google is there to save time. Microsoft word and Windows further saves time for them by editing their work. You want to make animation movie, try doing it without Windows and Google. You want to make games, again try doing that without Windows and google. Almost every field that wants to create something needs them. Where computers have come, Windows and Google come with them.

Go to Money 6 or Money

Money 4

Till now we saw how money can be created physically and directly to be precise. By saving during a production process and by increasing the marketing of the product to establish a brand and then increase the selling price and earning profits in return. But these are minor to the fact that you still have to sell the product. And here is the real difference between all the rich people and ordinary people. How? Let’s see.
Assuming I am good at coding softwares. What if I make a software that asks you your name and then displays it across the screen and price it 50 rupees. Will you buy it? Ok I will hire a celebrity to advertise it and make a brand out of it. Will you still buy it? Well I created a product and I also created a brand .After that I will even optimize the way that software is made, bringing the production cost to almost zero. But if I am not able to sell it then I am not creating money. So the most important thing is to sell. In fact selling comes before production. From this statement I mean an entrepreneur (I am talking about entrepreneur because they create money through companies) should think that how I can sell a product before he must think that how he can produce it. This is one of the most common mistakes of entrepreneurship. Most of the times, people go for a field in which they are best or in which they have a technology that reduces the cost of production and then they find means of how to sell the product. But it should be opposite. First you must assume that you have made the product with your expertise and the best technology and on that assumption try to see as how you can sell that product. Don’t get me wrong, that doesn’t mean that you can’t go into the field in which you are good, but before that just see what you are selling and that means what other people are buying. That also means if other people are buying then explore the reason why would they buy your product.There are also few products which are needed for everyone’s survival. You can earn by producing/creating these products.Money 5 is dedicated to as how to see why someone would buy/use your product.

There is a more obscure way to create money. This many of us don’t know and don’t notice. It deals with non-physical concept of money. If you have read my Money 2 post there I mentioned that time is a non-physical incarnation of money.How? Now is the time to tell you how. We start with an example as usual. The best example is a Xerox Machine. Why do you think people buy or use Xerox and how it is different from my product that I told you about in the start? First similarity, (:D, I dared to compare these two but please stay with me) my product and Xerox don’t help people create/earn money directly. But Xerox does more than that. It saves a lot of time that otherwise will be wasted in typewriting all the documents that gets copied in secinds. Just try to think a world without Xerox machine and you will realize how Courts and Government offices will function. Their already low productivity will take further nosedive like a scuba diver. That is the value of Xerox. That’s how they sell their product and at the same time price their product more than what it takes them to produce. The difference it the created money and is the value of the Xerox technology that was created and the machine produced together. This created money is distributed to the patent holder of that machine (creator) and the company producing it (producer). More of this is there in Money 5 Blog.

If you are finding it difficult then just go through Money 2 to Money 4, consider it as one article and then you will be able to grasp the whole thing very easily.Then only go to next blog because next blog can be tough for unprepared. Thank you.

Go to Money 5 or Money 3