The Bitcoin Bubble- What does it mean to us?

“Governments were only invented to give banks the medium of exchange. Politicians are the only universal currency”, wrote Bauvard in his fictional work ‘The Prince of Plungers’. Banks dealing with huge sums of public and private money have come to rule the modern civilization and its thought. The advent of the internet as an interaction medium in the late 20th century has proved to be the corner stone of human civilisation. It has democratised knowledge, brought down the boundaries of the world and has made way for infinite opportunities to mankind. The Bitcoin is a direct result of this democratization of knowledge. Big banks needn’t rule the world by the virtue of big money they made through favorable money transactions and legislations. The advent of an e-currency shall prove to be a serious threat to the monopoly of banks and federal governments in money transactions. While bitcoin has serious flaws which it need to overcome to garner wider acceptability, the idea of digital currencies which make money transactions simpler has ignited a major spark.

1. The need for money

Man is a social animal and has an intrinsic need to depend on others for his various needs. The evolution of man from an ape to a civilized creature was aided by trade. The earliest form of trade was by barter. One exchanged 10 eggs for kg of sugar, a bag of barley for a bag of wheat etc. This form of trade had its limitations. The Chinese were the first to invent paper during the 8^th century A.D. It was natural that they were the first to invent paper money too. A number written on a piece of paper authorized by the King brought that number to life. This made the King all the more powerful. He could print whatever number that he wanted and exercise his power. This simple idea evolved trade in China manifold. Marco Polo, an Italian traveler who traveled to China in the 12^th Century A.D noticed a peculiar piece of paper which people used to buy and sell goods. It was an idea whose time had come. Marco Polo went back to Italy with the idea and then it gradually spread to whole of Europe. The King in Italy printed notes and made merry. Traders began lending them. The Italian word ‘banca’ which means a table, often used my traders to lend money, came to be known as bank. That was the first revolution money witnessed. It made and unmade empires and nations. I strongly believe the internet money will be the second revolution that money will witness.

2. Why has Bitcoin become an important point of discussion?

The media, especially the pink press, as the financial press is more freely known has discussed the merits and demerits of Bitcoins in great detail. Bitcoin is nothing but a glorified computer generated program code. It is stored in a service called a digital wallet. Each user shall have a unique digital wallet and bit coins stored in them. The digital wallet can be accessed by individual user through a password which has high encryption. This allows users to anonymously trade over the internet market place. Nobody clearly knows when did the first Bitcoin transaction happen? Satoshi Nakamoto widely believed to be the founder of Bitcoin, denied being associated with it recently. He is a known maverick. The service itself came to the limelight in 2013, when silkroute.com, a website which sold banned goods was busted. Bitcoins, in its infancy was used to trade drugs. It has its share of notoriety attached to it.

But Bitcoin has the genuine potential to be an equalizer. It along with a host of other digital currencies has got a major role to play while more and more number of people hop on to the internet highway. This is exciting in terms of financial inclusion and ease of trading. The full potential of money can be realized through this means. However there are grave concerns regarding its safety and acceptability. The American government has commissioned a study to find how bitcoins can be put to good use. Leading economists and technologists are busy finding a workable workaround to the loopholes in Bitcoins. But what excites me is the possibility of a digital currency. The wheel has surely started moving.

3. The need of regulation

In the volatile financial world that we live in, the need for regulation of currency is paramount.  A powerful idea like the internet currency has manifested itself as bit coin. This does not mean this is the only e-currency that is in circulation now. There are a host of others. There credibility solely depends on their reach and acceptance. Laxmi Coin is, India’s own version of bitcoin.  The medium of internet makes these amazing possibilities happen.  When so many of  the currencies are around, naturally the need for regulation such that these currencies do not fall into wrong hands is needed. It was not wars that brought down empires, it was money.

The volatility of bitcoin can be seen in the below picture illustrated by forbes.com. The American government and the leading think tanks in the world are working on making this more acceptable and stable. This is a welcome step.

The volatility of bitcoin

4. Conclusion

Nothing is powerful as an idea whose time has come, said Victor Hugo. The idea of an e-currency is one such. The world will wake up to freely transacting on the internet very soon. Governments and societies have to be part of it. Those left behind will find it hard to catch up. Bit coin by itself may not be perfect with its inherent defects, but it represents a powerful idea for sure.

– Vinay Biradar

Write to him: vinay@pinnacleacademy.in

How Unreal Money Destroyed the Real World

“If you want to know what God thinks of money, just look at the people he gave it to” said American writer Dorothy Parker. But if you really want to know what God thinks of money, then study how it got created and you will know that God hates it. The origin of money, paper money to be specific, has caused man-made disasters far greater than natural ones. Vivek Kaul in his new book “Easy Money: Evolution of Money from Robinson Crusoe to the First World War” explains how easy money changed the course of human evolution. I just completed reading the book and it has left me startled about currency economics. I am writing to share my thoughts on the book and money economics in general.

Front Cover. Courtesy: Amazon.com

Human beings are social animals. After food, clothing and shelter comes the need to trade because man is an interdependent creature. It is not the case with other animals. A cow can fulfil all its needs by itself and doesn’t have to depend on another cow for something it needs or it might need in the future. Humans initially traded goods with goods (barter system). The system had sound economics to back it up, but it was not efficient for complex transactions. This led to the invention of paper money. In the book Vivek Kaul explains how Marco Polo took the idea of paper money from his voyages in Mongolia and China to Italy his homeland. The Chinese invented paper, ink and also the art of printing. Naturally paper money was first developed there. The thought that paper can be used as money must have occurred first to a very intelligent man, but it is not known who that genius was. Imagine I and you are trading with currencies like rice and maize. I sell 3 goats for a bag of rice, 10 eggs for ½ a bag of maize. The whole society around me is built on that and suddenly 1 day I wake up to find that you give a piece of paper to buy 10 eggs from me. It must have been revolutionary idea at that point in time.

After the Chinese invented paper money, the idea has travelled far and wide and has now engulfed every aspect of human existence. It isn’t wise to study human history without studying the history of money, for everything that history stands testimony to, money is the reason for it. The story of Jack Law, narrated by Kaul catches my imagination the most- how one man’s fantasy destroyed France the most powerful nation on earth, in early 18^th century.  Jack Law was jailed for murdering a man ‘for the affections of a certain Elizabeth Villiers’. (Imagine Shahrukh Khan of Darr in the early 1690s) Law escapes prison and publishes a text titled “Money and trade considered, with a proposal of supplying the nation with money” in the year 1705. He was of the opinion that more money means more progress and more prosperity. That might be true, but what he did not think about is the source of such money. Printing money on paper had caught everybody’s fancy in Europe in those days. France had lagged behind in that endeavour. Jack Law wanted to test his hypothesis that more printed money means more prosperity.  Sadly, an economic theory cannot be tested in a laboratory, which is why most economists end up committing their mistakes on humanity.

The King of France during early 18^th century was Charles V, who was a minor. So France was ruled by a regent. Law managed to convince the regent that he would be able to clear all the debts of France, which was a whooping 300 million Livres by setting up a bank and printing paper money. The regent gave him the land of Mississippi , now in USA to start his operations. Law set up Banque de Royal and issued shares of his bank in 1719. The genius also told the public that he would give loans to buy shares of his own bank. Foolishness has been contagious for humankind at all times. The public went hysteric and soon the shares of Banque de Royal jumped up from 500 Livres to 20,000 Livres per share. Among the people who made a lot of money were chimney cleaners, waiters and a variety of other lucky people.  John Law’s coachman also made a lot of money in the process. The term ‘millionaire’ first came to be used then. One morning, the coachman showed up and resigned from work.  He told Law that there were 2 replacements for him.

Law replied “But I only need 1 of them”.

The coachman said, “The other I shall engage myself.”

Such was the frenzy that the uncontrolled printing of money created. Law became a national hero in France and the royalty gave him special status. As long as the money is coming, it doesn’t matter where it is coming from, thought the regent.

Money printed should be backed by something worthwhile. The best form to back it up with is Gold, Silver or any other precious metal. Banque de Royale’s intention was to print more money without any credible backing. When Prince de Conti, grandson of the regent of France was disappointed for not getting enough shares of Banque de Royal, he sent 3 wagons full of Banque de Royal’s notes asking Law to return the equivalent in coins. Sensing something fishy, there was a mad rush of people to withdraw their paper money’s equivalent in coins. There were several measures, foolish or otherwise which were put to stop this mad rush. But none of them could stop Banque de Royal from becoming the forefather of Lehmann Brothers. It went bankrupt in 1720. John Law became the most hated man in France from being the most respected in a year’s time and died a poor man of pneumonia in Vienna 7 years later. The French press wrote a brilliant obituary. [Producing it verbatim from the book]

 

 My shares which on Monday I bought

Were worth millions on Tuesday, I thought.

So on Wednesday I chose my abode;

In my carriage on Thursday I rode;

To the ball-room on Friday I went;

To the workhouse next day I was sent

Perhaps, it is wisely said “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time”. The life of Jack Law carries a lesson for present day economists and financiers but they aren’t willing to learn it. In the book, Kaul explains in detail how United States of America went into economic crisis roughly every 3o years in the latter half of 19^th century and early 20^thcentury. Crisis due to excessive money printing was handled by even more excessive money printing. How mistakes with money ruined the Roman empire, destroyed the British Pound as the major currency with which the world traded, making way for the hegemony of US Dollar are  all explained brilliantly by Kaul. Bigger the size, mightier the fall!

Courtesy: Google Images

In the world of today, economic power is vested with a handful of people who sit in ivory towers and think they are supreme beings. In a way, they are. They decide which way the world moves when it wakes up tomorrow morning. But are they sane and capable enough to decide the right direction is the question? After all, we now know the story of Jack Law.

Easy Money is an essential read; if you are intrigued with these questions.

– Vinay Biradar

Write to him: vinay@pinnacleacademy.in

The article is cross posted here from Vinay Biradar’s blog.

An Inspiring Teacher

Editors Note: The article was chosen as the winning entry for the Teachers’ Day article writing contest conducted by Pinnacle Academy.

The question ‘who is an inspiring teacher?’ most often makes us think of our favorite teacher or professor in school or college. A teacher need not necessarily be a professor or lecturer. That’s a myth the changing education system of today is busting slowly but steadily.  A teacher is simply one shares his or her knowledge to inspire others to go in pursuit of it. An inspiring teacher is one who magnanimously motivates students to achieve beyond one’s potential. They staunchly teach discipline and robustly foster a person’s character. They understand one’s dynamic flow of thoughts and guide them accordingly towards their destiny.

A teacher can take any role in our lives. It might be our siblings who support us during ups and downs in life, a friend who rectifies our mistakes, a role model whose achievements ignite the spark of passion in us to reach the top, an orator whose speech intensifies the thoughts and consequently provokes positive action or instances in life which unwittingly influence pivotal decisions.

For me the most inspiring teachers are, beyond a shadow of a doubt,  my parents. They imperceptibly have kept motivating me whenever I’m down. In general I attribute imbibing of moral values, discipline and responsibility to my parents. Parents help build our confidence, our outlook in life and guide us through their experience.

Today our ability to communicate is because of our parent’s understanding of  our broken language during childhood and their boundless zeal to teach us. We are able to walk upright today only because of the fact that each time we have fallen, our parents have encouraged and smiled to make us feel that falling is a part of life and getting up each time is the key to success.

Our parents who often are our very first teachers. (Courtesy: Google Images.)

Every time we have come up with a creative idea, they have backed it. They have cherished our intelligence when it worked and inspired you to try again when it didn’t. They have inquired about our problems when we scored less and made us to work on our weaknesses. They taught us math with stars and chocolates.  One grows being influenced by their parents. Their actions make an impact; their achievements trigger the bullet of fruitful desires.

Like at times a teacher becomes a sibling, a friend and a role model; same is true when it comes to parents. They support, rectify and inspire. Like a teacher expects his student to overcome all the challenges and outperform himself, a parent too expects his child to rise above the odds and gain the respect of others.  The sole purpose of a teacher’s hard work is to see the student succeed and accomplish his/her goals. The parent too wants his/her child to succeed in life come what may.

Hence the onus is on the student to be vigorously passionate, clearly focused and to work hard and to thrive. His responsibility should be to blindly trust his teachers, honestly obey their orders and strongly believe in his own strengths. The fruit of success is the greatest ‘Guru Dakshina’ one can give to his parents. When you look back, the compromises made by your parents will be motivating enough to conquer your dreams.

– Shriram Kulkarni

Write to him: shri.uvce2007@gmail.com

An Open Letter to You

To,

You,

Indian.

I want to convey my thoughts to you. I know you are too busy with your Life. You are watching a cricket match. You are on Facebook. You are learning. You are playing. You are cooking. You are thinking. But I also know that you are so kind that you will leave your work for some time and read this.

I salute you. You deserve my salute. It is you because of whom we are among the top ten economies of the world. Your creative and innovative ideas have made it possible to launch INSAT 3B. Your hard work has earned us a name in this material world. Your army is among top 5 in the world. You are the largest democracy .This potential of yours has not erupted suddenly. It has come from thousands of years. Your struggle for freedom is unbelievable. Your support for peace and Integrity is still evident. You are a cultural hub in yourself. You invented Zero .You taught the world Ayurveda and the list goes on.

But still you are a developing country. You top the list in poverty and corruption. Among every 6 people in the world, there is at least one where you will find yourself. Still you struggle to win medals in Olympics. You are murdered even before you are actually born.

One of the greatest characteristic of you is feeling helpless. You feel helpless when you see beggars. You feel helpless when you drive on potholes. You feel helpless when you need to give bribe to get your driving license. You feel helpless when Indian jawans die in a war. You feel helpless when you are not promoted. You feel helpless when your son does not study. You feel helpless when you are forced to marry someone of your parent’s choice. You feel helpless when you don’t get a job. You feel helpless when scams are exposed. You feel helpless when prices increase. You feel helpless when your land is occupied by neighboring country. You feel helpless while deciding whom to vote. You feel helpless when you get raped publicly. You feel helpless when you are suspended .You feel helpless because you believe it is not in your hands. You feel helpless because you don’t dare to bring about a change. You feel helpless because you are too selfish.

But, you were not like this.

You believed you can ride a bicycle. You believed you can cook. You believed you can score marks. You believed you can support your family. You believed India will win the world cup. You believed you can travel alone. These might look silly but the fact is you believed in yourself.

Even today if you start believing that a change in you will change the nation, then you will never ever feel helpless.

Believe that if you follow the traffic rules there will not be any traffic jams.

Believe that if you don’t encourage bribe, India will be free of corruption.

Believe that if you use dust bin every time, you will see a clean city.

Believe that if you use Indian made goods then India’s economy will rise.

Believe that your child can still achieve everything if he does not opt for science or commerce.

Believe that if you try to improve. You will improve.

Believe that if you use public transport or start car pooling, global warming will decrease.

Believe that you can learn anything.

Yes it will take time .Yes you will have to wait. May be you will not be alive to see the difference but your children will be able to see it. They won’t feel helpless. Only you can bring this change.

Spread this belief to everyone like you. Make them believe in themselves. If you don’t think you can pass this to everyone again you doubt your strength. Ask Mark Zuckerberg, he knows how strong you are when it comes to networking.

The time has come to change your thoughts. To bring a revolution.

I believe in you. You will change and you will inspire others to change.

Inquilab Zindabad – Longlive revolution.

Yours lovingly,

An Indian

– Shriram Kulkarni

shri.uvce2007@gmail.com

The Art of Creative Thinking

Creativity, innovation, disruptive mindset, out-of-the box thinking have all made it to the modern day lexicon’s most popular words. You hear them on a daily basis from your boss, your colleagues, your teacher or from the road side vendor who may call it in his terms as Jugaad. It is a set phenomenon and that is growing exponentially by the day. Tomorrow you might see a job description on naukri.com or the Wednesday employment supplement of your newspaper, which reads- “Wanted Out-of-the-Box thinking individuals who have a disruptive mindset”. Not people who can write Java code, or who can tell you what is there in the rule book, but solution givers. Our education system makes us accept the solutions given, but does not encourage us to go in search of them. Often people who seek solutions are the ones who think disruptively and are said to be creative.

I recently had a chance to attend a Webinar of Puneet Bhatnagar, an advertisement professional and a creative person. No, not all advertisement professionals are creative.  Have you watched this Idea commercial? I guess you have the answer. Puneet spoke on ideating- how do we generate ideas? What do we do with them? Is there any pattern or science to it? It was a very informative webinar. I wanted to share my learning with all our readers which made me write this post.

Creativity when captured through a camera lens

Creative thinking is an art like Pranayama. Every living thing can breathe, but there are only a few who can breathe to increase their vital body energy. That is because they have practiced Pranayama. More fundamentally, one has to know that such a thing exists and can be practised. The history of human civilization is the history of human creativity and innovation and not to forget foolishness. We confused creativity with intelligence. Intelligence is applying known facts to solve a problem efficiently while creativity is thinking of newer and better answers to the problem. Not all intelligent people are creative but creative people are intelligent for they know what already exists. They are interested to find if there exists something which is better. Puneet gave the example of Google founders- Larry Page and Sergey Brin. When they started to build a search engine, Yahoo the market giant already had it in place. People used Yahoo search and thought this is the finest, although it returned search results for Sandalwood trees among other things when one searched for Bollywood. But Larry Page and Sergey Brin weren’t happy about the search results and asked- is there a better way to write the search algorithm? That was their Ph.D project.

The result as we know is history. Google became the quickest company to turn their founders into millionaires and today it is the most valued company in the world. Google in fact tried to buy Yahoo a few years ago, if you remember. This characteristic of creative people which Puneet explained is called Creative Dissatisfaction. If you aren’t happy with something in your life, are you dissatisfied with it or are you creatively dissatisfied with it?

Q:  How to be creatively dissatisfied?

A: By creative cribbing.

If you crib about a situation creatively, chances are you’ll strike on an answer which will do away with your dissatisfaction. The example of Google founders is the classic case of creative cribbing. They spent hundreds of hours using Yahoo search and to crib about its shortcomings. Through this they knew how to build their product. This technique can be used in all our daily lives where we encounter shortcomings and dissatisfaction. Lets crib about that in all ways thinkable. Are we able to find a solution? No? How about round 2?

 Creativity comes with patience like most other things. Creative thoughts are refined. No person can land on a path breaking idea at the first moment he starts thinking. For beginners, all thoughts generated at first might be trash, or not usable, or not practical. Most of them give up at that moment and never go to round 2. While readers of this post shouldn’t leave it at that and go to round 2 like a trained boxer. If you have the habit of taking down notes, or keeping track of your thoughts by some means that is comfortable to you, it will be of great help. One must understand that sometimes it takes years to come to that defining idea. In the process you know the journey that you have made. You are now acquainted with a millions of tiny ideas that you have encountered which can be used elsewhere. You are now the most powerful person known to you.

Who said if you don’t have a jersey you can’t play football?

The Indian Jugaad is now a respected methodology of optimizing the resources. Farmers, traders, hawkers, housewives use their jugaad to utilize the limited resources available to them to the maximum extent. Necessity as they say is the mother of all inventions. For ideas to come, you must ask yourself- Have I created a necessity for it? Does it help me or the society in general? Can I live with mediocrity?

May be answers to those questions have given you a few ideas to kick start. How about sharing them with me in the comments section and we can together use them as our magic carpet to fly into a better world.

– Vinay Biradar

Write to him: vinay@pinnacleacademy.in