Inflation explained for the last time

Food price rises put onions out of reach in India

Let me sound bit rude for a moment. Everyone is talking about inflation but no one really knows it’s meaning or what causes it. Most of the people when asked about inflation will tell you – “Onion prices are up, sugar is more expensive, prices of food have gone up. This is inflation” If this all you know about Inflation, it will be worth reading further.

Frankly, this is all I thought and knew of inflation, until recently I spoke to my cousin who has golden hand in explaining complex subjects in easiest and interesting way.

Point 1) Inflation is always read in relative terms. Price from past are compared to present.

Do this exercise: Take yourself back by 15 – 20 years in past. Try to remember how much money you paid to buy ‘Idli Sambhar‘ at local Udpi restaurant or ‘Vada Pav‘ near your house. And what is the price today at that same place. I am sure the present price  are way higher then what you paid in past. This also holds true for anything and everything around you. If your saving was 1 lakh rupee 20 years back, you were really rich. If your saving is 1 lakh rupee today, you have long way to go.

Point 2) If point number one doesn’t make much impact in your mind here’s a stronger point. Inflation occurs when there is lot of money in market and less products.

An experiment was done in a school using fake money. 25 small kids were given 100 rupees each. A toy was kept in front of them and they were asked to bid for it. Whoever bids maximum price will get the toy. Bidding quickly reached 100 rupees. most of the kids got ready to pay 100 rupees. It was decided to cancel bidding.

Now, kids were given 1000 rupees each and same toy was kept in front of them. It took less than 2 minutes before bidding reached 1000 rupees. Most of the students were now ready to pay 1000 rupees for same toy.

This simple experiment explains core of inflation. If there is lot of money flowing in market, people tend to spend more and prices go up.

Point 3) Who pumped extra money supply? Where is the money? I didn’t get any? Well go back to 2008 slowdown, globally each and every country was adding stimulus package to save their economy. Reserve Bank of India allowed banks to give easy loans. Our Government invested in new infrastructure and power projects which would create new jobs and pull country out of recession. All that extra money pumping is now visible on street in form of inflation.

Point 4) Corporate India is the culprit. They are raising prices and killing poor people. Not True! Not True! Not really True!

Companies buy raw material, make products and sell in market. They pay taxes on profit they make. If raw material becomes costly, they have increase prices. Eventually they have to pay more taxes. Companies do not really advantage of price increase, infact they loose customers due to price hike.

Point 5) What happens next? Our government and Reserve Bank of India is putting pressure on banks to avoid lending money(loans) to people. Banks are increasing percentage hike on EMI on existing loans. Many non-crucial projects will be put on halt.

Point 6) I am trader. What should I do with my savings? Always take professional help/guidance. Historically it is found that in inflation money sitting in your bank account looses value for no reason. Experts recommend to put some part of money in to equity/stocks of stable companies who have pricing power(power to increase price if they have to). example: A telecom service provider doesn’t have pricing power, but a company selling or processing food does.

Interview with Kirtibhai Doshi

The History proves that the people of Indian Diamond market are very hard working, enterprising, and very resourceful. Indian Diamond market  professionals do not wait for an opportunity, rather creates one and makes success for it. They are smart with their money and their policy is to include others in their growth story. Lets meet Kirtibhai Doshi who has been part of Indian Diamond market for more then 30 years.

Kirtibhai Doshi, Diamond Broker

Kiritbhai, please tell us about how you started career in Diamond market?
I started working in Diamond market in 1978. I was still completing my studies when I started working part time in one office. Those days members of only Palanpuri community use to be part of market. Later Kathyawadi members started entering market and grow their business. Kathyawadi members use to do business on their personal capital whereas amongst Palanpuri members it was common practice to use Bank’s money to grow business.
I started working first at Rasiklal & sons. After this I tried to do some business independently but I made some loss and things didn’t work out, so I once again took a job. I started working for a company named Divya Jewels, owned by Rajubhai. My responsibility was to take care of inventory in this company. Today Rajubhai’s business has grown in to company named Tara Jewels, jewelry factory named Tara Ultimo and Ritesh Exports. I use to sell for Ritesh Exports.

Due to health reason I had to take a break for sometime and couldn’t stay in active touch with all business associates. But I got back to work and nowadays I am doing Diamond Brokering.

Tell us something about your experience during 2008 slowdown?
Slowdown was visible everywhere and everyone was talking about it. However big champions in market have fix market share and they do business within a small business circle without letting outside traders get any business out of it. For established companies things were not as bad as many other people.

In your last few years of experience have you come across some good or bad aspect about market?
Big companies and traders give their business to selected group of people. Usually avoid small traders. Big companies are getting bigger and business is getting tougher for small players.

If you get chance to change one thing in market, what would that be?
A common member can never bring any change in the way Diamond market works. The only thing if changed would be  is help, if established members support and give business to members who run small businesses. This will allow big companies to fulfill their requirements and small business owner can make some money. Big companies try to complete transactions within fix business partners, today there is a need for them to increase their circle.

In next few years what changes do you expect in Diamond market? Any thoughts on BKC?
We have to move to BKC and that is for sure. The kind of facility and office space which is in BKC can never be compared to what we have in Opera House location. However there are so many offices and cabins inside Panchratna building, which is 25 storey tall. In small office you will find 6 small cabins. Panchratna, Prasad chambers, , Sheerji Chambers, Sheerji arcade, Floxe chamber etc. It looks like it will take its own time for all these people to move to BKC. Presently only big companies which are DTC site holder will move to BKC.

Do you want to give any message to DiamondBhai.com readers ?
Each and every member in Diamond market is smart and enterprising, I don’t need to give any message. <smiles>

Why does exchange rate keeps changing?

I know one man who bought disposable face masks in lots of 1000s when Swine Flu news broke on News channel. He bought and stored boxes of masks in his house. Month later everyone on street was wearing masks, thanks to Indian news channel, they reported 24 hours about flu and
made it sound more scary. He sold all his masks to local shops when they were out of stock and made good 30% margin.

Udaya Kumar, designer of the Indian rupee sign.

Indian Diamond market is full of enterprising people. Once a trader, always a trader. In our markets its common to find people who are Diamond trader by profession, but in addition make profits out of trading land, stocks, electronics, currency and anything that is in demand.

I recently asked a question to one friend who occasionally does Foreign exchange trading. “Why does dollar price go up and down?“. He explained me the reason. I am going to simplify same explaination here.

Lets assume there are only two international traders between India and US.
– Mr Patel in Mumbai who supplies Diamond Jewelry to a store in New York.
– Mr. Brown in Chicago who supplies Industrial Robots in Noida.

Assume dollar price today is 45 rupees.

Today Patel sold 10 piece Jewelry set to NY store, cost of each piece was 1000 dollars. Total selling amount = 10,000 dollars. Now Patel wants to convert 10,000 dollars to Rupees. If rate is 45 rupees to 1 US dollar. After conversion Patel should get 4.5 Lakh rupees.

Same evening Mr. Brown from Chicago, sells one industrial robot in Noida for Rs. 2.25 lakhs. As per 45 rupees to dollar rate, Brown is expecting to convert Rs. 2.25 lakhs to 5000 US dollars.

So we have
— 10,000 US dollars to be converted to rupees. [After conversion worth Rs. 4.5 Lakhs]
— Rs. 2.25 Lakhs to be converted to dollars [After conversion worth 5000 US dollars]

We have a problem. Demand for Rupees is more than that for dollars. In other words for this particular trading day, there seems to be more supply of dollars than that of rupees.

Patel and Brown log to Foreign Exchange website to convert their currency.
First 5000 dollars gets exchanged easily. And the rate is Rs. 45 to 1 US dollars. Brown is happy he got his 2.25 lakhs converted to 5000 US dollars, he logs out of website and goes home. Patel still has more 5000 US dollars to convert in to Rupees. He got some money on credit from a friend and promised to return him on time with small interest fee. Patel also wants to pay salary to karigar (people on manufacturing floor) who manufactured jewelry for him.

Patel is now desperate to convert remaining 5000 dollars to rupees.

Lets add one more character in to story now.

Mr Desai who runs a Travel Agency and organises tours to countries like UK, USA, Asia etc. He logs to website and sees someone waiting to exchange 5000 US dollars to rupees. Desai knows that he will need US dollars sometime next month and was looking to buy some at good price. He offers a bargain. Last price for dollar was 45 rupees, but if someone sells dollars for 43 rupees, I will buy it.

Patel being in rush, agrees to sell dollars for lower price. Patel converts  remaining 5000 US dollars at rate of 43 rupees. 5000 x 43 =  2.15 lakhs. Patel doesn’t mind loosing small amount because he will able to make payments on time.

Now latest Exchange rate is:  Rs. 43 to 1 US dollar.

After few weeks , Desai (Travel agent) gets a big contract to organise tour for a group of 100 people. He needs lot of dollars, he logs in to website and sees Patel ready to sell 10,000 dollars for 47 rupees. Desai desperately needs dollars, he buys it.

Now excahnge rate is: Rs. 47 to 1 US dollar.

Interview with Amitbhai Nayak

Wise person tends to be grounded, experientially aware, in-sync with the present time, and connected with the world. They are completely authentic, not trying to be someone else or prove anything. Lets meet one such member of Indian Diamond market, Amitbhai Nayak. Amitbhai has been part of Indian Diamond market for last 21 years.

Amitbhai Nayak, Diamond Broker, Mumbai

How did you start yours career in diamond industry?
I started my career about 21 years back (1989) a company named A S Exports. At A S Exports, I learned Diamond Assorting and related aspects. I worked with A S Exports for 14 years. Later I started working as a Diamond Broker with a well know person in diamond market, Arunbhai.
Presently I work independently as a diamond broker.

If not in diamond market which other profession you would have chosen?
I am a professional Tabla player.  I would have surely chose to become Tabla player in music industry. For a while I also tried to work in Diamond market and play Tabla, but eventually I kept getting busier in Diamond market. I decided to focus on my work in Diamond market. I still practice tabla playing when I get chance.

Tell us about your experience during business slowdown in 2008 in Diamond Market?
During 2008 slowdown, I was working with Arunbhai. Being with a well established person in market, slowdown was not as severe as it was for many other people in market. For 2 months I didn’t see any trade or transaction. There were no buyers in diamond market. For almost 5 to 6 months there was lack of activities. Later things started changing and slowly we started seeing some demand.

Any good or bad aspect you have seen in your last 21 years of experience in Indian Diamond market?
Indian Diamond market is still a close knit community. Due to nature of the business trust factor becomes extremely important. Family person gets more preference. If you don’t have relative or person who can refer you, it becomes difficult to make progress. Talent and hard-work takes back seat. Faith and connections get more preference. Unless some well respected member support you it is close to impossible to grow.

You will find many cases where a person with good potential who is part of Industry since last 25 years but still cannot go beyond Diamond Assortment role.

Person’s aspirations also play important role in level of success. Person who believes in himself and keeps high ambition will do good. However you really can’t replace the support of some a well established member in market.

Where do you see Indian diamond industry in world?
I personally don’t have any idea about that. But one thing I can tell you, Indian Diamond Industry is very small compared to many other Corporate industry in India.

Can you think of any changes that will occur in our market in next 2 – 3 years ?
I think we companies and people will get more professional like other industries. There will be lot delegation of work to vendors and partners on contract basis, rather then running in house team. Companies will get re-engineered to reduce staff and train employees in to multitasking. Instead of hiring and employing 4 people, they will train one person to do multiple things, perhaps use computers to get more output. Such things are common in other corporate office, banks etc.

Do you want to give any message to diamondbhai.com readers?
No work is big or small. It’s not the stature of work that matters, but what you learn from working that counts.

Interview with Mr. Pranav Shah

Trustworthy behavior is something you cannot fake without the beliefs and values behind them. Pranav Shah, our guest today, says that in dealing with people in business trust but first verify.

Parnav Shah, Diamond Broker

How did you start yours career in diamond industry?
5 years back I started working with my cousin who was already part of Indian diamond market.  Learned about all the important aspects of diamond assortment. Got experience of buying diamonds in market. Later I worked at Supergems Jewelry and got very good experience in marketing.
Presently I am working at opera house (Mumbai Diamond market) as diamond broker.

How was the slowdown of 2008 diamond industry?
People who were working some Diamond companies faced lot of tension. There was lot of uncertainty about job security. However now things are better and bad phase has passed. People should be prepared to see such ups and down in diamond market, a kind of cycle which will repeat.

Any bad or good things that comes to your mind in your last 5 years of experience?
One important thing is one has to be very careful in diamond brokering. A thorough check needs to be done on buyers in market. Dealing with unknown party has lot of risks.
In 2008 slowdown lot of companies and individual went broke just because they were not able receive payments on goods they has delivered. This is one risk I have distinctly seen in my experience.

Can you think of any changes happening in local Indian diamond markets in next 5 to 10 years?
I cannot speak of 5 years but for next 2 -3 years diamond market should enjoy growth and see good days. Looking at present demands of goods I am very optimistic.

Do you want to give any message to diamondbhai readers?
Trust but verify! keep faith in yourself and keep working hard.

 

How did you start yours career in diamond industry?

5 years back I started working with my cousin ‘Cousin-name’ who was already part of Indian diamond market.  My Cousin owns a business with name ‘company-name’. Learned about all the important aspects of diamond assortment. Got experience of buying diamonds in market. Later I worked at Supergems Jewelry and got very good experience in marketing.

Presently I am working at opera house (Mumbai Diamond market) as diamond broker.

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It’s OK to be a Fool but not a Greater Fool
How fast do you adopt new changes?
I Already made some Loss – so now I choose to make some more
I want all your Diwali Bonus back…

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Interview with Mr. Nilesh Pathak

How was 2008 slowdown for you? Not good, rite? So many job cuts, inventory cut. For a change we have found a guest who is talking positive aspect of 2008 economic meltdown. Every coin has two side. Meet Nilesh Pathak who thinks 2008 slowdown brought lot of changes in the way we work in Indian Diamond Industry and it will help us to grow more efficiently in future.

Nilesh Pathak, Sales, Kapu Gems

How did you start yours career in diamond industry?
I started working in Indian Diamond industry in 1996. Started as Diamond Grader in company named ‘P D Kothari’. Got acquainted with basic knowledge of diamond Manufacturing. Over period of time learned and played various roles including Diamond Assorting, Trading, Sales. Other companies I have worked with are Munjani Brothers, Amipi Inc and few other manufacturing companies.
Presently I work in sales with Kapu Gems (Diamond Manufacturer). Working in sales requires one to be well informed about products, industry and competitors.

What do you think about 2008 slowdown?
According to me it wasn’t a slowdown rather it was learning phase for Diamond manufacturing and Diamond jewelry Industry.

If you look at the bigger picture in long run you will find that 2008 slowdown brought many good changes:
* Manufacturers now work as per actual demand of the market, there is reduction in the unnecessary inventory and working capital.
* When businesses started to lose profits and started incurring losses, they analysed each and everything they do. This disclosed many opportunities for improvement.

Recession got reed of all the money wasting unfit business model and opened the ways for more efficient practices. Only the fittest of fit will survive the game.

Where do you see Indian diamond market in the whole world?
Indian diamond industry is leading in whole diamond world according to me and it is due to perseverance and hard work.

If you get to change one thing in Diamond Industry – what will that be?
I cannot think of anything and feel industry is full of enterprising people. It will sustain the growth and make changes as per market situation. We only look for big changes, however, changes often happens slowly over a period of time.

To move forward in businesses, rather than looking for the next big events in future, consider what gradual changes have happened in our environment but have not yet had the full impact. Then make plans for redirecting your business strategy based on those changes.

Can you think of any changes we will see in next few years in our industry ?
Diamond market is getting more saturated. Personally I see Diamond Manufacturing related businesses getting more stronger and Diamond trading activities will keep getting tougher.

Lets say all the companies in India Diamond market get listed on stock market and you are given some amount to invest. Which companies would you put money in?
I like investing in Stock market. However at this point of time I don’t think I will put money in any Diamond market companies.

Do you want to give any message to diamondbhai.com readers?
I don’t want to give any message. A good learner finds and picks up good things form what comes in front of him.

 

How did you start yours career in diamond industry?

I started working in Diamond industry in 1996. Started as Diamond Grader in company named ‘P D Kothari’. Got acquainted with basic knowledge of diamonds. Over period of time learned and played various including Diamond Assorting, Trading, Sales. Other companies I have worked with are Munjani Brother’s, Amipi Inc.  and few other manufacturing companies.

Presently I work in sales with Kapugems (Diamond Manufacturer). Working in sales requires one to be well informed about product and industry.

I don’t mind loosing 100s today if I lost 1000s yesterday.

It appears first line is shorter than second. In reality both are of same length. Our eyes, ears, mind does not understand things clearly all the time.

Everyday we make 100s of decisions without completely understanding the kind of analysis that happens inside our mind. Things we choose are driven by the comparisons we make in our mind. If we have some price already in mind and then we are offered a different price – we do comparison and make decision.

An experiment was conducted by one economist – he asked 5 students to tell last 3 digits of their cell number. This 3 digit is the minimum price they have to pay for each of the several items kept in front of them. for eg: if my cell number is 98696 63539, so last 3 digits are 539. Now I would be asked to pay Rs 539 or higher for each of the several items.

First item was placed in front of these 5 students – an antique clock. These 5 students were asked to bid for the price. After bidding for first item was completed next item was placed in front of them for bidding. Many items were placed in front of them one after the other – wireless keyboard, old wine bottle, jewelery etc.

It was found that person who had the biggest number from his cell phone’s last 3 digit was bidding higher price every-time. Person who had smaller number always gave smaller maximum bidding amount.

Students were reminded that phone number was a very random number and didn’t really give any concrete information but still it was found that person with bigger number gave higher bidding price.

During normal decision making, we overly rely, on specific information and then adjust to that value to workout other elements of the situation.

While buying a used car – we focus excessively on the odometer reading and the year of the car, and use those criteria as a basis for evaluating the value of the car, rather than considering how well the engine or the transmission is maintained.

While trading many people give excessive importance to discount price instead of thinking about overall value of the product at a given price.

Push my brand in middle of two ears

Statutory Warning: “This post will start with a complain about modern times compared to life 25 years back. It might remind you of your old grandparents. Post gets better eventually.”

Outbound Marketing

Lets rewind life in Mumbai or any city of India like Surat Ahmedabad, 25 years back. If you talk to people you will find that life was very easy 25 years back and they had time to do everything. There were no computers, no hi tech gadgets, no mobile phones. In last few years we have invented machines which do lot of things automatically however life is getting more and more busier and tougher. This is strange. If we have invented machines to do our work and calculations, then why is life still getting tougher everyday?

Reason is the huge number of products and services available in this world. Today if you go inside Big Bazaar and spend 5 minutes you will see at least 3000 different brands and products. Go inside your favorite local restaurant – there are 5 different types of rice to order – Zeera rice, Pulav, Biryani, Fried rice etc, previously restaurant use to serve only one thing called ‘Rice Plate‘. There are so many options for everything you do in life.

With growing number of products and brands – we come across enormous amount of marketing messages in front of our eyes. Do this exercise – When you start your day tomorrow morning – count how many brands you come across in front of your eyes – while walking to train station – while traveling in train – while spending time in market. You will be surprised to find that by the time you end your day you were bombarded with 1000s of brands and marketing messages.

Every marketing professional in this world has one task at hand – ‘Push his brand in middle of your two ears’. And to do this he or she will do all kinds of things. They will interrupt you anywhere and everywhere you go. They will interrupt you at work, home, inside movie hall, inside text messages, while you travel, while surfing internet, while listening radio. There are scientists who are trying to innovate system which will interrupt you in middle of your dream.

Interrupt way of marketing is loosing its value day by day. When was the last time you saw a big poster on railway station and felt like buying the product ? When was the last time you opened an Spam email and actually ordered a product ? Gmail has created a folder for spam where it collects spam email and deletes it automatically.

Over next few weeks we will talk about how marketing has changed. The new form of marketing is known as ‘Inbound Marketing‘  . We will  talk about how small and medium size companies are using inbound marketing to get new customers. If you are a business owner then it be worth to read and understand how you can get new customers without interrupting them. In Inbound marketing you never spam or interrupt your customer. Instead people who have interest in your product discover you. People find you and your product. Once people find you, you start a interactive relationship with them, instead of bombarding stupid marketing messages.