Monday, 29 April 2013

I don't want to win a lottery

What is man's greatest weakness. No, its not sex. No, its not even gambling.  It is his uncanny ability to fall for every "get rich quick" scheme.

Take the case of the collapse of the Saradha  (and probably numerous other such schemes) in West Bengal. This was a classic Ponzi scheme. Investors were attracted by fantastic returns (15-50% !!!). The early investors were paid off with money collected from subsequent idiots. Bingo. An avalanche started. Two years on, it has collapsed leading to much hand wringing and vociferous shouts of indignation.

What attracted my attention was not the scheme per se. They are dime a dozen. Remember the Emu farm scheme a little while ago in Tamil Nadu. Emu farming I believe - never mind that not one soul who put money into it had seen an emu in his life. But what has really got my attention is the response to the affair after it broke news.

There has been much clamour for regulation of such funds and criticism of governments for not regulating them well enough. Ramamritham must be rubbing his hands in glee at this new opportunity that has fallen into his lap. They want the death penalty for the owner of Saradha. A few people who have lost money have committed suicide. The loud lady who holds sway in the part of the country where this mess happened has announced a Rs 500 cr package to reimburse those who lost out . Never mind that the state is plain broke - there isn't money to pay salaries of government employees. The economically challenged lady, plumbed record depths by saying that she is going to  fund this by raising taxes on cigarettes and then exhorted her fellow citizens to smoke more !!!!! I kid you not.

The ancient fossils who are in opposition to the shrill lady, obviously oppose this, but their alternative is that those who lost must be reimbursed by auctioning the property of the owners of the chit funds. No wonder that this state has little hope of any advancement, if it is blessed with such wonderfully economically literate leaders.

Not one word has been said against the  lot who invested in such schemes. Pray ; why reimburse the clowns who lost money in this. They are no saints. They were simply attracted because somebody promised incredibly high returns. Any human with an ounce of intelligence must pause and think whether such returns are possible. Where will they come from. There is no return without risk and the correlation is direct. So if you let greed rule you, then don't cry when you lose your shirt. You deserve to be fried. 

One of the great rules of life is that winning a lottery is actually a curse. Getting rich quick is the surest way to misery. There is plenty of research to show that the majority of lottery winners do not find happiness.

The way to a better life is to get rich, of course. But slowly. Through hard work. Through initiative, through endeavour, through education, through innovation and through blood, sweat and tears. That is what brings true wealth. And happiness.

By the way, talking of Ponzi schemes - the biggest Ponzi scheme of all is property.  The only difference is that it operates on a time scale so large that an entire generation can become rich before it starts to unfold.  Pause and think about it. Every one of us gloats about the land/flat/house we bought some time ago and how its value now has an added zero to it. If you really think about it, its just another Ponzi scheme - some sucker will be left holding the curse sometime into the future. 

Grant me Lord, the ability to do a hard day's work, to make money by ethical and honest means, the strength not to be carried away by temptation, the courage not to want to get rich quick and some compassion for those who weakened and got burned. Compassion yes, but bailout, NO.


Sriram Khé said...

Hey, hold your horses, buddy ... in my blog I refer to the higher education business that I am in as one heck of a "legalized" ponzi scheme ;)

really, emu farming? in Tamil Nadu? when I get some free time, I will try to read up about that ... emu? seriously? in TN?

yes, get rich schemes are so tempting, right? what I don't understand is the government stepping in to bailout the people.

That is not how it works in my country.

Here in the US, the government only bails out too-big-to-fail banks that came up with quick rich schemes that failed while dragging down even people in Iceland, who ought to have known by now how a rotten fish would smell! and, those schemes also screwed up those who didn't invest a penny in those schemes ...

so, hmmm, it looks like the Indian government is better than mine ;)

Asha said...

Completely agree with you. It is really crazy how people want to make short term gains and become rich overnight.

It happened in my own condominium. A man had invested all his life savings in this person's online enterprise and thought he would reap huge profits.They were such good friends and they were from the same community and we thought they were relatives. He even recommended many of us (his co-residents) to invest.
One fine day, the man ran away with the loot and is now on the police radar. Funny thing is the man who invested is one of India's leading furniture dealer and runs business even in Dubai.How even the most intelligent slip sometimes. Now with 3 grown up children, he is repenting.

There was one with your name too ' Ramesh Cars' in TN and another teak farm just like emu farm. There was the gold quest. Oh god! so many out there.

Ramesh said...

@sriram - The bank bailout issue is a little different, although I see your point. This one is plain greed and idiocy and the lady bailing out those who lost is one of the worst forms of populism.

@Asha - Oh yes, there are lots of such traps. Unfortunately neither wealth nor education seems to be a defence against the temptation to get rich quick. Neither is the name Ramesh a defence against crookery :)

gils said...

for such a fake industry its called real estate!!! ennaa koduma thala ithu...I once asked my birend in hat estate...epdida oru area rate fix panreengannu..he didn't answer...suthi suthi I wanted to get an answer...I never got one...vaaiku vantha number solida vendiathu pola!!! how come same apartment..under construction building..same floor...oru flat 2500/sqft..pakkathu apartment 2750...that too in weeks span!!! yaar decide panra itelaam!!!!

Sanjay Balachandran said...

I beg to slightly differ here. I believe most people who invest in these schemes are not literate enough to perhaps make judicious decisions. The fund owners portray a perception of glamour, of having rich assets and more often that not political backing. I also think people are forced to join some of these schemes due to political goondagiri.

I agree that people who are literate and invest in such schemes should not be reimbursed, but otherwise folks who do are not literate to make judicious calls or who were forced to part with their money should be given consideration...

Ramesh said...

@Gils - The less said about the property sector, the better. There is little in it to say even a remotely kind word.

@Sanjay -0 Understand your view, but I think its misplaced sympathy. The really poor do not invest - they have nothing to invest. So its the middle class that is really affected. Much of this sector is actually risk averse , since the marginal utility of money is huge for them. It's the irresponsible punters in this who take such wild risks - the vast majority will have nothing to do with such schemes. If you bail out the punters, then the message you give to the careful folks is that they are idiots. By all means, take action against the originators of the Ponzi scheme - throw the book at them. But don't bailout those who lost.

The Million Miler said...

funny eh! the guy who is supposed to invest my money and get me rich is called a broker. Can I trust him not to get broke? There is no substitute for hard work - seen them all, teak farms, emu farms, timeshare holidays, real estate pre launch offers, chit funds, UTI, couple of gujjus who go by the name Mehta and Parikh. None of these have beaten my money making scheme, which is to do whatever job you are doing to the best of your ability and not to become a fossil.

Anonymous said...

Tend to agree with the Million Miler and have felt the same in my limited experience as well..


Ramesh said...

@Kiwi - Brilliantly said. That surely has to be the last word

@Exkalibur - Amen to The Million Miler indeed.

Reflections said...

Hahahaaa....the post itself was illuminating but ur desciption of the lady had me in splits;-D. Your irritation and inability to personally do something abt it err her shows so clearly...heeehahhaaaaa;-D.

Even here in Dubai there are a lot of schemes going on...the H even joined one to get some guy off his back[I simply don't get tht even now...why cdn't he just say a firm NO;-/]. I echo ur sentiments...'but ofcourse there is no substitute for good ole hard work':-)

Ramesh said...

@Reflections - I have a particular affinity for this lady and take great pleasure in needling my Bong friends that they voted her :)

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