Organizational Entropy

Entropy (thermodynamics) is the energy that is not available for any useful work. Entropy in software measures the degree to which it is unordered, degree to which it can't be maintained. Entropy in organization measures the degree to which the workforce is unfocused & unordered. Though the field of application is different, by the very definition we understand that entropy is not a thing to boast about. The system continue to go in favor of entropy unless it is taken out in the form of heat.

Entropy in organization implies that energy that is available and that will eventually be spent on matters that is not so useful to the organization either be it taking too much of tea for a prolonged period in cafe or putting up a strategy in a conference with tea (or beer). All these are efforts which won't necessarily be converted to results. The next question that may come you mind - "is entropy same as that of being unproductive?".

Being unproductive is the result of having an entropy at higher side. Productivity is a metric that is measured after the event has happened. You have to wait for a week, a month, a year or until you have next meeting. But entropy measures how much of energy you have and what portion of it will be spent on things that will have little to no impact.

I feel like measure on entropy, and trying to reduce it, is a proactive approach than doing with measuring productivity alone. You better remove entropy periodically. Keeping a check on entropy increases the awareness and anticipation which in turn increases the probability of producing productive work/results.

Either in software or organizations, the entropy has to be worked against.

Related Links

Entropy in Thermodynamics

Entropy in Software

Learn Trading - Enter with Exit in Mind

You might at least heard from few of the stock broking firms or from your friends that you can make great deal of money by short term trading. If they also say that there is equal chance of losing the money, you can believe their words. If they build their pitch around profits, get away from them. Even world's greatest traders and technical analysts cannot exactly pin point when the market will reverse and go against your position. But this doesn't mean that you are going to be loser always. But the loss is a possibility. There is a risk and the risk pays you off equally.

Unless it is long term investment, if you are trading for short term to medium term for some quick profits, the key is money management and taking positions in phases. We will more about more about these in upcoming posts. The more important is the mindset. For example, if you buy a stock for 40 rupees and waiting for making huge profit without any time line or price target, you are unlikely to get profit. So, when you are taking positions, it is very crucial to enter in the right price and right time. It is equal more important that you exit in right price and right time. In the next post, we will discuss why "entry" and "exit" are more important with charts.

Lots of Money To Be Made - Really.

This year is going to be start of another bull market and it is likely to run for at least next few years. After Oct' 08 lows, everyone (including myself) thought that the market is going to hit another bottom. The stock market proved again that anything can happen. It never made another low and probably won't hit a new bottom again. The stocks which traded in hundreds came to as low as to 10 rupees. For example, my preferred stock HDIL made a low in 60s and went up to 300 rupees.

By looking at the patterns, I feel that there are lots of money lying with mutual fund houses, domestic institutional investors and particularly Life Insurance Corporation of India (LIC) that needs to come to market. These educated folks don't invest like kids. They are guys who make the markets move in either direction. These folks have real huge money and many of them are sitting on reasonable proportion of cash. This tells us that those money has to come to market sooner or later.

Ideally, one should have started to invest during October so as to "bottom fish" but literally one cannot bottom fish as no one knows where the bottom is. So, the key to successful investing is systematic investment. Like SIP plans in Mutual Fund, one should go for building portfolio at crucial support levels of each stock. By this, one can reduce risk and maximize the returns. While "buying at bottom" and "seeing at rise" is a common strategy, the strategy cannot be applied directly. One has to systematically plan for investment, spilit up the prinicple amount into at least 4-6 portions and invest at every crucial support levels (or for every 2000 points drop/rise in Sensex).

When you invest/trade like a machine, you must make a real lot money. Period.

Role of Financial Consultant

How long will you work? At some point in your life, you would like to take a permanent off from your work and people call it retirement. This is the time, you will spend more time with your family, doing small things that excites you and do some traveling/pilgrimage. In order to have peaceful life, it is absolutely essential that you have enough corpus to support your family and yourself. It is quite reasonable if you want to build a corpus of 1.5 - 2 crores.

When you want to build a portfolio of products, I strongly believe and recommend you to go for a financial consultant who is experienced and who will be working for you and sensitive to your needs. Do not get in touch with inexperienced consultants who offer you products bits and pieces. For example, most of the consultants whom I met before I met my current consultant (Mr Anand Srinivasan) were focused only on specific products. They never asked me questions on current investments. As far as they are concerned, it is their business, they want to sell their products.

But with any experienced/knowledgeable consultant like Mr Anand, they start their interaction with the clients with questions. I still remember the number of questions he asked when I met him first time. He literally made my father and me to run the safe more than 5 times to bring the details of investment. He clearly analyzed my "risk-reward" in accordance with my age and finally suggested me to go for few products. Most importantly, he never pushed me to buy products from him. He was focused only on creating the corpus - slowly with discipline. Periodically, he used to visit my home and make sure that the investments are on track and make timely shuffling to reduce risks. He is one of the very few people who look things over a long term and do shuffling for short term to maximize returns. There is no wonder why I still continue seek Anand's help for all my investment.

When you want to retire with a good corpus, it is essential that you need someone to educate you and who can help you to make sensible decisions. Go for a financial consultant not brokers.

Don't drive focussing too much on rear mirror

Just in case, if you are successful in the past, you do not need to necessarily be successful in the future. The future may be very different. Would you ever drive only by seeing rear mirrors? Rear mirror just helps you to keep you checked. The present and the past successes are just like seeing through rear mirrors. It is something like sugar written on a paper and utmost it breeds complacency. But seeing through the future is different ball game and exciting too.

There are two ways that one can do to learn how to pierce through the future. Go through some websites and go through some presentations of people, memorize few words to appear that you are educated. Then you address a gathering rather blabber something. This one particularly works well when you have authority and up in the hierarchy. Many folks are made to sit like a ducks and they hear you duck quacking - quack, quack, quack. Irrespective of the time slots given to you, you just quack. The second way and often least preferred route is to make whole heart attempt to learn seeing through the future from the scratch. The second method is worth taking and equally rewarding.

When it comes to a vision, it has to so compelling and the strategy built has to be forward looking and motivate people to give their full. Don't blow the old trumpets which never worked, people are clever sometimes to recollect your tune as they heard it many times. No vision/strategies can be so compelling than creating a future. So, don't drive people to look backward but just encourage them to look forward because the past is irrelevant.