Monday, April 7, 2008

Diversification

Diversification is to take or get more of something in order to reduce risks and gain benefits.

Business wise, diversification is a risk management technique that enables user to enjoy lower risks and higher returns.

For example, by diversification, investors can reduce risks and have higher return yield because of the variety of investments in a portfolio compared to just a single investment which will have higher risk and lower return compared to the basket of investments.


The following is purely deduced from the definition of diversification
and
it may or may not be wrong.



Now, done with the theoretical explanation. Lets do some application of the theory to real life issues. In particular, adultery and polygamy.

Adultery and polygamy is not uncommon. Heck, I know quite a few people who have at least 3 girlfriends or boyfriends. Surprised? I don't think so. I think most of you would know what I am talking about anyway. =p

However, it can't be denied that there are loyal single-hearted people out there. After all, the society is practicing monogamy as a whole.

Why are there differences in the way people think? Some may blame it on genetics/biology, saying that they can't help it because that is the way they are since prehistoric times.

Diversification might just be the reason. Deep down, in their instinct, they have this gut feeling about diversification. By diversifying in their choices of partners, they can reduce the risks of getting incompatible partner and also reduce risks in other areas as well.

The explanation can be breakdown to two major categories. The prehistoric times and the modern times.

Lets start with the prehistoric times. This is the time where human beings are not at the top of the food chain. they desperately need to populate and grow. This is caused by the fact that they are small and they have to had strength in numbers. Survival of the fittest. In the end, those who lives are the winner. Hence, the need to populate as much as possible.

In that manner, if the prehistoric male practice monogamy and only have one partner/wife for life then there are probability that the female is not fertile which means there will not be any future generations. This is also the same if the male is not fertile.

Thus, diversification aka polygamy is practiced which drastically increases the survival rate of mankind. This is in line with the view that the risk of not being able to populate will be low and that the probability of being able to populate and survive will be higher. Correct?

Done with the prehistoric category, lets move to the modern category.

In the modern times aka now, there is no need to survive by populating as much as possible. This is because the human species are on top of the food chain already.

However, with the changes of time comes different interpretation of risks. These days. people are worried about not being able to find the ideal or compatible partner hence resort to being polygamous. The so called you are not my cup of tea sort of thing.

From there, diversification comes to mind. Diversifying by having few partners reduce the risk of incompatibility and greatly increases the chance of finding the one. Or the so called your cup of tea. Hence, you will see that this type of people are constantly on the move to find and gather as much "investments" as possible in line with the purpose of diversification. Correct?

That is why, you see that networking portals such as Friendster, Myspace, and Facebook are so popular. Diversification to the max. Digitally that is. If previously, diversification are limited socially and geographically, now with the digital improvement theoretically there are no limit to diversification.

So, now you know why people are polygamous in nature. Blame it on the theory then.

Conversely, there is this theory that is called the law of diminishing return. Briefly, this theory explains that there is a limit to how many investments can be added. Past the point of diminishing return, you will get higher risk with no significant increase in returns.

Let me give you an example so that you understand better. Lets say you tried the diversification technique to find your cup of tea. You keep on adding "investments" to your portfolio. Add like nobody's business. Up until a point when without realizing it, some of the "investments" knows other "investments" in your portfolio. "Investments" are not stupid okay?. That is when the law of diminishing return kicks into action. You have added one too many "investments"

As a result? All "investments" are forfeited and not only that you do not have increased return from the addition of "investments", you suffered losses and the risk of you not finding your cup of tea becomes higher. Way higher.

Male Polygamy

**image taken from Google Image**

So, an advice to all polygamous people out there.

Stop while you are ahead.

Better than to suffer losses/consequences.

=p




P/S:
All the above inferences takes into account Ceteris Paribas which means "under the assumption that other things are equal or that other variables are unchanged".



Female Polygamy
**image taken from Google Image**

Laugh leh.
Not funny meh.

5 comments:

  1. is this a Psychology lesson?:O

    benard...u study wat wan hah?:O

    ReplyDelete
  2. errrr... where did u get this idea aaaa cometh? so creative lol

    ReplyDelete
  3. Wha. economics theory applied to social science. Benard, you very geng! *two thumbs up!*

    ReplyDelete
  4. Wah~ so twisted explanation~~

    ReplyDelete

  5. yipguseng: Well, not really. Study a bit here and there loh. =p

    kaklong: Got it while attending class.

    3point8: Thanks. Seems like you know your stuff.

    宝茹: Well, in a way. In a way.


    ReplyDelete

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