Winners Curse

The news sounds interesting, “IBM head of Human Capital Management Tim Ringo told industry publication Personnel Today that the computing and services giant is on a path to shrink its worldwide, full-time employment base by a whopping 75%--from about 400,000 workers to 100,000—by 2017” (source: internet). How could a company like IBM would be able to survive at this competitive edge by laying-off 75% of its work force and maintain leadership in technology, business and innovation?

Well, IBM plans to enjoy the benefits of so-called “crowd-sourcing” by rehiring laid-off workers as sub-contractors on a project-by-project basis. Also, would outsource some of the services to the partner organizations. By reduction in work force IBM might save 30% of its operational cost as it does not have to pay for the building, pension, insurance, etc. With crowd-sourcing, the sub-contractors could work from anywhere using their own office, own computer and getting their own insurance. This also helps IBM to save in EDD and other government taxes. In this case, as IBM is an established firm, the contracts and transaction costs are not significant. But, would IBM will be able to full-fill IRS guidelines on workers behavior, financial terms, and contractual obligations (“type of relationship”).

John is a casual investor. He is fascinated by tech stocks. He does not have really much time to do enough research on stock market. He heard the news that Facebook (FB) is going for an IPO. How to get pre-IPO stocks? He was taking to his brokers. Well, broker said that you need an account of $250K to get IPO price stocks. But, he is not willing to invest that much. What option does he have? Is there a fear of “winner’s curse”?

John was thinking what to do. It is a risky investment and lot of uncertainty. Jon in the past gained and lost money. This time he needs to decide on something he never had to do for a hot IPO. He regrets of not buying Google stocks on the IPO day at $85. See where...