Thursday, 31 March 2011

How much is enough?



A good question. I don’t know about you, but I invariably raise this query frequently and get beaten almost every time. In hindsight, I realized that I was not serious enough for a response. Had I been, things would have been clear and my bank balance in the first place would have been a shade better than what it was thus paving the way for truly wealth creation avenues.

For instance, let me calculate how many times I picked up a few magazines and copies of books at airport lounges and supermarkets and paid unblinkingly. Almost on every visit. Considering the fact that I travel at the drop of a hat, it tells huge business for bookstores. Or put it differently, more outgo from my purse. Or put it even better: less savings.

Did I read any of those tomes? You bet, I did. I love reading to the core. On second thoughts, do I really need to read all those stuff that I lay my hands on? This question I refused to answer as reading, in my reckoning, is a joy forever. I read, re-read and re-read at various intervals. Suppose I don’t buy and read, what will happen? Nothing. Absolutely nothing will happen. Heavens won’t fall. Sun and moon won’t give up their daily schedules. Perhaps I may be less informed compared to the past.

As a zen follower succinctly put it, ‘we often want more than what we have now. More money, more gadgets, better furniture, a better house, a better car, more clothes, more shoes, more success”. More, more and more. Greedy, did you say? It is not out of place to rope in none other than the Father of Nation – our own Mohandas Karamchand Gandhi a.k.a. Mahatma Gandhi to throw light on the enough. Did he not say that it is easy to satisfy the need of every human being on earth, but not the greed? Maybe he is not of the mark. But, honestly, who listens?

Open your wardrobe and count the number of shirts, pairs of pants, neckties, kerchiefs, jackets. The list, no doubt, will be long. List out the talcum powder tins, eau de cologne sheesas, deodorant cans, facial packs, combs, bottles of gel that occupy your dressing table or combing area near the huge mirror on your cupboard or washing room. You will truly be embarrassed. What you have discovered may clothe more than half a dozen human bodies.

The debate on ‘how much is enough?’ will be unending. Not because, there is no answer is in sight, but because we are confused about the definition of ‘enough’. Does it mean bare necessities of life? asked Vinod Varma as we were moving around a spanky hypermarket with loads of anxiety to buy and wads of currency to the hilt.

The perfect definition of ‘enough’ maybe this: Enough means having enough to live, enough to be happy and enough to thrive, as one pundit put it. Yes, it is very subjective. Quantification of anyone of these elements (live, thrive and happy) is a tough job and it varies from person to person. One’s station in life – age, profession and ambition, hobby etc – determines the enough puzzle.

Recently I bumped into a friend who was curious to know whether it would be advisable to park his savings in a particular equity. He already has a decent portfolio that gives sizeable dividend income year after year. Besides he is gainfully employed and makes a decent package which does not force him to dip into his dividend income earned and lying dormant in his savings bank account. Though hale and hearty and kissing sixties, he could not figure out on risk.
For me, the question was whether he has ‘enough’ in his kitty or not? If yes, why take a risk? Of course, it was not difficult to decipher what the issue was: his inability to quantify what constitutes ‘enough’.

He hastened to explain and dispel my misgivings. It is not that his needs are not fully met. “They are,” he pointed out and added, “It’s my children’s needs I am trying to fulfill. Their needs keep multiplying while mine is shrinking.”

Today’s younger generation – even school-going children – sport mobile phones, wear branded clothes off school, party at slick restaurants for birthdays and special occasions, drive or prefer to be driven around in latest models, attend coaching classes that charge exorbitant fees, watching movies at multiplexes or on DVDs or on giant screens at home. Reason: peer pressure. If parents of ‘X’ or “Y’’ can afford, why not you, papa? is an inevitable question. And understandable, too.

Parents in a perpetual fix. By the time they come – at least, they claim – out of this chakravyug, their offspring force them to return to the same game of satisfying unending demands.

Enough is enough. I mean, enough to the onslaught of troubles. If one can define ‘enough’, then he/she can alter one’s lifestyle. How? It’s simple: less demand means need for less money. If so, then one can rework one’s priorities in life: less work, more leisure. Sounds philosophical? Can’t help it.

I don’t know about you. But I have decided. For the time being at least. Maybe for the next three months, let me take time off – thus giving some time for yourself at my cost to mull over the imponderable. Enough!

Thursday, 10 December 2009

Millions in US lack bank access



By Sarah O’Connor in Washington and Francesco Guerrera in New York

December 2 2009

Some 60m adult Americans live without a bank account or use pawn shops and other non-bank operations to handle their finances, according to a government report that called for an expansion of basic services to the “underbanked”.

The report, issued on Wednesday by the Federal Deposit Insurance Corporation, a banking regulator, could increase political pressure on banks to do more for their communities after unprecedented government efforts to bail out the sector.

“[There is] an imperative for government and industry to expand financial access to the substantial number of households that have never been banked,” the report concluded. Sheila Bair, FDIC chairman, said financial groups should offer tailored products to the underbanked.

The study, the first of its kind, lifts the lid on the vast banking underclass in the US, a country that prides itself on the sophistication of its banking sector.

The FDIC found that some 17m US adults are in households without any bank accounts. Another 43m had accounts but were “underbanked”, relying on non-bank services such as pay-day lenders and pawn shops.

The number of underbanked Americans dwarfs the estimated 46m citizens who lack health insurance. Barack Obama has staked his presidency on bringing that group into the system.

The regulators’ pressure on banks to expand their services could prove controversial when many financial groups are still reeling from losses in their consumer operations.

A push to extend basic services such as accounts to poorer communities with patchy credit histories would be especially sensitive because of the role of the subprime mortgage crisis in sparking the recent turmoil.

The FDIC survey revealed vast racial disparities in access to financial services.

Almost 22 per cent of black households had no bank account compared with 3.3 per cent of white households.

In some areas, the difference was starker: in St Louis, Missouri, 31 per cent of black households had no bank account compared with 1 per cent of white households.

Matthew Lee of Inner City Press, a watchdog group in New York, said people who used non-bank services could become easy prey for unscrupulous lenders.

He said: “As a society, we should make banks cover these people.”

Mr Lee added that branches in areas such as the South Bronx did not lose money, partly because of pent-up demand for banking services. “These are not money-losers, but they are not as sexy as other business propositions,” he said.

Not having enough money to need an account was the most common reason cited for staying outside the banking system. One third of households that no longer had accounts said they closed them because of the cost of maintaining them, such as minimum balance requirements, service charges and overdrafts.

Geographically, the south had more households with no accounts than the rest of the country, with Mississippi, Georgia and the District of Columbia posting the highest rates.

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Wednesday, 9 December 2009

Asexual Abandon



In a finite world, high growth rates must self-destruct. If the base from which the growth is taking place is tiny, this law may not operate for a time. But when the base balloons, the party ends: A high growth rate eventually forges its own anchor.

Carl Sagan has entertainingly described this phenomenon,musing about the destiny of bacteria that reproduce by dividing into two every 15 minutes. Says Sagan: "That means four doublings an hour, and 96 doublings a day. Although a bacterium weighs only about a trillionth of a gram, its descendants, after a day of wild asexual abandon, will collectively weigh as much as a mountain...in two days, more than the sun - and before very long, everything in the universe will be made of bacteria."

Not to worry, says Sagan: Some obstacle always impedes this kind of exponential growth. "The bugs run out of food, or they poison each other, or they are shy about reproducing in public."

Even on bad days, Charlie Munger (Berkshire's Vice Chairman and my partner) and I do not think of Berkshire as a bacterium. Nor, to our unending sorrow, have we found a way to double its net worth every 15 minutes. Furthermore, we are not the least bit shy about reproducing - financially - in public. Nevertheless, Sagan's observations apply. From Berkshire's present base of $4.9 billion in net worth, we will find it much more difficult to average 15% annual growth in book value than we did to average 23.8% from the $22 million we began with.


Warren E. Buffett
March 2, 1990 Chairman of the Board