Saturday, February 6, 2010

Return on Investment

Hats off to Prof. Eshwar who could relate any MBA funda to life and tried to teach us the same in the operations management classes. I found my analogy for operations management in life from one of the financial world's most important formula.

Its impossible to rationalise feelings and quantify relationship value. However I do feel the ROI (Return on Investment) can really give us a fair unbiased qualitative analysis.

ROI ∝ E1 x E2 x E3

E1 = Emotion; E2 = Esteem; E3 = Energy

It takes time to break even, however in the long run, the ROI should rather be positive. If any one of the E'd take a beating and goes negative, ROI will go down and then its not a project worth investing into. Time ofcourse is irrelevant here.

Some Hypothesis that is! But true if you spare a thought and analyse it.

Food for thought, aint it?

8 comments:

  1. What if 2 of the 3 E's is -ve? The answer would be positive as per your formula, but will it really be +ve? I guess not. So your formula is wrong based on this simple mathematics.
    As for Prof Eshwar goes, well he is one of the worst teachers I have ever had; in fact I shouldn't even be calling him a teacher.
    So it is obvious that the formula has to be wrong; and it is as I just proved.

    ReplyDelete
  2. @ UW - Its qualitative not quantitative! Thats what i said, its not mathematics! So rules of integer multiplication do not apply!

    ReplyDelete
  3. Qualitative things don't have equations

    ReplyDelete
  4. @ UW - its not an equation, its a ratio and proportion. Will become an equation only wen the 'proportional to' is replaced by a ' = k (constant) * something'

    ReplyDelete
  5. ∝ means k*. That's how equations are formed :)
    And E1 x E2 x E3 imply the same.
    So it turns out to be an equation

    ReplyDelete
  6. @UW - paper pen leke aaio, samjhaungi, tere funde gol hai :P

    ReplyDelete
  7. Let me know the time and venue and I will be there :P

    ReplyDelete
  8. You forgot to divide it by time :D

    ReplyDelete