Saturday, February 27, 2010

Why companies manage their earnings?

 Joseph Grundfest and Nadya Malenko analyzed almost half a million earnings reports from 1980-2006. They discovered that when companies want to appear more successful than they are, they often massage their per-share earnings numbers upward by a tenth of one cent. 


Why earnings management?


Consistent with analyst coverage being a determinant of earnings management, quadrophobia increases (declines) when companies gain (lose) analyst coverage, and is more frequent when earnings are close to analyst forecasts."


Why analysts' coverage is required? In my opinion asymmetry of information about business between outsiders and insiders.


Quran says: Ayat 8 - 16 of Sura Al-Baqara


First the characteristics of people who lie.
  1. Of the people there are some who say: "We believe in Allah and the Last Day" but they do not (really) believe.
  2. Fain would they deceive Allah and those who believe but they only deceive themselves and realize (it) not!
Then the reasons why people lie.
  1. In their hearts is a disease; and Allah has increased their disease and grievous is the penalty they (incur) because they are false (to themselves).
Then the symptoms of people who lie.
  1. When it is said to them: "Make not mischief on the earth" they say: "Why we only want to make peace!"
  2. Of a surety they are the ones who make mischief but they realize (it) not.
  3. When it is said to them: "Believe as the others believe" they say: "Shall we believe as the fools believe?" nay of a surety they are the fools buy they do not know.
  4. When they meet those who believe they say: "We believe" but when they are alone with their evil ones they say: "We are really with you we (were) only jesting."
Then the benefit cost analysis of lying.
  1. Allah will throw back their mockery on them and give them rope in their trespasses; so they will wander like blind ones (to and fro).
  2. These are they who have bartered guidance for error: but their traffic is profitless and they have lost true direction. 




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Wednesday, February 24, 2010

What is a Linchpin?

I don't know whether the following review of the "book" is a marketing tactics or it is an earnest opinion but it is worth reading.


As Godin says, “a linchpin is the essential element, the person who holds part of the operation together. Without the linchpin, the thing falls apart.”
For much of our lives, we have been trained to be the opposite of a linchpin — an interchangeable part in an industrial machine. Even before the global recession, it often took a career of job hopping to get ahead. In today’s world, companies and customers will show their loyalty only to those who are indispensable. This arrangement, Godin explains, leverages talent and creativity more than it rewards obedience.
However, we are hardwired to avoid this arrangement like the plague.  Our “lizard” brain is what prevents us from becoming a Linchpin, and it orchestrates what Godin calls the “resistance.” The resistance is what prevents us from doing what we say we will do. It prevents us from getting that project completed, those phone calls done, and from stepping outside of our comfort zones. Our lizard brain wants us to remain safe, and at the earliest sign of danger, gives us all sorts of reasons why we can’t accomplish what we set out to do. For instance, it will tell you that people will laugh at your ideas if you hit publish on that blog post, and that you should probably rework that last paragraph to be a little less confrontational. Godin tells the story of a software engineer at Apple who was reluctant to finish a piece of code he had been holding on to because “it wasn’t quite ready,” to which Steve Jobs replied, “artists ship.” So, the only real way to prevent your lizard brain from taking over your life is to complete things even when it feels uncomfortable.
What is clear from Godin’s book is that the world has changed, and you are at the right place at the right time to make a huge difference in your organization and in your life.  Reading this book just might be the kickstart you need to become a linchpin yourself.  I hope you’ll take on that challenge.
Here is what Seth Godin says about being a Linchpin


The minute there’s a map there is no art. Paint by numbers is not art. Paint by numbers is a mechanical activity. There’s a village in China called Dafen… By one estimate, a third of all the oil paintings in the world are painted in this village in China. And what happens is as soon as the sun rises hundreds of thousands of people run outside, set up their easels, and paint as fast as they can until sunset. That’s what they do for a living. No one would claim that these people are artists. They are painters. They are people who put oil paint on canvas. They have a manual. They have a map.
If I told you, step-by-step, what to do to become indispensable, then anyone could do it. And if anyone could do it, it wouldn’t be worth very much. Scarcity creates value. And, this is going to frustrate people, but the emotional labor of work, today — the thing that makes you worth $50,000 or $100,000 or $150,000 a year — is that you can navigate the world without a map. People who need a map, are going to get paid less and less and work harder and harder every day, because there’s plenty of those people, and I can find them with a click of the mouse. Challenge — the only thing I’m selling in this book — is the decision that you will now live without a map, that you will be less obedient, not more obedient; less compliant, not more compliant; and that ultimately, you will do work that matters. And, if I achieve that, with even a hundred people it will be worth the effort.


Seth Godin on What it Takes to be a Linchpin [INTERVIEW]

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Saturday, February 20, 2010

Don't underestimate even small loan

The story of a student loan that is considered "good debt" because an education can lead to a higher salary.

When Michelle Bisutti, a 41-year-old family practitioner in Columbus, Ohio, finished medical school in 2003, her student-loan debt amounted to roughly $250,000. Since then, it has ballooned to $555,000.



It is the result of her deferring loan payments while she completed her residency, default charges and relentlessly compounding interest rates. Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.
"Maybe half of it was my fault because I didn't look at the fine print," Dr. Bisutti says. "But this is just outrageous now."
To be sure, Dr. Bisutti's case is extreme, and lenders say student-loan terms are clear and that they try to work with borrowers who get in trouble.
But as tuitions rise, many people are borrowing heavily to pay their bills. Some no doubt view it as "good debt," because an education can lead to a higher salary. But in practice, student loans are one of the most toxic debts, requiring extreme consumer caution and, as Dr. Bisutti learned, responsibility.
The debt load keeps her up at night. Her damaged credit has prevented her from buying a home or a new car. She says she and her boyfriend of three years have put off marriage and having children because of the debt.
Dr. Bisutti told her 17-year-old niece the story of her debt as a cautionary tale "so the next generation of kids who want to get a higher education knows what they're getting into," she says. "I will likely have to deal with this debt for the rest of my life."
Allah says
If the debtor is in a difficulty grant him time till it is easy for him to repay. But if ye remit if by way of charity that is best for you if ye only knew.  Aya 280 of Sura Al-Baqara
Here is an advise from Prophet Mohammad (PBUH)

Narrated Aisha
Allah's Apostle used to invoke Allah in the prayer saying, "O Allah, I seek refuge with you from all sins, and from being in debt." Someone said, O Allah's Apostle! (I see you) very often you seek refuge with Allah from being in debt. He replied, "If a person is in debt, he tells lies when he speaks, and breaks his promises when he promises."  Sahih Bukhari 3.582




the-555000-student-loan-burden: Personal Finance News from Yahoo! Finance

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Wednesday, February 17, 2010

Prejudice towards Islam

Islamophobia is the word that describes the prejudice of West towards Islam.


"In 1997, the British Runnymede Trust defined Islamophobia as the "dread or hatred of Islam and therefore, to the fear and dislike of all Muslims," stating that it also refers to the practice of discriminating against Muslims by excluding them from the economic, social, and public life of the nation. It includes the perception that Islam has no values in common with other cultures, is inferior to the West and is a violent political ideology rather than a religion."


"The Case of Swiss Minarets" is yet another example of this prejudice. Following excerpt is an interesting analysis of the situation.


"It is, therefore, quite surprising that of all things bothering the Swiss, the last thing one would have imagined is the building of mosque minarets. Yet, earlier today, a referendum was passed that expressly forbids the building of minarets. The referendum passed with a 57 % majority vote, and 22 out of 26 cantons (Swiss provinces) voted in favor of it. Over 55 % of the population voted in this referendum (to put this figure in perspective, that’s around 4.3 million voters).

One would expect, with such a large number of people voting, that the skylines of Zurich were perhaps being threatened with ominous minarets poking up at every street corner.  Maybe the beauty of the chalets nestled in the Swiss alps was being marred with the presence of mosques suddenly appearing on the back of Swiss postcards. After all, for 4.3 million people to be motivated for an election, surely some huge quantity of minarets would have to exist.
It is, therefore, almost surreal to discover that in the entire country of Switzerland, there are a grand total of fourminarets. Each of these minarets is found in a separate province altogether. Thus, 99.9 % of cities and towns across the country don’t even have a single minaret, and only four cities can boast one minaret each.  That works out to about one minaret per four thousand square miles of Swiss soil (Muslims themselves are less than 5 % of the entire population in Switzerland).
So then, why all the fuss?"
According to the author of the article a "rough sketch" of the response from Muslims is as follows:
  1. Quiet Isolation - "Typically, talk of the ever-utopic hijra to Muslim lands."
  2. Militant Confrontation - "Muslims must prepare for the inevitable Grand Armageddon between the forces of good and the forces of evil. "
  3. Political Activism - "Muslims start writing articles and sending out press releases in order to increase public awareness about the issue. A hue and cry is raised about the travesty of human rights, the prejudice and double-standards shown to Muslims in a supposedly liberal and free society, and the woeful lot of law-abiding loyal Muslims around the Western world."
  4. Religious Conservatism - "As they scratch their heads wondering what step to take next, many amongst them opt to join one of the three aforementioned categories, whereas others increase in their commitment to Islam, studying the religion and increasing their awareness of the tradition."
  5. As Usual - "Unclassifiable, uncommitted, non-practicing Muslims who go about their daily lives, completely oblivious to the changes happening around the world and unconcerned about transformations in the political and intellectual currents of the world. Sadly, this category forms the bulk of the Ummah."
If Quran is the guidance for Muslims in this world and hereafter, then we all - Muslims - should turn to Quran for guidance.

This is the Book; In it is guidance sure, without doubt, To those who fear God; Aya 2 of Sura Al-Baqara

Never will the Jews or the Christians be satisfied with thee unless thou follow their form of religion. Say: “The guidance of Allah that is the (only) guidance.” Wert thou to follow their desires after the knowledge which hath reached thee then wouldst thou find neither protector nor helper against Allah. “ Aya 120 of Sura Al-Baqara

“Not equal are those believers who sit (at home) and receive no hurt and those who strive and fight in the cause of Allah with their goods and their persons. Allah hath granted a grade higher to those who strive and fight with their goods and persons than to those who sit (at home): unto all (in faith) hath Allah promised good: but those who strive and fight hath He distinguished above those who sit (at home) by a special reward.” Aya 95 of Sura An-Nisaa

“When angels take the souls of those who die in sin against their souls they say: “In what (plight) were ye?” They reply: “Weak and oppressed were we in the earth.” They say: “Was not the earth of Allah spacious enough for you to move yourselves away (from evil)?” Such men will find their abode in Hell what an evil refuge!” Aya 97 of Sura An-Nisaa

Ye have indeed In the Apostle of God A beautiful pattern (of conduct) For any one whose hope is In God and the Final Day, And who engages much In the praise of God. Aya 21 of Sura Al-Ahzab

Narrated Umar bin Al Khattab

The Prophet said, "The (reward of) deeds depend on intentions, and every person will get the reward according to what he intends. So, whoever migrated for Allah and His Apostle, then his migration will be for Allah and His Apostle, and whoever migrated for worldly benefits or for marrying a woman, then his migration will be for what he migrated for."  Sahih Bukhari 3.706

Narrated Ibn Abbas

The Prophet said, on the day of the conquest of Mecca, "There is no migration (after the conquest), but Jihad and good intentions, and when you are called for Jihad, you should immediately respond to the call."  Sahih Bukhari 4.311

One can draw following conclusions from reading of above.


  1. Jews and Christians will never be satisfied with Muslims until the Muslims follow their religion. So if someone wants to please them he should be ready to convert to Christianity.
  2. Muslims should not hide behind pretexts rather should struggle for their identity.
  3. The course to follow is
    1. When weak and oppressed, should migrate to other areas where they are safe and can perform their religious duties.
    2. When they attain sufficient strength then they should fight in the way of Allah.




Sunday, February 14, 2010

Too much data leads to not enough belief

This is what Allah says of people who don't believe.



And We have explained to man in this Qur'an every kind of similitude: yet the grater part of men refuse (to receive it) except with ingratitude!

They say: "We shall not believe in thee until thou cause spring to gush forth for us from the earth
"Or (until) thou have a garden of date trees and vines and cause rivers to gush forth in their midst carrying abundant water;
"Or thou cause the sky to fall in pieces as thou sayest (will happen) against us; or thou bring Allah and the angels before (us) face to face;
"Or thou have a house adorned with gold or thou mount a ladder right into the skies. No we shall not even believe in thy mounting until thou send down to us a book that we could read." Say: "Glory to my Lord! am I aught but a man an apostle?"
What kept men back from Belief when Guidance came to them was nothing but this: they said "Has Allah sent a man like us) to be (His) Apostle?"

(Sura Al-Israa Ayat 90 - 94)


Unintentionally, Seth Godin has come to the point that " The skeptic will always find a reason" to disagree if they want to disagree. Here is an excerpt from his blog.

"In my experience, data crowds out faith. And without faith, it's hard to believe in the data enough to make a leap. Big mergers, big VC investments, big political movements, large congregations... they don't usually turn out for a spreadsheet.

The problem is this: no spreadsheet, no bibliography and no list of resources is sufficient proof to someone who chooses not to believe. The skeptic will always find a reason, even if it's one the rest of us don't think is a good one."


Seth's Blog: Too much data leads to not enough belief

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Thursday, February 11, 2010

Future of Internet

Here is a quick look into the future of internet.


"Imagine sitting in a rural health clinic, streaming three-dimensional medical imaging over the web and discussing a unique condition with a specialist in New York. Or downloading a high-definition, full-length feature film in less than five minutes. Or collaborating with classmates around the world while watching live 3-D video of a university lecture. Universal, ultra high-speed Internet access will make all this and more possible. We've urged the FCC to look at new and creative ways to get there in its National Broadband Plan – and today we're announcing an experiment of our own."

Official Google Blog: Think big with a gig: Our experimental fiber network

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Thursday, February 4, 2010

iPad, the Dream Machine

Following predictions have been made about iPad.

  1. Tablets will turn out to be the 21st-century equivalent of the printed page.
  2. It will replace the laptop.
  3. It will eat into Netbooks sales.
  4. It is a threat to dedicated e-reader like Amazon's "Kindle".
  5. It will become a popular gaming machine.
I am a long time fan of Apple. My first interaction with a computer was with Apple IIE back in 1985. It was a love at first sight. I dreamed of having an Apple machine in my office ever since. Finally, I was able to get hold of an Apple 'Mac G3' and then 'Mac G4' in late 2000. I am enjoying occasionally Mac G4, which has Mac OSX 10.4 operating system and hunting for a used Mac G5 but still without any success. 

I also like to make some predictions for iPad. Here is my list.
  1. It will replace dedicated e-readers.
  2. It will kill netbooks.
  3. It will be used as a replacement of laptop on shop floors and would be used for statistical and notetaking purposes.
  4. It will not replace the laptop but laptops would be sort of convertible tablets.
  5. It will not replace the mobile phone like iPhone for that matter.
  6. It will not be a success as gaming machine.


Apple unveils the iPad: Steve Jobs and the tablet of hope | The Economist

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Tuesday, February 2, 2010

Apple & Innovation

"APPLE is regularly voted the most innovative company in the world, but its inventiveness takes a particular form. Rather than developing entirely new product categories, it excels at taking existing, half-baked ideas and showing the rest of the world how to do them properly. Under its mercurial and visionary boss, Steve Jobs, it has already done this three times. In 1984 Apple launched the Macintosh. It was not the first graphical, mouse-driven computer, but it employed these concepts in a useful product. Then, in 2001, came the iPod. It was not the first digital-music player, but it was simple and elegant, and carried digital music into the mainstream. In 2007 Apple went on to launch the iPhone. It was not the first smart-phone, but Apple succeeded where other handset-makers had failed, making mobile internet access and software downloads a mass-market phenomenon."


The above excerpt from an article describes the route Apple has taken to innovate products. It does innovation through "taking existing, half-baked ideas and showing the rest of the world how to do them properly." 


So, innovation does not mean one has to produce an entirely new or unique product.


Another aspect of this innovation is the leadership - "Under its mercurial and visionary boss, Steve Jobs." One of the critical and essential trait of a leader is "he has to be a visionary". This has been rightly described by Allama Muhammad Iqbal, the great philosopher & poet of East in his famous verse


"“NIGAH BULAND, SUKHAN DILNAWAZ, JAH PURSOZ
YAHEE HAI RAKHT E SAFR MEER E KARWAN K LIYAE”
(Supreme vision, Sublime language, sensitive soul
These virtues are pre-requisite for leading the caravan)

Tablet computing: The book of Jobs | The Economist

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