Luxories vs. Opportunity cost of money!
Printed From: The Equity Desk
Category: Personal Finance & Lifestyle-Strategies & problems
Forum Name: Personal Finance - Startegies
Forum Discription: Discuss startegies for tax planning, insurance coverage, Retirement planning, Home loans car purchases or any thing that affects personal finance.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=1019
Printed Date: 25/Jun/2024 at 10:25am
Topic: Luxories vs. Opportunity cost of money!
Posted By: manishdave
Subject: Luxories vs. Opportunity cost of money!
Date Posted: 22/Jun/2007 at 11:12pm
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Legend has it that Mr Ambani - the chairman, and largest shareholder of Reliance Industries, India's largest private sector company - wants to enjoy a "full view" of the Arabian Sea.
************* Warren Buffet: At $27 million an acre I’d rather stare at the bathtub. In reference to - CM: There’s a real estate asset price bubble going in places like Laguna, Calif. and Washington, DC. A very ordinary oceanfront house in Laguna sold for $3.5 million. Figure $500,000 for construction costs; that means that the land sold for $3 million. Granted, it was an oceanfront property, and so relatively scarce. Still, the plot size was just under an eighth of an acre, which means that the land underneath a modest oceanfront house sells for around $27 million an acre.
************ If there is staff of 600 ppl, one floor may be for retail. |
Replies:
Posted By: kulman
Date Posted: 22/Jun/2007 at 11:49am
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Warren Buffet: At $27 million an acre I’d rather stare at the bathtub.
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Thanks Manish jee for that quote.
In an interview with CNBC, Buffet told the anchor (Liz Klaman) very interesting reasons why he doesn't like to own a yacht or a cruiseliner.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 1:31pm
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undoubtedly warren is an amazing investor .. but when it comes to lifestyle then i think he lags behind...and reason behind that is very stupid (atleast for me)..he would drive his old beatle...Reason: spending 500k on a ferrari is not worth..because in 20 yrs at 24% cagr 500k would become a few million....this way buffet can never enjoy the super luxuries....its good to make money but if you cant spend it for such stupid reasons then whats the use of it.??? ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: basant
Date Posted: 25/Jun/2007 at 3:23pm
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I have a different perspective on this and I have also indicated it elsewhere. It all boils down to marginal utility and price. People who have studies basic level micro economics would be able to understand it better. Now if I find interest in spending Rs 25,00,000 for a world tour I would not mind the cash. Jim Rogers divorced his first wife because she wanted to buy a sofa set and he wanted to understand the Magic of compounding. He went across trhe world in his merc and spent millions perfectly allright for him because that is how he wants to use up his wealth. BTW I do not own a car inspite of a fact that I can afford the best ones in the country because it does not make financial sense to put in money where I lose 50% at the end of year 3 where the opportunity cost is of multiplying it a few times in 3 years
 I operate from my home.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 4:10pm
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i understand your point...its absolutely fine to multiply your money but after a certain point of time and after making certain amount of money one should enjoy better things in life....
one must walk on the sand before resting on a silk carpet ... so spending money on luxuries in the begining of one's life is not advisable but if one has worked hard and has built assets for himself then there is no harm in spending the hard earned money.... i have observed this trend that people who make money from equities or via investment generally don't put lot of money in luxuries e.g: buffet, jhunjhunwala and basant ji ... whereas businessmen like: vijay mallaya, bill gates, mukesh ambani etc prefer super luxuries...maybe investors know the magic of compounding and are reluctant to lose the future value of money....and businessmen are confident of generating lots of cashflow to meet the expenses bought upon by their luxuries....... and where buffet finds interest is tough to identify: still living in his old house, driving old beatle, no space trips, no islands, no yachts, i think he has no interests except investing  ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: basant
Date Posted: 25/Jun/2007 at 4:24pm
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i have observed this trend that people who make money from equities or via investment generally don't put lot of money in luxuries e.g: buffet, jhunjhunwala and basant ji ... whereas businessmen like: vijay mallaya, bill gates, mukesh ambani etc prefer super luxuries...maybe investors know the magic of compounding and are reluctant to lose the future value of money....and businessmen are confident of generating lots of cashflow to meet the expenses bought upon by their luxuries.......
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You make a good point there but the investors pay from their own pocket whereas in the case of business men the minority shareholders are fleeced. Also it is impossible to change the tastes, and habits under the influence of wealth. Sunil Gavaskar could never bat like Kapil Dev!!!
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 25/Jun/2007 at 4:31pm
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True Wealth has different meaning to different people Kunal ji. At some point, the very process of creating huge wealth itself becomes a big joy and a mission in life, rather than actually spending it lavishly. I have this mindset, dont know about others.
For me, the process of achieving incredible wealth(as per my standards) through investing gives me so much more joy than buying a mercedes with it. Whenever I have had the thought that someday I shall buy that dream car of mine, the fact that I would rather spend it on some poor person comes to my mind and I feel really really guilty. Thanks to God here, that he has kept my conscience somehow nagging me, now and then so that I do not do something stupid. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: vip1
Date Posted: 25/Jun/2007 at 4:36pm
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Car/Money/ Wealth is a means not and end in itself . Car is basically a means to get from point A to point B , someone might do it by walking some by scooter/Bus etc and some like Vijay Mallaya on a yatch/ Plane .
Does it make me Less Happy?
Bhai Mere , Pasand Apni Apni Khayal Apna Apna .
BTW in a Famly of 5 Adults and 2 Children we have 5 Cars , but definitely when we Had Less Number it was better .
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Posted By: smartcat
Date Posted: 25/Jun/2007 at 4:48pm
For most people, a car represents freedom and passion - it is not just a mode of transport. There is a reason why we have 6 automobile magazines in India. You invest in equities to make money yes - but I bet my car that you have a passion for equities too.
It just happens that equity investment passion increases wealth while automobile/big villa passion improves the mental health of those who indulge in it.
Also, consumerism (spending on houses, automobiles, jewellery, laptops, mobiles etc) is the best way to spread the wealth.
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Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 4:56pm
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BTW in a Famly of 5 Adults and 2 Children we have 5 Cars , but definitely when we Had Less Number it was better .
vipul ji i would like to make things better for you, kindly give me one of the cars ... number of cars less ho jayengi and your life pahle jaisi mast 
------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: vip1
Date Posted: 25/Jun/2007 at 4:57pm
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Also, consumerism (spending on houses, automobiles, jewellery, laptops, mobiles etc) is the best way to spread the wealth.
A better way of spreading wealth can also be to give it away like Warren Buffet and Bill Gates( last time he came to India he gave 100 million USD for Aids prevention and Cure)
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Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 5:03pm
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pasand apni apni khayal apna apna ...
atleast i can not be motivated to make more and more money and then donate all of it to some charity....... charity destroys and work builds... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 5:07pm
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buffet is denoting $37bn ... it might have given him utopian pleasure to do so but then had this money been given to someone like dhirubhai then he would have created jobs for thousands..wealth for millions and that is not in anyway less than charity..rather its better than charity.... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: smartcat
Date Posted: 25/Jun/2007 at 5:09pm
In India, when you give away money, there is a always a niggling doubt at the back of your mind - is my money being utilized properly?
Me neither. Laxmi Mittal answered the question "Sir, Do you plan to give away all your wealth like Warren Buffet"? very well with his answer -
I'm not that old yet!
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Posted By: basant
Date Posted: 25/Jun/2007 at 5:28pm
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Seriously I believe charity begins at home. All of us will have some cousin, some relative, some old friend some one who wants to get his daughter married off maybe an old servant I like giving to them instead to an unknown face.
I know many people who do not take care of their near anbd dear ones and then take the whole community to sacred places. That is a sin in my dictionary.
To me my near and dear ones come first. I know this is anti communism but that is how the thought process has been developed.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 5:30pm
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very well said basant ji.. ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: basant
Date Posted: 25/Jun/2007 at 5:34pm
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Biyani made a very controversial statement. he said People give to hide their guilt! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 25/Jun/2007 at 5:36pm
That is very true Basant jee. It should be a mix of both in my opinion however. To each his own. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: smartcat
Date Posted: 25/Jun/2007 at 5:38pm
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Whenever Forbes comes out with its billionaire list, the media always comes with statements like 'Bill Gates/Warren Buffet's networth is more than the GDP of 100 poorest nations put together'. And then they follow it up with images of hungry starving children.
I guess this makes them feel very uncomfortable.
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Posted By: deveshkayal
Date Posted: 25/Jun/2007 at 5:41pm
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I believe in Living Life King Size..There can be no example better than Vijay Mallya!! Earn and Spend..its as easy as this.. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: drpatils
Date Posted: 25/Jun/2007 at 7:07pm
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Often we tend to forget that money is side product of life not the destination.Every one wants money but happiness is our goal.
Those who have money want something else.I admire Basant Ji for not having a car although he can afford the best in country.For me display of wealth attracts attention n its consequent sequelae. To be able to buy but not buying shows control and Thats what lacks mostly in early young life.Balance is crucial. Otherwise there is no end to the rat race.As u grow in life, u have to accept that what u want n what u get need not be the same. ------------- The journey of thousand mile begins with single step-Chinese Proverb |
Posted By: tyler_durden
Date Posted: 25/Jun/2007 at 8:46pm
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very well said sir.."Otherwise there is no end to the rat race."
i think life becomes a rat race if i am pursuing the things which i don't want, if i know what i want then i can never be a part of the rat race, and basant ji didn't bought a car because if he spends 15 lacs to buy an accord today then he would not even get 7 lacs post 3 yrs but in stocks he can make 50-60 lacs from those 15 lacs...its not about self control...its about having different priorities.... self control would be to detach oneself fom all the worldly affairs and seek joy rather than success... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: vivekkumar_in
Date Posted: 25/Jun/2007 at 10:17pm
Buffet has written off 85% of his gigantic fortune garnished this way to charity. Is'nt it a good use ? ------------- Often we forget there's a company behind every stock,and there's only one reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies. P Lynch |
Posted By: deveshkayal
Date Posted: 25/Jun/2007 at 10:25pm
Rakesh Jhunjunwala lives in one of the poshest area of Mumbai.He bought the apartment for 25crs and also has a Villa at Lonavala which is worth 10crs.I am sure he is driving Merc or Audi or Honda.So you cant compare him with Buffet. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: manishdave
Date Posted: 25/Jun/2007 at 10:27pm
Agree 100%. I would put priority for elderly people, for education to bright and hardworkind students and for medical purpose.
Gates/Buffet can not apply this theory as their close ones are already well off. So I what they are doing is for masses and absolutely right thing.
Buffet doen't own ferrari but owns plane. He has named it 'indefensible'. When it was helpful while Solomon crisis, he named it to 'somewhat defensible'.
For some people ferrari or any other car simply does not make any difference in feeling or satisfaction. Some people just can not get it but that is fact.
Two major disagreement betn Buffet and C Munger is this plane and political side. C Munger is against it and I think never uses it.
There are some businessmen(mostly very honest) who live simply. For example N Murthy. And many fund managers live lavishly too.
Living very luxuriously has side effects. Your ture freinds will keep distance from you if they are not that wealthy. Employees will get bad feeling and they send wrong message to kids.
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Posted By: vivekkumar_in
Date Posted: 25/Jun/2007 at 10:36pm
Omji, I think you should reconsider this point. In one of the oldest investments books written- "The Richest Man of Babylon" the author says something like this...something like (pardon my writing while I try to mimic the anglo-saxon english). "...Gold finds itself plentiful onto whom understands the laws of it and who seeks wisdom of men and makes it a slave for it to multiply and grow like the flocks of cattle. For those who don't understand the laws of gold, it shall flee them between their fingers. Any gold that one rightfully earns or awarded to thee is rightfully his and he shall not be obligated to part with it for those who don't understand its laws. For it is the duty of the one who knows it to abide by the laws of it..." Where gold is generally referred to as wealth of any kind. You don't have to feel 'guilty' to spend your own money. It is rightfully earned and you deserve to spend it when you are ready. By this I don't mean that one should not give charity. Charity could be part of your wealth. Don't avoid spending, feeling guilty. ------------- Often we forget there's a company behind every stock,and there's only one reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies. P Lynch |
Posted By: kulman
Date Posted: 25/Jun/2007 at 10:38pm
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Hmmm......... very intriguing debate here. While I'm not much qualified to participate in this discussion, here's one thought provoking quote: Wealth consists not in having great possessions but in having few wants---Epicurus
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: manishdave
Date Posted: 25/Jun/2007 at 10:40pm
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I don't agree with what Jim Rogers did. I would prefer losing an opportunity to make family members unhappy, as long as I can afford it and is reasonable.
I have met Jim one-to-one and admire him a lot as an investor and his veiws but I don't adminre him as a person. Until his final marriage and had a daughter, he was one is a company and two is crowd like person.
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Posted By: smartcat
Date Posted: 25/Jun/2007 at 12:05pm
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If your networth is $1 billion, you can buy almost everything that a guy whose networth is $10 billion.
Now every individual has a particular level of networth at which they feel that they've achieved everything (wealth-wise). They lose interest (as a goal) in earning more and more money and they try to spend time on other things on their minds.
Narayan Murthy, Azim Premji, Bill Gates, Buffet etc have already reached that particular level of networth. Vijay Mallya is not there yet.
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Posted By: manishdave
Date Posted: 25/Jun/2007 at 12:47pm
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I would like to die as dissatisfied Socrates than a pig satisfied. - Socrates |
Posted By: omshivaya
Date Posted: 25/Jun/2007 at 1:26am
Thank you Vivek jee for that quote. Will try to work on it. I think I have to keep a healthy balance between both worlds. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: Mohan
Date Posted: 25/Jun/2007 at 4:15am
Tyler, Buffet is like that only. I don't think he would change his tastes or preferences because of what others think. BTW, He actually drives a Cadillac now. He used to drive a Lincoln Town Car with the Lic plates THRIFTY. The question is do we have our posessions ? or Do our posessions have us ? ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: tyler_durden
Date Posted: 26/Jun/2007 at 6:19pm
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dhirubhai drove cadilac 20 yrs back..mukesh and anil have personal jets... thats wat i was talking about.. difference between lifestyle of an investor and a businessman..
devesh ji said jhunjhunwala has a villa worth 25 crores...thts his only extravagance according to him.+ one bunglow in lonawala i think..which is really big....he himself said that apart from his home he doesn't have any other assets or costly purchases....mukesh ambani planning to build one worth 5000 crores...bill gates mansion is awesome...lakshmi mittal purchased costliest palace in uk.... and basant ji very correctly stated the reason for this difference... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: tyler_durden
Date Posted: 26/Jun/2007 at 6:24pm
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"Originally posted by tyler_durden
its good to make money but if you cant spend it for such stupid reasons then whats the use of it.??? --------------------------------------------------------- posted by vivek Buffet has written off 85% of his gigantic fortune garnished this way to charity. Is'nt it a good use ?" --------------------------------------------------------- as i quoted " charity destroys work builds "... so according to me $37BN in charity is a big waste... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: Shankru
Date Posted: 26/Jun/2007 at 8:12pm
I wish more people think like this. More spending..more consumption.. higher GDP...higher returns on stocks ------------- I know it's all Maaya |
Posted By: tyler_durden
Date Posted: 26/Jun/2007 at 8:17pm
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if money is spent then it creates jobs for so many people...ambani is spending $1bn on his dream house..600 people re staffed ... don;t know how many would ve been employed by the builder....not to mention the companies which provided raw material....not to mention the property tax ... ain't it better than charity....the people at charity don't earn they only spend and hence they can never value the money..... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: tyler_durden
Date Posted: 26/Jun/2007 at 8:23pm
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this topic is a never ending debate and better suited for some spiritual guru's site... 90% of us haven't even earned the money yet and we are debating how to use it... abhi to bhains khareedi bhi nahi aur dahi kitne ka bechenge is baat pe discussion kar rahe hain ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: mragarwal
Date Posted: 05/Jul/2007 at 1:36am
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Excellent debate this-- a couple of things i can gather from this discussion are:
1) one must buy appreciating assets and lease depreciating assets.
Basically, if anyone buys land, or a home, however grandios that may be, it will only help in increasing the networth of the individual- be it an investor or a businessman.
Moreover, would you call Vijay Mallya's fleet of vintage cadilacs an investment or a wasteful expenditure? On these lines, would you call purchasing costly paintings (by hussain etc) investments or personal gratification?
2) There are some depreciating assets that businesses do invest into, and they cannot be measured from the returns on investment viewpoint. For example, what is the cost of brand building? Would Pepsi/Coke sell more/less if they were to advertize less/more? where is the optimum expense here? In short, some businesses do invest in costly show-offs in order to build a brand image.. and that can be expensive cars, expensive offices, jets etc.
3) Some expenses are meant for personal satisfaction. what Vijay Mallya does can be called as personal gratification, but his public image helps further build his brand- the King of good times!! Having said that, there are businessmen who love to splurge on themselves and as has been said here, if you have earned it....
Thanks
AA
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Posted By: tyler_durden
Date Posted: 18/Jul/2007 at 8:32pm
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vijay mallya's fleet of cadillac's is wasteful expenditure or a means of fulfilling his fantasies......
but buying hussain is not....its a great investment.....sir we see paintings being auctioned for such a huge premium..... ------------- If you aren't fired with enthusiasm, you will be fired with enthusiasm. |
Posted By: basant
Date Posted: 18/Jul/2007 at 8:55pm
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When it comes to things like the ones we are discussing in this thread we can justify ANY action, point is are we doing the right thing in terms of our long term financial goals/principles etc? Are we comfortable spending or saving. AT the end of the day it is the comfort factor which should be looked in line with the reason that our brain generates! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |