Thursday, September 01, 2005

Job market, stock market?

It was one of those discussions: Two friends and their objectives in the stock market.

What is the objective in picking up a stock? Since the measure of returns from a stock is not in its holding period, defining objectives in terms of a holding period hardly makes sense. Therefore, we reasoned, a stock has to be held with a certain target percentage of return in mind. Once that target is achieved (there is no saying that this target is right), as an investor, we sell it and move to another stock. In a bull run, such as the present Indian bull run, with the benefit of hindsight, the medium term seems profitable while the short term is filled with opportunity losses (and reasonable profits) while nobody is really sure of the long term despite all the exuberance (irrational or otherwise). The short term investor operates on the premise that the profit he makes by rotating his (limited) money is more than what he can make by investing (technically, all his money) in one stock for a long term.

Then, came the question. Would you do the same if it were your job or would you have a different objective?

On the face of it, it is a tough question. But thats what many of us do. Except for some "buy and forget investors" or employees who do not seek a change unless change takes them by their collar, most employees have a certain target in mind from a job. What one seeks out of a job could be salary, learning, responsibility and so on. Once those targets are met, the employee re-looks at the job both inside and at the opportunity outside and picks up what he feels best.

In the stock market there is a sudden demand for certain types of stocks (today it is nanotech and biotech, yesterday it was the dot com) or a bull run in certain counters. What if it happens in the job market that there is a sudden demand for a certain type of job/skill? In the market all (except the naysayers) investors throng to the "in vogue" counters. Likewise, eligible employees throng to these jobs (In India currently it is the call center job or IT jobs for non IT engineers and MBAs ).

Bull runs are characterized by their fickleness. Likewise, job booms are followed by periods of stagnation or dips in demand for certain skill-sets. Over a longer term, out of the millions employed, only a few go on to become CEOs. Employees therefore seek to maximise their return in the job market bull run, while hoping for a long term appreciation (of their skills).

As employees they are cashing in on a bull run in certain job markets. Like investors in a bull run, they hope that it continues for ever, despite the fact that no bull run lasts for ever. Given limited investment potential (working life span during the boom period) we try to maximise our earning potential during the bull run. How do companies ensure that employees see a perceived return, and stick to them, despite such bull runs in the job market?

4 comments:

Kitchie said...

Agree completely. Just to add:Exactly like the stock markets, where the stocks which survive the bust after the boom are the ones which are fundamentally strong: Similarly, in the job market, the ones who survive on the long run are the ones who are technically and fundamentally strong. In the long run, they will be the ones who will maximise returns.

The strategy for the mediocre players are to maximize returns in the short run/medium term and then keep moving to the 'booming' components of their industry.

Anoop said...

It would be too materialistic to compare a Job with Stock, taking in the Social Impact, psychological fulfilment and sense of achievement, Stock stands no where near the job, if we consider just the materialistic point of view then whole of the article below holds good and it's really a good comparison, article is good enough for Economic Times but not for our daily news paper because it don't touch our inner soul.

Vulturo said...

Couldn't have said it better. As a recruiter, I fully appreciate your insights

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