While India went going gaga over Gautam Adani being the second richest person in the world (briefly), be aware that:
- He is sitting on a debt of INR 2.2 trillion
- His debt-to-equity ratio of 2,021% is the second-worst in Asia
- While some of Adani’s companies have given shareholders more than 1000% profit in the last few years, his business model is questionable in the long term.
- Net worth is only a measure of (mouldable) perception and not an indication of real wealth.
Don’t get me wrong.
I am not against Indians taking over the world by breaking the glass ceilings, but definitely against the incessant growth of someone at the expense of others. Remember that wealth is a zero-sum game. Similar stories of debt-ridden Vijay Mallya and Nirav Modi have yet to see the light of day.
Internationally, the same thing is happening with China’s housing project company Evergrande and now threatening the economy of the complete nation. 2008 financial crisis of the US also happened because of similar reasons. A group of wealthy individuals continued to borrow (and lend) money whereas when the risks became issues, those very individuals went away with declaring bankruptcy (aka holiday) while people like you and me lost their jobs.
Coincidentally, this idea is very well explained in the book called Skin in the Game by Nassim Taleb. He claims that our whole financial system is based on bogus theories which help the rich in getting richer at the expense of middle-income groups.
This content was originally published on my linkedin profile.
