Saturday, November 10, 2012

Companies that I should have invested in.

Here is a list of companies I should have invested in, some five years back, if I wanted to have the millionaire life. (NASDAQ)

1. Activision
2. Nvidia
3. Netflix
4. Apple
5. Coach (The handbag manufacturer)

Closer to India, here are some of the firms, I wish I had invested in.

1. Mindtree
2. Godrej Consumer goods products limited.
3. Bharat Petroleum Corporation Limited
4. Hindustan Unilever Limited
5. Bank of Baroda
6. Bajaj Auto Limited

Now, if I were to invest somewhere between $5000 to $10000 in the companies listed on the NASDAQ, my earnings would have been in the range of $10000 to a maximum of $100000.

Similarly, if I were to invest in the Bombay Stock Exchange, in the stocks listed above, I would have earned nearly two times to as much as ten times the amount invested.

The reason I decided to write this post is this, to identify a pattern in the companies listed in the NASDAQ and the companies listed in the BSE/NSE.

Of the NASDAQ listed companies:
1. Four are California based companies
2. Five are technology companies, primarily dealing with e-commerce engines, computer hardware software.
3. There aren't too many lifestyle brands, or consumer products with the exception of Apple and Coach. But since Apple comes under technology, we can assume that a consumer durable company is Coach. And it was founded in New York in the 40s.

Of the BSE/NSE listed companies
1. Five out of my wishlist of six companies are old powerhouses.
2. Five out of six companies are old companies, offering banking, utilities, consumer goods among other things.
3. With the exception of Mindtree, none of the other IT companies have been able to really pull it off since 2008.

The reason I present such a comparison is this, India is a developing nation, and the demand of consumer durable goods will only increase. This might be a good time to invest in companies which produce such goods. Utilities demand will only go on increasing, hence that would be a good area to bet on. Infrastructure has always been a good bet, so I haven't mentioned it here.

In the US, start ups which offer something niche would be the best area to invest in at the moment. Standard run off the mill products might not be good places to invest in. But companies which are innovating new technology that is touted to be the next big thing needs to be measured with certain amount of care. It is a high risk market, but the returns if you place your bets right are outstanding.

The important thing I have learnt by observing such things are the following:
1. When investing in companies in the US, the stakes are high, and you need to have a certain amount of buffer to absorb the shocks which are to be anticipated. But if one were to honestly believe in the stocks and the companies, and hold on to the stocks, it can reap rich dividends. All the investor has to do is to hold on patiently for the P/E ratio to be phenomenal before selling.

2. When investing in the India, do what the herd does. The returns might not be great, but you will get a steady profit. In a sentiment driven market, you can't really take chances, and here is where you have to invest smart. Spread your risks, and ideally invest 5-8% of your money in start ups and relatively new companies.

And such trends, I think will continue in the future. At least for the next five to six years.

Tuesday, November 6, 2012

Search Engine Optimization

SEO, or Search Engine Optimization seems to be the latest buzzword in the world of Internet Marketing. If you don't do it, you are leagues behind the rat race.

The objective is to look at SEO, and what role it plays in the whole publicity dynamics of companies who are looking to reach out to a greater audience.

Have you googled something you are looking to buy from Amazon and found the first three links coming up as sponsored links? Most probably you have.

Well this is because these companies paid google to have their results come up first based on the string that you entered in the search box.

Now this tactic is quite fascinating. And quite scary if you stop to look at the flip side of such a thing.

Typically, what happens when you are searching via google or any other search engine is you log in with your credentials to make opening your mailbox or your facebook page easier.

The servers then maintain something called as analytic data against your username. They profile the users based on the web searches, your profile likes and dislikes.

The companies then pay these companies to analyze the data and create grids of users who might be interested in a specific set of products. They create profiles also known as clones. To elucidate, consider this example.

A and B are two individuals who are online "window" shoppers.They both look at multiple sites for rates of a similar kind of camera which they are planning to buy. They add the camera to their "wishlist".

Now the analytics engine records the data and stores it.

A company XYZ, is planning to start selling the same model of the camera but wants to reach out to a maximum number of online shoppers in quick time.

It approaches the search analytics company and gets the users information, on who might be interested. So that when A and B (now clones, since they are searching for a similar kind of camera) now search for the camera in the internet, they get a bunch of advertisements from XYZ which says they are selling the camera.

That is SEO for you.

Now I'd like to see what this holds for us mere mortals in the future.

This paves the way for a pressing moral question. Who decides what data the analytics firm can share with the companies! Because if we are private people, we do not want strangers to look at our browsing "profiles" and come up with schemes to woo us.

I feel, yes, this is something which makes a lot of financial sense, especially for start ups who do not wish to invest in quality market research. But it puts the customers at serious risk. Because most of our lives are spent online one way or the other, our privacy is our prime concern.

Now that is something to ponder about.

US Elections and what it means to me

I am not an American citizen, and I don't see myself becoming one in the near future.

So, to a casual observer, who gets elected as president hardly matters.

But to me, it does. There are things that it holds in store which can have rather far reaching consequences.

For instance, before Mr. Obama came into power in 2008, the IT scene in India was quite good, and Infosys stocks, an Indian IT bellwether, were at $57 a piece at the NASDAQ. As soon as he came into power, the stocks plummeted to $23. That is an almost 60% drop in share value.

Needless to say all companies followed suit. And it spawned what we now recall as the recession of 2009. Which co-incided with the Lehmann Brothers declaring itself bankrupt. The ripple effects are something which we still face today. It brought to light several crucial aspects of the global and especially American economy that would not only affect the USA but also India.

Lets rewind the clock to 2004, before Mr. Obama, Mr. Bush was re-elected to power. Let me go by the Infosys stock prices in the NASDAQ. The stock prices were low, at $21 per unit, but as soon as Mr. Bush got re-elected to power, the stock prices climbed steadily and reached $35 by 2005 which is a 66% increase. What followed was a period of prosperity for the global economy.

What I am basically trying to say here is, that the Indian economy though has strong fundamentals, and is capable of surviving a global crisis is sentiment driven. And, contrary to what people might think, is affected by who is in power in the US.

How does that affect me? Well, it's quite simple. It determines inflation, the cost of fuel, the cost of electricity, the chances of me going to the US for a visit among other things.

Now, the point of the blog, how does the future look?

We perhaps as an economy should focus on self sustenance and core sectors. The inflow of FDI in retail does come in with its own share of ups and downs. By encouraging FDI we are bringing in more money into the economy, but are also making ourselves more vulnerable to external variables, such as the American stock markets, and presidential polls, and American policies.

India needs to start perhaps with agriculture and infrastructure. If a nation is eating right, and eating well, more than half our troubles are solved.

If India has good roads, good transportation systems, and good connectivity, India can mobilize resources more efficiently and quickly.

How do we start with all this? Or how do we better the approaches taken so far?

Its quite simple. For all this we need to invest in education. Why you might ask and I would say, awareness.

The first step towards self sustenance is awareness. Aware of ones flaws, strengths, opportunities and threats, one would be able to assess the situation much better and plan a much better tomorrow.

Saturday, October 13, 2012

Children of the Future

What will a child in the year 2040 be like?

A question that can have several controversial answers.

Here is my take.

The world is becoming smarter by the day. People in the developing countries, as well as the developed countries, are focussing on higher education, beginning to learn things fast, becoming taller, sharper, stronger (No reference to Complan here), and hence are continuously evolving.

We can see the evidence all around us, we see new entrepreneurs coming up regularly. They might not be as famous as a Bill Gates, or a Steve Jobs, but are doing quite well in their own way. We see Olympic records being shattered every four years. We see soccer players becoming faster and more skilled than perhaps their predecessors. We see scores people get on competitive exams go higher.

Now all these facts point to one direction. The future is getting more and more competitive, and definitely more cut throat. So the child of 2040 HAS to be smarter and faster in order to survive.

I am a firm believer in the fact that humans, like animals, have to adapt to survive. Going by the same logic, the child of 2040 will already have adapted to the changing world, thanks to its parents.

But my intention is not to look at it from an optimistic angle. I want to try and think, what could end up on the flip side.

One of the first things that comes to mind is the fact that the child of 2040 will be detached from human interactions and emotions that accompany human interaction. It will not be able to comprehend what it feels to have friends. Reason being, all forms of communication will eliminate physical presence, and will be on a strictly need-basis. Evidences which point to that are the hugely successful platforms called facebook, WhatsApp, Google Talk, and Skype. To the child of the future will be born with certain traits and genes which will instinctively draw it towards these networking platforms. The risks of this are several, and one of the first things that come to mind in such a case is unsuccessful copulation. 30 years down the line, the earth will be full of people. At the current rates of growth of India and China, these two countries alone will account for more than 50% of the estimated population of over 10 billion. Now, we are taught about the sigmoidal graphs in school, what I think is going to happen, is that the earth can only take so much, so it will stabilize, and then either head for a double logistic kind of a pattern, or will wind up as a negative exponential function which might lead to bigger problems.

Secondly, the child of the future will completely phase out any kinds of physical activity, thanks to the advent of virtual presence. Schooling will be done from home. Gaming will be a source for the mind to relax and feel free. Work will be completed from home. So basically the surroundings will get narrowed down. So much that privacy and personal space will become of paramount importance as opposed to the shared spaces we have today. If you look at ten years back, a child, even if it had a room, gave complete access to its parents and family. But today, personal and private space is so important, that parents rarely muster up the courage to visit their offspring's room, i.e. personal space. This trend is here to stay, is what I feel, and is certainly going to get more and more stronger. Socializing skills of children will be at an all time low. A decline is human interactions will lead to other possible dire consequences, and we will witness a steep rise in cases of depression.

Thirdly, we will witness a tremendous rise in consumerism of expendable products, if current trends are anything to go by. Unlike yesteryears, where we used to see reuse of mineral water bottles, today we see that the amount of water bottles discarded has grown exponentially. I have a feeling, if someone has to invest in the future, one should invest in waste management practices. Because even if everything else in the world, such as gold prices, oil prices, futures, mutual funds, is unpredictable, we can be rest assured, that the amount of waste generated will always keep increasing and can be predicted with certain amount of surety. And there soon will be a time, when we no longer have space to dump waste. That is when effective use of waste will come into the picture, and governments will be willing to spend a lot of money on it. Coming back to the child of the future. It will take this a step forward and end up wasting and consuming more and more natural resources, which will witness a sharp decline.

Finally, the societies which are currently collectivist in nature will witness a shift to individualistic nature. The we will be replaced by the I. Team work will be replaced by individual work. Corporations around the world will not invest in one team, rather will invest in individuals and hence, man management will become more about coordination and  handling the super-ego and less about team management.

I agree what I may have written about might not at all be convincing, but I like to think about all the possible pros and cons. And in this case I wanted to think about the cons.

This topic can be discussed in greater depth and detail, bringing in more contexts, but for now, I'll stop here.

How does WhatsApp make money?

WhatsApp has destroyed the SMS based incomes of a number of telecom companies. It is one of the most successful instant messaging platforms linking millions around the globe. Started in June 2009, by two employees of Yahoo Brian Acton, and Jan Koum, the objective of the company was to provide a means for Apple's iPhone and RIM's Blackberry devices to communicate with one another. Soon it became available on other platforms such as Android, Java J2ME, Symbian etc.

Today WhatsApp delivers on an average 1 Billion messages each day. Users can share texts, locations, and media such as photos, videos and audio. What more can an instant messaging service provide!

It is doing to the instant messaging world what Skype did to telephony all around the world. Bringing the world together and doing it in a way that makes it cheap, effective, reliable and very cool.

Now all this got me thinking, how does WhatsApp make money, without advertisements, and since it is a freely downloadable application? I mean, what are the things that WhatsApp needs to run operations at such a scale (a study shows they crossed the 10 billion messages mark in 2010 and it stores user messaging history, data storage costs money and lots of it)? And the last question, how do they market themselves?

To find the answers I dug a little deeper.

And this is what I found.

1. WhatsApp employs only 20 engineers who work on the development of the application. The rest are involved in customer support. The exact number is unknown, but my guess would be around 20-50 people.

2. WhatsApp prides itself on working with extremely limited budgets, and hence, is extremely efficient. Brian Acton once himself said that in order to keep the venture profitable, it needed to operate with extremely tight budgets.

3. WhatsApp's website is worth $10 only! Which means they do not spend here, tight budgets? Yes, we get it.

4. WhatsApp is the #1 downloaded application on several application store platforms, such as Google Play, Apple iTunes, etc. And it does not spend a penny on advertising, again saving costs. They rely on word of mouth publicity, which is why probably in the European markets, where telecom companies used to make a killing by charging exorbitant rates on messaging services, (TSPs telecom service providers) ignored the presence of WhatsApp initially where downloads were in thousands, but surged to millions in a matter of one year making life difficult for TSPs who had to lay off people!

5. They recently got funding from investment companies to the tune of a cool $8million!

6. The cost of downloading WhatsApp on iTunes is only 99 cents, and on other platforms is available for free. But there is a catch, WhatsApp is free only for the first year. Second year onwards there is a fee for $1.99 for a period of 3 years, and this is where they are going to make money, no not make money, MINT money. Consider this, currently WhatsApp has over 100 million subscribers, and suppose 80 million are non-iOS users, they will earn a cool $160 million easily! What a genius marketing strategy!

7. They rely on their funding from donations, much like Wikipedia. Which keeps the company afloat despite high running costs.

Now the other set of questions which is what this blog is about. The future.

1. What will happen if some TSP buys out WhatsApp in the future?
2. What happens when there is a better Instant Messaging platform which comes to the market? Will it mean the death of WhatsApp?
3. Is advertisement free applications the way to the future?

Here are the answers I came up with, and I am open to discussions.

1. If WhatsApp is bought by a TSP, then, we will witness the DEATH of free instant messaging as we know it now. Not a pleasant possibility, but considering the way WhatsApp is operating now, we can be rest assured that like Wikipedia, WhatsApp will survive. For a long long time.

2. What happens when there is a better Instant Messaging solution available? Well, WhatsApp will die, unless it re-invents itself, but that again looks to be a distant possibility. I again refer to Wikipedia, which is still going strong, and there is no way, there can be another Wikipedia in the near future. So I feel WhatsApp is safe.

3. Advertisement free applications available for free Instant Messaging IS the way to the future. I mean, who wants to see an application being bombarded with advertisements, which in more cases than none, irritate users by slowing down the application, hogging bandwidths of data plans! So yes, advertisement free applications are here to stay, and if someone else comes up with a platform as unique as WhatsApp can and should emulate WhatsApp's strategies, for success is guaranteed!

I am a faithful WhatsApp user and I certainly do hope this trend continues!

Monday, October 1, 2012

The Objective

The objective, when I begin to write on this blog, is to look at the present and try to predict things about the future. No, I am not Nostradamus, neither am I inspired by the Mayans. The aspects I will be looking into are going to be extremely narrow in scope.

I am going to talk about genetics, people, technology, markets, businesses, sports, music, movies and any other topic that I fancy.