He researched on agricultural plants and animals. He wanted to find, effect of body size on metabolic rate of the organisms, a thing that was useful in cattle industry.
Cattle industry owners saw potential in his research, as he could predict how fat their cattle will grow and how much bounty they can get by serving them to carnivorous masses.
Working over this, he stumbled upon a pattern, which is called kleiber law.
He noticed that as organisms grow in size, they slow down.
A rat has faster beating heart; as compared to an elephant. A bull’s heart beats slower than a cat, when he munches his grass.
He applied his mathematics knowledge, to analyse it and he found that it follows, “negative quarter power scaling.”
That means something; that blasts mind of every guy, who didn’t like maths at the school.
But, we can only know that if we take mass of an organism and do its square root and do square root of result obtained again; we will get approximate idea of its metabolism. Metabolism is 3/4 th power of its mass.
That means we do sqaure root twice.
By these ratios, we can predict relative metabolism of two animal species.
For example, if we take a cow and a rat. Let’s assume if cow is x times heavier than it; then cow’s heart will beat x times slower than rat and it will live roughly x times longer.
Scientist Geoffrey west took it further, when he applied this law to non living things like cities, creativity and ideas.
It applied well to cities when we saw cable length, petrol stations, factories etc.
But when he applied it to Idea generation and innovation it was not applicable.
As size of cities increased, number of ideas generated increased exponentially.
That is why cities serve as centres of growth and innovation.
As different ideas collide; they generates new combinations.
Hence, although kleiber’s law can help in comparison of heart rates and life-span of different species, it doesn’t apply everywhere as a basic law of energy distribution in nature.
Let’s stop here. I don’t see too many fans of mathematics, who scroll on social media.
Inspiration – Where the good ideas come from Steven Johnson.
Right from the time, when we wriggled out of the sea water and started infiltrating all over this planet; we always needed fiction to survive.
We needed myths like Gods, states and religion.
Man needed stories to stick to. We needed groups to be part of and we needed feeling of, “us and them” to feel purpose in our life.
Then ideologies corrupted our minds. Some followed communism; which raised right questions but provided few solutions.
Few followed capitalism; that solved many problems but gave birth to extreme inequality and ecological disturbance.
Communism still holds firm in many countries; especially in Eastern parts of the globe.
Communism is basically,” from each according to his ability and to each according to his needs.”
In this all property is owned by the community and each person contributes and receives according to his ability and needs.
Communism is still deeply ingrained inside every inch of capitalism and we don’t even observe it.
It is necessary for capitalism to flourish and spread.
In the house joint family members share their possessions with each other. They earn them by capitlistic market and then put to use based on communist principles.
When we get out of house; we ask strangers for directions free of cost. We may get shelter under strangers umbrella. Somebody may tell you that you forgot to remove stand of your bike, without charging money.
In office, your senior colleague may answer your queries or act as a mentor free of cost.
Now see Facebook and Instagram. How much money they would earn if people didn’t share their pictures and art free of cost.
Would Amazon feel the same, if reviewers didn’t post product reviews for free on it.
So, capitalism may boast of anything but it is nothing without this daily communism.
Elinor Ostrom took this idea to her heart and studied how humans can judiciously share common resources without need of a state or autocracy to intervene.
This concept of commons need to reach more people and should be recognised for its vital role.
Her studies got Elinor Ostrom; Nobel prize in 2009 but still capitalism with its bright lights is outshining the garden of commons.
It is eye-opening write-up. It tells us that; even if intentions are good and legislation in place, still beneficiary may be deprived of a benefit due to misinterpretation of things and complexities of a process.
In year 2015, as people tried to flee to better lands amongst middle eastern Syrin war. As many as 4000 refugees drowned in meditarranean sea; as they tried to cross it with inflatable boats.
They paid loafty money to mediators and found themselves with their families; in the middle of no where.
This happened in spite of Geneva convention aggrement; which enables refugees from Syria to seek asylum in Europe.
But, when people tried to reach airports they faced effects of anti illegal immigrants directive, which was designed to stop illegal immigrants. This directive required airlines company to ship back illegal immigrant for free.
Hence, on airport counter every asylum seeker was seen as illegal immigrant. Hence Geneva convention failed to help them due unclear and complex process.
Why didn’t they use good boats.
Because, there is EU policy to confiscate illegal boats. Hence, if people used boats they will be captured and gone
Hence, desperate people used inflatable boats which are very unstable and risky.
Hence inspite of remedy (permission of asylum under Geneva convention); it was really hard for refugees to reach Europe to seek asylum.
Sorry, for the heading of the blog. This was to get your kind attention.
This blog is about stocks, also known as shares, with particular focus on Indian general masses, who want to enter and explore share market.
It is simplified basic knowledge about share markets.
Babies will not need it. But their dads will need it, to secure their future. Hence in a way this blog is for those babies too; who are going to discover in future, that their daddy knew next to nothing about economics and investing.
As uncertainty, looms in the economy with unpredictable future, you need to have knowledge about all the spheres of the investing.
If you have money, it should grow with time and this can be done by wise investing.
So let’s clear our basic doubts about shares.
First let’s clear biggest confusion according to my analysis. It is terminology which blogs use to explain shares. It is confusing.
We must know that ;
equity = share = stock = security
First you should know this fact that they call shares with so many names. As different sources write different names, it can be daunting. They all are interchangeable.
We will use term share in this blog, to avoid confusion.
“Share is a physical or digital certificate that gives buyer partial ownership of a business.”
Let’s imagine a business is worth 100 rupees. Its owner divides this into 100 shares each worth 1 rupee.
Now, he puts them in stock market ( stock exchange) from where people can buy or sell these shares.
So, if someone buys 40 shares of this company, he becomes 40% owner of the company. Any one who invests 1 rupee, he becomes 1% owner.
So shares help businesses in raising money for their operations.
His investments are now dependent on the performance of the business. If it grows, he earns money and if business falters, he looses money.
He can buy or sell shares anytime on the stock exchanges.
There are two main stock exchanges in India –
1. The Bombay stock exchange ( BSE)
2. The National Stock exchange ( NSE).
Companies are listed on stock exchange. And only listed companies can sell their stock in stock market.
These are regulated by SEBI ( Securities and exchange board of India); which is a statutory body responsible for fair working of the exchanges.
It penalises for wrong practices and frauds and formulates rules and regulations for working of stock exchanges.
Hence, one can invest money in stock market without worrying about frauds or cheating, as far as stock companies are concerned. Whole system runs on trust.
These days stocks are available in digital format and can be easily purchased or sold using apps like zerodha, Angelbroking etc. Whole process is very simple.
You need to make a demat account with regulator and after kyc verification (know your customer) verification; you can purchase and sell from comfort of your home.
How does initial price of a stock is decided?
It is random value in decimels decided by the company promoters. After that performance of the business and demand and supply and perceptions about future decide the price of that stock.
Total number of stocks issued is called total shares outstanding.
If we multiply number of shares issued with the price of one share, we get market capitalisation ( market cap) of the company.
All companies listed on stock exchange are divided into groups based on market cap.
1. Large cap –
Top 100 companies in terms of their market capitalisation. These are safer and successful companies. Examples in India are TCS, HDFC, L and T, wipro etc.
2. Mid cap –
101-250 in list of companies based on market capitalisation. Examples are pfizer, emami, bayer etc.
3. Small cap –
Above 250. These are generally lesser known volatile companies.
Now based on performance of the company, its management, brand value, public sentiments and many external factors like war, disaster, competition, fads;there are fluctuations in the price of stock in the market on day to day basis.
But generally in long term ( 10-15 years ); if business of the company is sound, it results in rise in stock price over time in spite of the short term wide fluctuations. Hence stock market investment is for long term.
If you don’t have 10-20 years of time to let your money grow, it can be less fruitful mode of investment.
What happens when stock prizes rises?
Company can give you part of the profit, that is called dividend.
Or it may hold extra cash for liquidity and expansion.
It may invest gains for further expansion of the business.
Why the people worried about Sensex rising or falling. What is this sensex?
Sensex is a metric using which we can guess overall performance of the economy.
We can’t check each and every stock daily. So we have devised a simple measurement number. It simplifies monitoring.
Sensex and nifty are such numbers. They are stock market indices. They tell the direction of the market, whether towards positive or negative.
Sensex belongs to Bombay stock exchange. It is made up of 31 hand picked companies, which are picked by private firms.
For example, sensex companies are picked by Sand P global. Companies are not fixed. Based on performance new companies enter and go.
Nifty belongs to the national stock exchange. It is made up of 50 stock. Hence, it is called Nifty 50.
Hence, next time you see a news anchor worried about fall in sensex, you will know that, she is talking about the performance of choosen list of companies on that day. Their performance is averaged based on their size and sector.
Few more terms that you hear everyday.
Bull market – when the market is on the rise like horns of a bull.
Bear market – when market is on fall like a crouching bear.
Blue chip companies- companies which are reliable performers.
What is initial public offering?
IPO – Initial public offering –
Each company starts as a small privately owned company. With Time it grows and it needs more money to expand. It then lists itself on Stock exchange, so that anyone in public can buy its shares as IPO. It raises a lot of money for the company.
A board of governors is appointed to oversee working of the company. Its data and performance are public. It is responsible to its shareholders for maintaining good performance.
Hence, IPO is the initial offering stock by a private company, which enlists itself on the stock exchange so that its stock can be bought and sold by general public.
This blog is aimed to provide introduction to the share market to Indian readers.