Evlampius (90.73)

Discounted cow flow

April 30, 2008 – Comments (0) | RELATED TICKERS: SWX

Getting back to my previous post on E-Cow-nomics http://caps.fool.com/Blogs/ViewPost.aspx?bpid=48963&t=01006703288950365104 and to add to it - I thought of the !N’yan’ga !N’yan’ga tribe recently and I decided to share some of the thoughts with you, my fellow investor friends. 

As I previously mentioned the wealth of a !N’yan’ga man is valued by the amount of cattle he possesses. Men of the !N’yan’ga !N’yan’ga tribe lead a very interesting lifecycle. Aside from their daily activities such as farming, hunting or fishing they do like to spend their quality time discussing their cows in their tribe gatherings. During their meetings they discuss which cow has the most beautiful color, which car produces more milk or even argue whose cow is the coolest, compared by the convexity of its horns? Hey bro! Check out that udder under my cow... Sometimes arguments heat up so much that they transform into nice group face-to-fist, face-to-table or face-to-tree fighting games.  Girls that are coming into a marrying age better have a significant “cow” dowry to bring with her to the husband’s family. The more cows are in your possession the more respected you are in social rankings of your village… 

…The more I keep thinking of what a beautiful life the tribesmen have the more similarities I can find to what we are doing when evaluating a company using the discounted cash flow method. Think about it for a minute... We are trying to estimate the company based on its cash inflows and outflows, whilst they (!N’yan’gas) are thinking about how much will marry a girl (depends how ug...i mean beautiful she is) will cost. Will that be two (maybe five) cows? The consensus is usually somewhere around three. Unless you are marrying a chief’s daughter then it’s close to twenty. Now based on the average lifespan of a cow multiplied by the amount of milk it is to produce over its remained life plus meat and hide, minus depreciation discounted back to its present value is precisely what we’ve been doing by trying to asses a company which we are evaluating!  

Even though, !N’yan’ga !N’yan’ga is a matriarchal society, a present value of a cow is always perceived to be higher than that of a bull. I would thus, excogitate that a cow to a tribesman worth more than a bull. (Although I think a bull is cool! I mean seriously it’s a bull!!) Whilst they are waiting for an earnings call (a.k.a. for a cow to give birth) there are some speculations going on… and on the “earnings announcement day” a newly born bull would signify a negative earning surprise if a cow was anticipated.

I always found Anthropology as a fascinating subject. I found a true passion in studying and comparing different cultures, different religions and different people. Some times you learn to appreciate very simple things when put in a different perspective.