Banking boom

If you have been reading this blog, and believing in everything that i say, and are thinking i know about markets or i am intelligent, you are violating Rule 2 of "The Basics".

Some months back, a guy came to my office, he wanted my dad to lend him some money. That time market rates were going around 24% per year. He was ready to pay 28% and needed money for 3 months. My dad knew him fairly well so credit risk was limited. I thought right now its not our Oil demand season, our money is free, and guy in paying good rates, we should lend it to him. My dad told me another concept, if somebody is paying you a high interest rate on your capital stop lending to him, if whole industry is paying high interest rate, stop lending and keep your money in bank account. However, if you as an engineer calculate the interest using the interest rate, and make decision based on numbers, you are bound to fail.

In 1998, suddenly a boom came and everybody from IIT wanted to become a Software engineer. This boom busted in 2000, and then just 3 years later, nobody wanted to be a Software engineer. Infact, people said i will do any shit job, but i will not code in my life. Just 2 years after that time everybody wanted to be an Investment Banker. The world changed so many times, with booms and busts, that it was stupidity to be sector specific/ technology specific. There for the rescue, comes a manager, the good part about having an MBA is, now you can look for a booming industry, pass your time, put your managerial fundaes, your ideas will not matter since it is a boom the company will make profits anyway. When the bust occurs, switch, start looking for another booming sector.

I discussed with a senior of mine, who saw IT crash and losing his job in the US. After that he came back to India and went to IIMB. We both discussed over rules to identify your job is a boom.

1. You will be paid higher than other people of similar talent. Don't be mistaken, that your higher pay is because of your intelligence and experience.
2. Your company will hire more people than it actually needs. So, you have to work much less than other people with similar pay.
3. This higher pay will attract a huge number of assholes in the job rather than actually talented people. If you see lot of assholes around you, and think that how does this company makes so much money using these assholes, then the boom is near its peak. Identifying assholes in a corporate atmosphere is difficult, because their money changes your perception about them. You have to learn more on identifying assholes in your college itself. I am not going to write down rules about it.
4. Your company will suddenly out of nowhere feel the need of smart people. It will go to the best educational institutes to hire random people, with kind of talent it not at all needs.
5. You will see some people quitting the job for no reason at all. Especially these people will be part of upper management.
6. Your company will become extravagant initially, then it will talk about cost cutting.


Lodha builders, a Bombay based builder, went to IIMs last year to hire people and paid them more than what ITC did. I don't know why a construction company will ever need managers from IIMs, and that too in such a huge numbers. If they came to IIT for hiring civil engineers that would made sense.