Economics, and by extension the financial system, is an unmitigated disaster.
Let me give you a personal example. I am a director at Thinvent. I am (partly) responsible for running the company. I know that we exist solely because of the value we bring to our customers, employees and vendors. We generate intellectual property. We build processes. We understand customer needs and solve their problems. And we do all of this with our people. Our people, therefore, are our soul.
But the bank disagrees. In the ten years of our existence, we have not seen eye to eye with any bank. And that is because the bank is obsessed with our balance sheet and our profit. It fusses over our operating expenses - the money we spend continually to keep our employees and customers happy. Sure, we make and sell products. But it is the service we give to our customers, through our motivated and well trained employees, that keeps the orders coming.
The bank wants to see capital. It wants us to make a healthy profit. Which is to say, we should spend less ₹ for every ₹ we earn. In other words, we should spend less on our employees and on service. We should not hand out healthy pay hikes. We should not reimburse them for a cab when they can travel by auto.
This profit should then be channeled into generating more capital. Buy offices and factories. Buy equipment. Own stuff. The entire economic system is obsessed with stuff. Stuff has value. People are expenses. If the directors of the company own a lot of stuff, then we can mortgage that stuff to get a loan for the company. Provided the company uses the loan to generate lots of profit, then uses the profit to buy tons of stuff. The heavier the better - buy a piece of the Earth if you can. Capital!
The financial system also makes a strong demarcation between the "owners" and the "workers" in a company. Within our company, there really are no major differences between the directors and other employees. We are all there to work. We all get tasks assigned by each other. We all earn our pay, our raises, our incentives. When any of us screw up, the others give us a piece of their mind. But the bankers are obsessed with the "promoters" of the company. And the "net worth" of the promoters of the company.
The financial system tries to create two classes of people. The promoting class, which brings value to the companies it promotes through its personal net worth. The promoting class should buy and own more and more. It should use its wealth and its ownership of other companies as leverage to raise even more loan for ever newer ventures.
And then there is the working class. The nuisance that eats away at the bottomline and prevents companies from generating profits, capital, wealth.
Every April is a tussle between doing the right thing for your team, and keeping the godforsaken financial system happy. This year we are already in May and haven't been begun to decide on our pay hikes.
Let me give you a personal example. I am a director at Thinvent. I am (partly) responsible for running the company. I know that we exist solely because of the value we bring to our customers, employees and vendors. We generate intellectual property. We build processes. We understand customer needs and solve their problems. And we do all of this with our people. Our people, therefore, are our soul.
But the bank disagrees. In the ten years of our existence, we have not seen eye to eye with any bank. And that is because the bank is obsessed with our balance sheet and our profit. It fusses over our operating expenses - the money we spend continually to keep our employees and customers happy. Sure, we make and sell products. But it is the service we give to our customers, through our motivated and well trained employees, that keeps the orders coming.
The bank wants to see capital. It wants us to make a healthy profit. Which is to say, we should spend less ₹ for every ₹ we earn. In other words, we should spend less on our employees and on service. We should not hand out healthy pay hikes. We should not reimburse them for a cab when they can travel by auto.
This profit should then be channeled into generating more capital. Buy offices and factories. Buy equipment. Own stuff. The entire economic system is obsessed with stuff. Stuff has value. People are expenses. If the directors of the company own a lot of stuff, then we can mortgage that stuff to get a loan for the company. Provided the company uses the loan to generate lots of profit, then uses the profit to buy tons of stuff. The heavier the better - buy a piece of the Earth if you can. Capital!
The financial system also makes a strong demarcation between the "owners" and the "workers" in a company. Within our company, there really are no major differences between the directors and other employees. We are all there to work. We all get tasks assigned by each other. We all earn our pay, our raises, our incentives. When any of us screw up, the others give us a piece of their mind. But the bankers are obsessed with the "promoters" of the company. And the "net worth" of the promoters of the company.
The financial system tries to create two classes of people. The promoting class, which brings value to the companies it promotes through its personal net worth. The promoting class should buy and own more and more. It should use its wealth and its ownership of other companies as leverage to raise even more loan for ever newer ventures.
And then there is the working class. The nuisance that eats away at the bottomline and prevents companies from generating profits, capital, wealth.
Every April is a tussle between doing the right thing for your team, and keeping the godforsaken financial system happy. This year we are already in May and haven't been begun to decide on our pay hikes.