People are at present focusing only on the immediate consequences of the Financial Crisis.
Lets look at the possibilities post the crisis.. May be 5-10 years later..
I think the world will be much better after this crisis... Every Crisis is end of a System and starting of a new system. What changes we expect to see in new system ?
The current crisis is the result of Leveraging Power given to Investors. For every $100 your have it was possible to invest upto $1000... 10 Times Leverage.
e.g.
If you have $10000 then you could easily buy a home worth $100000 ...
If you have $10000 then you could invest in financial instruments like derivatives upto $100000
If you start a new business with $100000 , then investors were ready to value it immediately to $1million or sometimes even more..
Even corporate, builders were able to get such a leverage.
This 10x Leverage is the main reason for the crisis. Financial institutes either invested in Derivatives, Projects or Lend to people. It has been good times and future growth looked secured, all the profits they earned was again invested with same leverage until few intelligent people started thinking that its too much and raised the alarm. Alarm sounded loud , that some big institutes started freezing money and all the ones above them started falling like pack of cards.
What it meant ?
Above 10x formula meant that Richer can become Rich much faster then poorer can become richer. In addition richer has much higher leverage available to him then a poorer. This is very clear if you analyze the data.
What post Crisis ?
Post crisis Rich people will not be able to leverage their money so much. Actually millions of Rich people would have become Poorer by the end of the crisis and they will never be able to reach earlier levels in several decades without focusing on Real Business Value.
This 10x Leverage took interest of businesses and entrepreneurs out of the basic fundamental of offering Real Value to the customers. They were purely interested in putting something forward so that they get 10x immediate value, and then they were looking for the next thing that will give this value.. Even though this process created jobs but unhealthy ones.
So reversal of this trend means Richer will not become rich quickly , they will have to offer fundamental value in the market, do innovation and face stiff competition. Which means creation of much larger number of healthy jobs, focus on value creation and long term outlook.
This will be very healthy for the economy and will create much larger number of jobs and significant value creation with long term focus. Hence I think that the post crisis period will be quite look for hard working individuals.
I remember in one entrepreneur meet in Bangalore, I heard one guy saying "These investors can make so much quick money in Real estate and Stocks that unless these things do not come down , we have little opportunities to get respect for our work" ... At that time I did not give much thought to it, but I think this is what will happen now. Very soon investors will look for intelligent, capable teams that have ability to build real value rather then play marketing and financial games.
What it meant that the "Opportunities of Growth presented by Small Businesses" who did not had enough leverage, were not attractive enough for Investors and hence they were not given due respect.. Instead investors were telling them to hire some HiFi CEOs or Financial manager who can actually ensure that the investment provided by the Level 1 investor gets its 10x value (some wanted 100x) from level2 investors... and Level2 gets 10x form level 3...
This is what they call as exit strategy... This is the man reason why you will see that many startups in India were mainly founded by Management Graduates with finance experience or CA .
So look for great time ahead and be happy that this world of financial gurus has come to an end.
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