Okay, how do you explain ESOP to someone who doesn’t know what a company is? Sonu, one of our employees here (remember, we are in rural India) almost every alternate day asks the same question – “When will my salary be 10,000?” And everytime I reply, “Whenever we can afford it.” I want him to know that we want to pay him as much as possible (which is contradictory to the prevailing norm in this place – that you should pay as less as possible coz there is abundant supply of unemployed youth). But today, instead of saying that, I delved into his reason of asking a higher salary. So today it went differently –

“When will my salary be 10,000?”
“What do you want 10,000 for?”
“I want to buy a buffalo.”
“Buffalo!” If it were six months earlier, I would have jumped from my seat. But now I am accustomed to such surprises.

“Yes, the milk you buy in the market is adulterated. Plus I can sell the milk and earn more.”
“Ok, Ok. How much does a buffalo costs?”
“Depends. Breed, age, health, many things. But 10,000 will be enough. I have seen one, and I want to buy it.”
“See, you are earning this much. If you save, you can buy a buffalo in just two months!”
“No, I am already saving for that. But when will my salary be 10,000? It’s not just about a buffalo. I have other things also.”
“Like I want to buy a motorcycle” They don’t call it a bike here.

Ok, so it was not a one-time problem, I thought.

I told him, that salary is not the only way to acquire the assets one wants in life. Then for about an hour I explained to him what a company is, what ownership means, and how a stock is a share of that ownership. That there is something called valuation, and when the company is valued each share gets a value and so on, about stock exchange where you can sell your share for that much value in rupees etc. He seemed to understand it all.

He thought for sometime and said, “Ok, so if I need to buy a motorcycle I will sell my stocks?”
“Exactly!” I was glad, had I just accomplished something – explained “value” to my not-so-educated guy.
“Ok, now when will I be able to buy a car?”
“If you want to buy a car, you will have to wait till stock prices go up. So that when you sell your holdings its worth the price of a car.”
“But if I sell my shares, then how will I buy a plot and build a house?”

God! I had targeted the wrong problem. I shouldn’t have explained him stocks. I should have explained him a truth of life – You always need money. That’s right. You always need money, coz no matter how much money you have; there is always something sellable that you still don’t own. It might be a buffalo, a bike, a car, a house, or a private jet. Unless we are satisfied, there will always be things we would want to go out and buy.