Would you fire me?

by Manshu on June 11, 2009

in Opinion

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Moral Compass by psd

A group of students at the Harvard Business School took an oath to be ethical. It was voluntary and the idea came from the students, not from the school itself. Most people who heard about this thought it was ridiculous and in some way or the other took a moral high ground and made fun of these guys (which is what I did, too). Later in the evening, this reminded me of an incident that happened a few years ago.

In India, brokerage is calculated as a percentage of the stock price. When your statement comes at the end of the month, the headline figure is the price at which you bought or sold. Within that price, there is the component of brokerage, but you need to make a little extra effort to see how much brokerage you paid.

If I manage your money and know that you are not going to make the extra effort, I could transact multiple trades for you in a month; make a small profit or loss and rack up big brokerage fees for myself.

If I have ten accounts like this, I can make a steady stream of money on the volumes and no one will ever find out what I am doing. In a bull run, a few stocks that are steadily going up will make you money (at least on paper) and you will ignore the trade volume in your other stocks. In a bear market, everyone is losing money, so you will not blame me beyond my incompetence.

I know someone who did exactly this, and got fired (eventually). I can tell you that it was not because he was unethical, but because he killed the goose that laid the golden egg. He grew in confidence and eventually the volumes became so high, that his boss said that it’s only a matter of time a customer discovered it and he fired him before that could happen.

A. Now, the question is, if you were my customer, would you get rid of me as soon as you figured out what I was doing?

    Now consider this, everything is the same as above, but I am doing it out of incompetence and not out of greed. Meaning, I really do believe that I can make money for you by trading, but in reality, I am not a good trader and I am not able to make any money for you by trading. Sure, I am making a lot in brokerage for my firm, but that is just incidental.

    B. Would you get rid of me now?

      What if I make a lot of money for you trading, better than all the other brokers you had in your past. You know I have a consistent track record and it’s not a fluke. You take me out to celebrate; I have a little too much to drink and blurt out that all those trades I made just for the brokerages didn’t do much damage after all.

      C.Would you get rid of me now?

        If you had no trouble answering A & B, but had to think about C, then give the Harvard guys a break.

        { 5 comments… read them below or add one }

        Mark Wolfinger June 11, 2009 at 6:07 AM

        A is my fault for not watching closely

        B Too many investors don’t know when their trusted advisor is doing badly. But yes, I’d fire you for losing too much money

        C is the worst of all. Knowing your motives, I”d fire you, tell your boss, report you to the SEC. I would not keep you, hoping you can continue to trade profitably.

        Reply

        Mikael @ Retire Rich June 13, 2009 at 4:00 AM

        I would definitely fire you on all three but I agree that I had to think about “C”. luckily for me I haven’t even seen the Harvard story mentioned so I didn’t point my fingers at them in the first place (I pretty sure I wouldn’t have if I had seen it).

        Being ethical is very important to me because I am a firm believer of do onto others what you want them to do onto you 😉

        Mikael

        Reply

        Manshu June 13, 2009 at 2:38 PM

        @Mark: I wish I had thought like you.

        @Mikael: I had to think on three too, but in the end I came to the conclusion that I would fire me too. If you can’t trust a fellow, you shouldn’t do business with him.

        Reply

        AK August 18, 2009 at 3:02 AM

        Stock market is nothing it’s a glass of liquid

        Stock market is nothing it’s a glass of liquid; Size of the glass depends upon economy of a country & its development which can be higher or lower in size.

        Different color cocktail with various flavor are the generator of this glass.
        Flavor provides attraction of its test which increases & decreases its size & test with quality, time and sucking capacity of an individual.

        Individual needs basic & require utilities with right time to suck the best test of flavor.

        Cocktail is a needy, innocent, and cruel motility as per its size, situation & time.

        It always requires the participation of small & big suckers to make it huge in size with daily, monthly and yearly basic by so many ways, parallel it provides sucking chances to its participators of good & bad test.

        Cocktail making & duplicity are the parasites to create huge hole in the glass.

        When size of the cocktail is very small then it shows its desperate neediness & ready to whisper any participators because it’s always being with so many parasites.

        Suddenly bunches of big suckers come with sucking passions by their all the tools to participate enormously because here they can wait until their desire wont be fulfilled.
        When some neat small suckers see the big ones then they start to be with them & the size of cocktail initiates to climb up & demonstrate its extreme innocence to welcome all other suckers to suck the beauty of its test.

        Timely some smart “big & small” suckers test the beauty of youthful cocktail & start to wait for another needy time. This makes some variations in the size of cocktail but its manufacture & treachery set up to hide the facts about real test by the grace of positive “artificial & natural” situations. This is called the ballooning the hole of liquid. Due to this bulk of small suckers come for the contribution.

        In this period of time some more suckers book their good & bad test & cocktail starts to reach a place between innocence and cruelty & so many fairyland stories start to begin and spring its magic among new comers.

        Suddenly groups of very big suckers swallow the large part of cocktail then all the air of glass hole have gone out & cocktail reaches in its cruel age.

        All the small new suckers stun to see the size of cock tail & they feel that test is very bad they have to wait until it will resize again but its going to down very frequently & their waiting has become an everlasting journey for them. Those addictive suckers were sucking the cocktail from needy time to upper innocence time suddenly they find that their participation is completely balanced or negative as compare to their joining time.

        Sucking capacity is not depend upon the cocktail size in the glass it completely depends on the chances of getting cocktail.

        Reply

        mark August 18, 2009 at 3:07 AM

        Amazing

        Reply

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