The Game of Perception

Go to any motivation workshop or listen to a good orator addressing a crowd- you will undoubtedly be recipients of pearls of wisdom on how to perceive things in a positive way. The glass is not half empty, not a ‘yes’ is not a ‘no’ either etc. What we are usually taught is to change our perception away from the harsh reality

It is rather surprising that in fact there are a few businesses that actually exist and function on the basis of perception.

I was reading an article in the papers last week which was talking of a list of Billionaires out of India. More than anything else, I was more involved in understanding what these league of extraordinary deep pockets do in life. Most were Chairman, MD’s, CEO’s of industrial houses or IT firms in India. What was even better was their value was a combination of movable and immovable assets, stocks, land holdings etc.

And that’s where the question popped in my mind, is this actually a measure of their monetary wealth? So if a certain Mr A sells his stocks, cars, aircrafts, houses, land etc, he is the richest man in India. That’s amazing- but sadly not true. All this was just perceived value.

Apparently in the 16th Century, the Spanish campaigns plundered the whole of South America and brought to Europe what was precious then; Silver: about 45000 tons of it. But what this influx did was devalue silver and resulted in breakdown of the whole economy of the Spanish empire. Main reason- the influx reduced the perceived value of silver and everything linked to prices of silver came down crashing.

It is much the same with Stocks or Real estate. Perceived value in such cases over rules Real value; sometimes by shocking margin. Most stock trade on a level which is exponential of their face value simply based on perceptions built out of speculations. The moment a large chunk of stocks are sold by anyone, value drops. So if Mr A even sells 2% of his stocks, he will lose a lot more money than he would gain through the sale. So by the time Mr A sells all his assets, I feel he would be lucky if he makes even 25% of his speculated worth.

Same is the case with Real Estate. If anyone sells a flat in Mumbai, I’m sure they cannot buy back the same place for the same value the next day. Real Estate can appreciate by close to 40% between the time you book a new flat and the day you actually occupy the same flat. There is no basis on why this may happen- but the perceived value just goes up. The day the builder sells four flats, the rate is hiked by a thousand.

Surprisingly this is how it is. We are all, to some extent are both: aware and skeptic of reality. I guess that is one reason, we all love the game of perception.