IIFT 2010 RC | Previous Year IIFT Paper
Read the passage and answer the questions that follow on the basis of the information provided in the passage.
Kodak decided that traditional film and prints would continue to dominate through the 1980s and that photo finishers, film retailers, and, of course, Kodak itself could expect to continue to occupy their long-held positions until l990. Kodak was right and wrong. The quality of digital cameras greatly improved. Prices plunged because the cameras generally followed Moore's Law, the famous prediction by Intel co-founder Gordon Moore in the l960s that the cost of a unit of computing power would fall by 50 percent every eighteen to twenty-four months. Cameras began to be equipped with what the industry called removable media - those little cards that hold the pictures - so pictures were easier to print or to move to other devices, such as computers. Printers improved. Their costs dropped, too. The Internet caught the popular imagination, and people began e-mailing each other pictures rather than print them. Kodak did little to ready itself for the onslaught of digital technology because it consistently tried to hold on to the profits from its old technology and underestimated the speed with which the new would take hold. Kodak decided it could use digital technology to enhance film, rather than replace it. Instead of preparing for the digital world, Kodak headed off in a direction that cost it dearly. ln 1988, Kodak bought Sterling Drug for $5.1 billion. Kodak had decided it was really a chemicals business, not a photography company. So, Kodak reasoned, it should move into adjacent chemical markets, such as drugs. Well, chemically treated photo paper really isn’t that similar to hormonal agents and cardiovascular drugs. The customers are different. The delivery channels are different. Kodak lost its shirt. lt sold Sterling in pieces in 1994 for about half the original purchase price. George M. C. Fisher was the new CEO of Kodak in 1993. Fisher’s solution was to hold on to the film business as long as possible, while adding a technological veneer to it. For instance, he introduced the Advantix Preview camera, a hybrid of digital and film technology. Users took pictures the way they always had, and the images were captured on film. Kodak spent more than $500 million developing Advantix, which flopped.
Fisher also tried to move Kodak’s traditional retail photo-processing systems into digital world and in this regard installed tens of thousands of image magic kiosks. These kiosks came just as numerous companies introduced inexpensive, high-quality photo printers that people could use at home, which, in fact, is where customers preferred to view their images and fiddle with them. Fisher also tried to insert Kodak as an intermediary in the process of sharing images electronically. He formed partnerships that let customers receive electronic versions of their photos by e-mail and gave them access to kiosks that let them manipulate and reproduce old photographs. You don't need Kodak to upload photos to your computer and e-mail them. Fisher also formed a partnership with AOL called "You've Got Pictures." Customers would have their film developed and posted online, where friends and family could view them. Customers would pay AOL $7 for this privilege, on top of the $9 paid for photo processing. However sites like Snapfish were allowing pictures to be posted online free. Fisher promised early on, that Kodak's digital-photography business would be profitable by 1997. lt wasn't. ln 1997 Philippe Kahn lead the advent of cell phone camera. With the cell phone camera market growth Kodak didn't just lose out on more prints. The whole industry lost out on sales of digital cameras, because they became just a feature that was given away free on cell phones. Soon cameras became a free feature on many personal computers, too. What had been so profitable for Kodak for so long- capturing images and displaying them- was going to become essentially free.
In 1999 Fisher resigned and Carp became the new CEO. In 2000, Carp‘s first year as CEO, profit was about flat, at $l.4l billion. Carp, too, retired early, at age fifty-seven. Carp had pursued Fisher's basic strategy of "enhancing" the film business to make it last as long as possible, while trying to figure out some way to get recurring revenue from the filmless, digital world. But the temporizing didn't work any better for Carp than it had for Fisher. Kodak talked, for instance, about getting customers to digitize and upload to the Internet more of the 300 million rolls of film that Kodak processed annually, as of 2000. Instead, customers increasingly skipped the film part. ln 2002, sales of digital cameras in the United States passed those of traditional cameras-even though Kodak in the mid-I990s had projected that it would take twenty years for digital technology to eclipse film. The move to digital in the 2000s happened so fast that, in 2004, Kodak introduced a film camera that won a "camera of the year" award, yet was discontinued by the time Kodak collected the award. Kodak staked out a position as one of the major sellers of digital cameras, but being "one of" is a lot different from owning 70 percent to 80 percent of a market, as Kodak had with film, chemicals, and processing. In 2002 competition in the digital market was so intense that Kodak lost 75 percent of its stock-market value over the past decade, falling to a level about half of what it was when the reporter suggested to Carp that he might sell the company. As of 2005, Kodak employed less than a third of the number who worked for it twenty years earlier. To see what might have been, look at Kodak’s principal competitors in the film and paper markets. Agfa temporized on digital technology, then sold its film and paper business to private-equity investors in 2004. The business went into bankruptcy proceedings the following year, but that wasn't Agfa's problem. lt had cashed out at a halfway reasonable price.
As per the passage which of the following statements truly reflects the real theme of' the passage?
- A.
Moore’s law predicted that cost per unit of computing power would exhibit a standard deviation of 25% per annum.
- B.
Popularity of removable media and internet lead to high demand for computers.
- C.
Kodak managers were able to predict the flow of digital technology and their critical value drivers.
- D.
Kodak did not have a vision to plough back the profits from old technology to research and development in new technology.
Answer: Option D
Explanation :
The passage gives ample data stating how Kodak could not envisage the pace of change in business happening around it. Even though it did identify the change coming, the steps taken did not help the company maintain the leading position in its core business of photography.
Option 4 encapsulates that.
Options 1 and 2 merely point to one piece of data presented in the passage and are not the central theme of the passage.
Option 3 is contrary to the central theme- even if Kodak's managers were able to predict the flow of digital technology, they were not able to predict their critical value drivers.
Hence, the correct answer is option 4.
Workspace:
Which of the following statements is not true?
I. Kodak bought sterling drug as a strategic choice for a chemical business as it was already in the business of chemically treated photo paper.
II. The chemical business was in sync with the existing business of Kodak running across the customer segment, delivery channels and the regulatory environment.
III. Kodak committed a mistake by selling sterling in pieces at a loss of 50%.
IV. Kodak’s diversification attempt with purchase of sterling to strengthen its core business and shift to digital world was a shift from its strategic focus.
- A.
Only I and II
- B.
Only II and III
- C.
Only III and IV
- D.
Only I, II, III
Answer: Option B
Explanation :
Statements I and IV have been stated in the passage.
Statements II and III contradict data given in the passage.
Statement II is incorrect as the passage states that chemically treated photo paper is different from hormonal agents and cardiovascular drugs; the customers and delivery channels are also different.
Statement III is incorrect as the passage states that Kodak committed a mistake by acquiring Sterling in the first place. It was out of sync with Kodak's business model.
Hence, selling it off (without consideration for the low price) was the most logical thing to do.
Hence, the correct answer is option 2.
Workspace:
Kodak lost a big piece of its market share to its competitors because of the following best explained reason.
I. When Carp became the CEO the digital Technology eclipsed film technology business and further Carp had been with the company for twenty nine years and had no background in technology.
II. Carp in 2004 introduced a film camera that won camera of the year award, yet it was discontinued by the time Kodak collected the award.
III. Kodak moved from traditional retail photo processing systems into digital world installing several thousands of image magic kiosks that failed to deliver real benefits to the customers.
IV. Phillipe Kahn led the advent of cell phone camera and Kodak lost out on the print business and ability to share images became a free feature with no additional charge.
- A.
I and II
- B.
II and III
- C.
I and IV
- D.
III and IV
Answer: Option D
Explanation :
The reason Kodak lost a big piece of its market share was its inability to move away from print photography and seize up the digital business opportunity.
The discontinuation of the award winning camera was an effect rather than a cause for losing market share. Eliminate statement II.
We have no data in the passage about Carp's tenure with Kodak or his understanding of technology. Eliminate statement I.
Statements III and IV are some of the prime reasons that can be attributed for Kodak's loss of market share.
Hence, the correct answer is option 4.
Workspace:
Arrange the given statements in the correct sequence as they appear in the passage.
I. Kodak lost to its competitors a big pie of its market share.
II. Kodak ventured into chemical business to strengthen its digital technology business.
III. Kodak downsized its workforce drastically.
IV. Kodak tied up with business firms for photo processing.
- A.
I, II, III, IV
- B.
III, IV, II, I
- C.
II, IV, I, III
- D.
I, III, II, IV
Answer: Option C
Explanation :
The correct sequence of events is:
Statement II: Kodak bought Sterling and entered into chemical business.
Statement IV: It tied up with firms for photo processing.
Statement I: It lost its market share
Statement III: Kodak employed less than one third of its work force compared to the work force employed two decades earlier.
Hence, the correct answer is option 3.
Workspace:
Match the following
- A.
1-d, 2-a, 3-b, 4-c
- B.
1-a, 2-d, 3-c, 4-b
- C.
1-c, 2-b, 3-a, 4-d
- D.
1-d, 2-c, 3-a, 4-b
Answer: Option A
Explanation :
The correct match is:
- Intel – d. Intel's co-founder Gordon Moore's prediction of 50% reduced prices of technology products every year or two.
- Fisher – a. preview cameras.
- AOL – b. tied up with Kodak for developing and posting online photos.
- Agfa – c. sold its film and paper business which later went into bankruptcy.
Hence, the correct answer is option 1.
Workspace:
Answer the question based on the passage given below.
People are continually enticed by such "hot" performance, even if it lasts for brief periods. Because of this susceptibility, brokers or analysts who have had one or two stocks move up sharply, or technicians who call one turn correctly, are believed to have established a credible record and can readily find market followings. Likewise, an advisory service that is right for a brief time can beat its drums loudly. Elaine Garzarelli gained near immortality when she purportedly "called" the 1987 crash. Although, as the market strategist for Shearson Lehman, her forecast was never published in a research report, nor indeed communicated to its clients, she still received widespread recognition and publicity for this call, which was made in a short TV interview on CNBC. Still, her remark on CNBC that the Dow could drop sharply from its then 5300 level rocked an already nervous market on July 23, 1996. What had been a 40-point gain for the Dow turned into a 40-point loss, a good deal of which was attributed to her comments.
The truth is, market-letter writers have been wrong in their judgments far more often than they would like to remember. However, advisors understand that the public considers short-term results meaningful when they are, more often than not, simply chance. Those in the public eye usually gain large numbers of new subscribers for being right by random luck. Which brings us to another important probability error that falls under the broad rubric of representativeness. Amos Tversky and Daniel Kahneman call this one the "law of small numbers.". The statistically valid "law of large numbers" states that large samples will usually be highly representative of the population from which they are drawn; for example, public opinion polls are fairly accurate because they draw on large and representative groups. The smaller the sample used, however (or the shorter the record), the more likely the findings are chance rather than meaningful. Yet the Tversky and Kahneman study showed that typical psychological or educational experimenters gamble their research theories on samples so small that the results have a very high probability of being chance. This is the same as gambling on the single good call of an advisor. The psychologists and educators are far too confident in the significance of results based on a few observations or a short period of time, even though they are trained in statistical techniques and are aware of the dangers.
Note how readily people over generalize the meaning of a small number of supporting facts. Limited statistical evidence seems to satisfy our intuition no matter how inadequate the depiction of reality. Sometimes the evidence we accept runs to the absurd. A good example of the major overemphasis on small numbers is the almost blind faith investors place in governmental economic releases on employment, industrial production, the consumer price index, the money supply, the leading economic indicators, etc. These statistics frequently trigger major stock- and bond-market reactions, particularly if the news is bad. Flash statistics, more times than not, are near worthless. Initial economic and Fed figures are revised significantly for weeks or months after their release, as new and "better" information flows in. Thus, an increase in the money supply can turn into a decrease, or a large drop in the leading indicators can change to a moderate increase. These revisions occur with such regularity you would think that investors, particularly pros, would treat them with the skepticism they deserve. Alas, the real world refuses to follow the textbooks. Experience notwithstanding, investors treat as gospel all authoritative-sounding releases that they think pinpoint the development of important trends. An example of how instant news threw investors into a tailspin occurred in July of 1996. Preliminary statistics indicated the economy was beginning to gain steam. The flash figures showed that GDP (gross domestic product) would rise at a 3% rate in the next several quarters, a rate higher than expected. Many people, convinced by these statistics that rising interest rates were imminent, bailed out of the stock market that month. To the end of that year, the GDP growth figures had been revised down significantly (unofficially, a minimum of a dozen times, and officially at least twice). The market rocketed ahead to new highs to August l997, but a lot of investors had retreated to the sidelines on the preliminary bad news. The advice of a world champion chess player when asked how to avoid making a bad move. His answer: "Sit on your hands”. But professional investors don't sit on their hands; they dance on tiptoe, ready to flit after the least particle of information as if it were a strongly documented trend. The law of small numbers, in such cases, results in decisions sometimes bordering on the inane. Tversky and Kahneman‘s findings, which have been repeatedly confirmed, are particularly important to our understanding of some stock market errors and lead to another rule that investors should follow.
Which statement does not reflect the true essence of the passage?
I. Tversky and Kahneman understood that small representative groups bias the research theories to generalize results that can be categorized as meaningful result and people simplify the real impact of passable portrayal of reality by small number of supporting facts.
II. Governmental economic releases on macroeconomic indicators fetch blind faith from investors who appropriately discount these announcements which are ideally reflected in the stock and bond market prices.
III. Investors take into consideration myopic gain and make it meaningful investment choice and fail to see it as a chance of occurrence.
IV. lrrational overreaction to key regulators expressions is same as intuitive statistician stumbling disastrously when unable to sustain spectacular performance.
- A.
Only I
- B.
Only IV
- C.
II and IV
- D.
Only III
Answer: Option C
Explanation :
The question asks us to identify the statement(s) which do NOT reflect the true essence of the passage.
Statements I and III can be considered to reflect the essence of the passage.
Statement II states that ‘investors appropriately discount the announcements’, which gives the impression that investors disregard the announcements. This is contrary to the passage which mentions the ‘almost blind faith investors place in governmental economic releases’.
Statement IV talks about two reactions being the ‘same’, whereas ‘statisticians stumbling’ has not been mentioned in the passage.
Therefore, both statements II and IV do not reflect the true essence of the passage.
Hence, the correct answer is option 3.
Workspace:
The author of the passage suggests the anomaly that leads to systematic errors in predicting future. Which of the following statements does not best describe the anomaly as suggested in the passage above?
I. The psychological pressures account for the anomalies just like soothsayers warning about the doomsday and natural disasters and market crashes.
II. Contrary to several economic and financial theories investors are not good intuitive statistician, especially under difficult conditions and are unable to calculate the odds properly when making investments choices.
III. Investors are swamped with information and they react to this avalanche of data by adopting shortcuts or rules of thumb rather than formally calculating odds of a given outcome.
IV. The distortions produced by subjectively calculated probabilities are large, systematic and difficult to eliminate even when investors are fully aware of them.
- A.
Only I
- B.
Only IV
- C.
I and III
- D.
II and IV
Answer: Option D
Explanation :
The question stem asks us to choose the answer option which does not describe the anomaly mentioned in the passage.
Psychological pressures do account for anomaly- according to the passage - along with small sample size and incorrect government statistics. Therefore statement I can be eliminated.
Statement III has also been mentioned in the passage- investors taking shortcuts with small sample sizes and little particles of information. Therefore, it can be eliminated.
Statement II is not implied in the passage. Further, it does not mention any anomaly at all.
Statement IV- subjectively calculated probabilities and their large distortions have not been mentioned in the passage at all, nor can they be implied.
Hence, the correct answer is option 4.
Workspace:
“Tversky and Kahneman’s findings ... lead to another rule that investors should follow”. Which rule is the author talking about?
I. Not to be influenced by short term and occasional record of a money manager, broker, analysts, or advisor, no matter how impressive.
II. To accept cursory economic or investment news without significant substantiation but supported by statistical evidence even if limited in data sufficiency.
III. In making decisions we become overly immersed in the details of a particular situation and consider all the outcomes of similar experience in our past.
IV. None of the above.
- A.
Only IV
- B.
Only I
- C.
Only III
- D.
I, II, and III
Answer: Option D
Explanation :
Tversky and Kahneman's findings relate to errors made by taking small sample sizes which are not representative of the larger population.
Statement I is an extension of this rule and can be eliminated.
Statement II reiterates the findings.
Statement III has not been mentioned in the passage at all nor can it be inferred.
Hence, the correct answer is option 4.
Workspace:
According to the passage which statement written below is farthest in explaining the meaning of the passage above?
I. Market letter writers have been wrong in their judgments many a times but they continue to express their opinion as dramatic predictions and well time call results in huge rewards to analysts, journalist and popular writers.
II. Public opinion polls are fairly accurate because they are based on randomly selected diminutive representative groups and hence are more meaningful than intuitive statistics of an outcome.
III. People generally limit the need for hefty statistical evidence as it satisfies their intuition without reflecting the reality.
IV. None of the above.
- A.
Only IV
- B.
Only II
- C.
II and III
- D.
Only I
Answer: Option B
Explanation :
Statement I has been mentioned in the passage- refer to the publicity and large number of new clients that advisers manage to secure.
Statement III has been explicitly mentioned in the passage- refer to the second sentence of paragraph 3.
Statement II contradicts the passage. Public opinion polls are fairly accurate because of large representative groups and not ‘diminutive representative groups’.
Hence, the correct answer is option 2.
Workspace:
Answer the question based on the passage given below.
When people react to their experiences with particular authorities, those authorities and the organizations or institutions that they represent often benefit if the people involved begin with high levels of commitment to the organization or institution represented by the authorities. First, in his studies of people's attitudes toward political and legal institutions, Tyler found that attitudes after an experience with the institution were strongly affected by prior attitudes. Single experiences influence post-experience loyalty but certainly do not overwhelm the relationship between pre-experience and post-experience loyalty. Thus, the best predictor of loyalty after an experience is usually loyalty before that experience. Second, people with prior loyalty to the organization or institution judge their dealings with the organization’s or institution's authorities to be fairer than do those with less prior loyalty, either because they are more fairly treated or because they interpret equivalent treatment as fairer.
Although high levels of prior organizational or institutional commitment are generally beneficial to the organization or institution, under certain conditions high levels of prior commitment may actually sow the seeds of reduced commitment. When previously committed individuals feel that they were treated unfavourably or unfairly during some experience with the organization or institution, they may show an especially sharp decline in commitment. Two studies were designed to test this hypothesis, which, if confirmed, would suggest that organizational or institutional commitment has risks, as well as benefits. At least three psychological models offer predictions of how individuals’ reactions may vary as a function of (1) their prior level of commitment and (2) the favorability of the encounter with the organization or institution. Favorability of the encounter is determined by the outcome of the encounter and the fairness or appropriateness of the procedures used to allocate outcomes during the encounter. First, the instrumental prediction is that because people are mainly concerned with receiving desired outcomes from their encounters with organizations, changes in their level of commitment will depend primarily on the favorability of the encounter. Second, the assimilation prediction is that individuals' prior attitudes predispose them to react in a way that is consistent with their prior attitudes.
The third prediction, derived from the group-value model of justice, pertains to how people with high prior commitment will react when they feel that they have been treated unfavorably or unfairly during some encounter with the organization or institution. Fair treatment by the other party symbolizes to people that they are being dealt with in a dignified and respectful way, thereby bolstering their sense of self-identity and self-worth. However, people will become quite distressed and react quite negatively if they feel that they have been treated unfairly by the other party to the relationship. The group-value model suggests that people value the information they receive that helps them to define themselves and to view themselves favorably. According to the instrumental viewpoint, people are primarily concerned with the more material or tangible resources received from the relationship. Empirical support for the group-value model has implications for a variety of important issues, including the determinants of commitment, satisfaction, organizational citizenship, and rule following. Determinants of procedural fairness include structural or interpersonal factors. For example, structural determinants refer to such things as whether decisions were made by neutral, fact-finding authorities who used legitimate decision-making criteria. The primary purpose of the study was to examine the interactive effect of individuals (1) commitment to an organization or institution prior to some encounter and (2) perceptions of how fairly they were treated during the encounter, on the change in their level of commitment. A basic assumption of the group-value model is that people generally value their relationships with people, groups, organizations, and institutions and therefore value fair treatment from the other party to the relationship. Specifically, highly committed members should have especially negative reactions to feeling that they were treated unfairly, more so than (1) less-committed group members or (2) highly committed members who felt that they were fairly treated.
The prediction that people will react especially negatively when they previously felt highly committed but felt that they were treated unfairly also is consistent with the literature on psychological contracts. Rousseau suggested that, over time, the members of work organizations develop feelings of entitlement, i.e., perceived obligations that their employers have toward them. Those who are highly committed to the organization believe that they are fulfilling their contract obligations. However, if the organization acted unfairly, then highly committed individuals are likely to believe that the organization did not live up to its end of the bargain.
The hypothesis mentioned in the passage tests at least one of the following ideas.
- A.
People continue to show loyalty only if they were initially committed to the organization.
- B.
Our experiences influence post-experience loyalty but certainly underwhelm the relationship between pre-experience and post-experience loyalty.
- C.
Pre-experience commitment always has inverse relationship with the post-experience commitment.
- D.
None of these ideas are being tested by the hypothesis.
Answer: Option B
Explanation :
Option 1 can be eliminated because of the word ‘only’. The passage mentions “usually”.
Option 2 has been mentioned verbatim in the third sentence of the first paragraph, with ‘not overwhelmed’ (in the passage) substituted by ‘underwhelmed’ (in the statement).
Option 3 is not true because of ‘always’.
Hence, the correct answer is option 2.
Workspace:
There is only one term in the left column which matches with the options given in the second column. Identify the correct pair from the following table:
- A.
a-1 and 4
- B.
b-3 and 4
- C.
c-2 and 4
- D.
d-1 only
Answer: Option A
Explanation :
The Instrumental prediction is that the outcome of the experience affects commitment. Better outcome leads to more commitment. Therefore, a-1.
According to the passage, from the instrumental viewpoint, people are concerned about tangible outcomes. Therefore, a-4.
‘Assimilation’, ‘Group value’ and ‘Institutional’ do not match with any of the meanings given in the second column. We can eliminate options 2, 3 and 4.
Hence, the correct answer is option 1.
Workspace:
For summarizing the passage, which of the following is most appropriate:
- A.
The study explored how citizens’ commitment to legal authorities changed as a function of their initial level of commitment and their perceptions of how fairly they were treated in their recent encounters with legal authorities.
- B.
The influence of individuals' prior commitment to an institution on their reactions to the perceived fairness of decisions rendered by the institution was examined.
- C.
Given the generally positive consequences to organizations of having committed employees, it may be that unfair managerial practices would begin to alienate the very employees that the organization would least wish to alienate.
- D.
The passage aims at understanding how people define happiness and these definitions include instrumental view-points.
Answer: Option B
Explanation :
Option 1 is incorrect because it limits the summary to ‘legal authorities’. The passage is much broader than merely legal authorities.
Option 3 is an inference. Secondly, ‘the generally positive consequences to organisations’ gives us only a partial view of the passage.
Option 4 is not an effective summary because ‘happiness’ is not the core of the passage.
Hence, the correct answer is option 2.
Workspace:
Answer the question based on the passage given below.
In the annals of investing, Warren Buffett stands alone. Starting from scratch, simply by picking stocks and companies for investment, Buffett amassed one of the epochal fortunes of the twentieth century. Over a period of four decades more than enough to iron out the effects of fortuitous rolls of the dice, Buffett outperformed the stock market, by a stunning margin and without taking undue risks or suffering a single losing year. Buffett did this in markets bullish and bearish and through economies fat and lean, from the Eisenhower years to Bill Clinton, from the l950s to the l990s, from saddle shoes and Vietnam to junk bonds and the information age. Over the broad sweep of postwar America, as the major stock averages advanced by 11 percent or so a year, Buffett racked up a compounded annual gain of 29.2 percent. The uniqueness of this achievement is more significant in that it was the fruit of old-fashioned, long-term investing. Wall Street’s modern financiers got rich by exploiting their control of the public's money: their essential trick was to take in and sell out the public at opportune moments. Buffett shunned this game, as well as the more venal excesses for which Wall Street is deservedly famous. In effect, he rediscovered the art of pure capitalism, a cold-blooded sport, but a fair one. Buffett began his career, working out his study in Omaha in 1956. His grasp of simple verities gave rise to a drama that would recur throughout his life. Long before those pilgrimages to Omaha, long before Buffett had a record, he would stand in a comer at college parties, baby-faced and bright-eyed, holding forth on the universe as a dozen or two of his older, drunken fraternity brothers crowded around. A few years later, when these friends had metamorphosed into young associates starting out on Wall Street, the ritual was the same. Buffett, the youngest of the group, would plop himself in a big, broad club chair and expound on finance while the others sat at his feet. On Wall Street, his homespun manner made him a cult figure. Where finance was so forbiddingly complex, Buffett could explain it like a general-store clerk discussing the weather. He never forgot that underneath each stock and bond, no matter how arcane, there lay a tangible, ordinary business. Beneath the jargon of Wall Street, he seemed to unearth a street from small-town America. In such a complex age, what was stunning about Buffett was his applicability. Most of what Buffett did was imitable by the average person (this is why the multitudes flocked to Omaha). It is curious irony that as more Americans acquired an interest in investing, Wall Street became more complex and more forbidding than ever. Buffett was born in the midst of depression. The depression cast a long shadow on Americans, but the post war prosperity eclipsed it. Unlike the modern portfolio manager, whose mind-set is that of a trader, Buffett risked his capital on the long term growth of a few select businesses. In this, he resembled the magnates of a previous age, such as J P Morgan Sr.
As Jack Newfield wrote of Robert Kennedy, Buffett was not a hero, only a hope; not a myth, only a man. Despite his broad wit, he was strangely stunted. When he went to Paris, his only reaction was that he had no interest in sight-seeing and that the food was better in Omaha. His talent sprang from his unrivaled independence of mind and ability to focus on his work and shut out the world, yet those same qualities exacted a toll. Once, when Buffett was visiting the publisher Katharine Graham on Martha’s Vineyard, a friend remarked on the beauty of the sunset. Buffett replied that he hadn't focused on it, as though it were necessary for him to exert a deliberate act of concentration to "focus" on a sunset. Even at his California beachfront vacation home, Buffett would work every day for weeks and not go near the water. Like other prodigies, he paid a price. Having been raised in a home with more than its share of demons, he lived within an emotional fortress. The few people who shared his office had no knowledge of the inner man, even after decades. Even his children could scarcely recall a time when he broke through his surface calm and showed some feeling. Though part of him is a showman or preacher, he is essentially a private person. Peter Lynch, the mutual-fund wizard, visited Buffett in the 1980s and was struck by the tranquility in his inner sanctum. His archives, neatly alphabetized in metal filing cabinets, looked as files had in another era. He had no armies of traders, no rows of electronic screens, as Lynch did. Buffett had no price charts, no computer - only a newspaper clipping from 1929 and an antique ticker under a glass dome. The two of them paced the floor, recounting their storied histories, what they had bought, what they had sold. Where Lynch had kicked out his losers every few weeks, Buffett had owned mostly the same few stocks for years and years. Lynch felt a pang, as though he had traveled back in time. Buffett’s one concession to modernity is a private jet. Otherwise, he derives little pleasure from spending his fabulous wealth. He has no art collection or snazzy car, and he has never lost his taste for hamburgers. He lives in a commonplace house on a tree-lined block, on the same street where he works. His consuming passion - and pleasure - is his work, or, as he calls it, his canvas. It is there that he revealed the secrets of his trade, and left a self-portrait.
“Saddle shoes and Vietnam”, as expressed in the passage, refers to:
I. Denier cri and Vietnam war
II. Growth of leather footwear industry and Vietnam shoe controversy
III. Modern U.S. population and traditional expatriates
IV. Industrial revolution and Vietnam Olympics
V. Fashion and Politics
- A.
I and V
- B.
II and IV
- C.
III and V
- D.
II and III
Answer: Option A
Explanation :
The passage mentions, “Buffet did this in markets bullish and bearish and through economies fat and lean, from the Eisenhower years to Bill Clinton, from the 1950s to the 1990s, from saddle shoes to Vietnam to junk bonds and the information age.”
Markets bullish and bearish reflect turbulent stock markets; economies fat and lean signify turbulent economic growth; Eisenhower years to Bill Clinton reflect political changes; saddle shoes and Vietnam signify fashion and politics; junk bonds and the information age signify modern market instruments and new technology. Thus each sector of the polity is being expressed through examples. Thus, statement V is correct.
Option 1 has I and V while option 3 has III and V.
Statement III has not been expressed in the passage. Nowhere has the passage made a distinction between modern US population and traditional expatriates. Therefore, option 3 can be eliminated.
‘Dernier cri and Vietnam war’ symbolise saddle shoes and Vietnam. In the passage Vietnam has been used to signify the Vietnam war while Dernier cri - which means the latest fashion - has been used to imply saddle shoes (which were the fad in the 1950s). The passage mentions, “from the 1950s to the 1990s.” Saddle shoes were popular among girls in the 1950s; the Vietnam war occurred in the 1960s and 70s; junk bonds were invented in the 1980s and the information age corresponds to the 1990s.
Statements I and V are correct.
Hence, the correct answer is option 1.
Workspace:
Identify the correct sequence:
I. Depression -> Eisenhower -> Microsoft
II. California -> New York -> Omaha
III. J.P.Morgan -> Buffett -> Bill Gates
IV. Mutual funds -> Hedge funds -> Brokers
- A.
I and II
- B.
I and III
- C.
II and IV
- D.
III and IV
Answer: Option B
Explanation :
Depression occurred in the 1930s, Eisenhower was President of the United States in the 1950s while Microsoft is contemporary. Thus, statement I is correct.
California – New York – Omaha is an incorrect sequence.
California has been mentioned after Omaha in the passage while New York has not been mentioned in the passage. Statement II is an incorrect sequence.
The passage mentions J. P. Morgan as a predecessor of Buffet, while Bill Gates is current and contemporary. They are all business magnates. Therefore, statement III is correct.
We do not know the order as to the development of Mutual funds – Hedge funds. Brokers were in existence long before these modern market instruments. Therefore statement IV is incorrect sequentially.
Statements I & III are correct.
Hence, the correct answer is option 2.
Workspace:
Choose the most appropriate answer: according to the author, Warren Buffett was
I. Simple and outmoded
II. Against planned economy and technology
III. Deadpan
IV. Spiritually raw
- A.
I and IV
- B.
II and IV
- C.
III and IV
- D.
I and III
Answer: Option D
Explanation :
Statement I is correct. The passage mentions his lack of reliance on computers or price charts. Further, he lived a simple lifestyle and his “homespun manner made him a cult figure”. Therefore, we can infer that he was simple and outmoded.
We can eliminate statement II because the passage is totally silent on Buffet's opinions on planned economies and technologies.
Statement III is correct. The passage mentions, “Even his children could scarcely recall a time when he broke through his surface calm and showed some feeling”. From this we can infer that he was deadpan.
Statement IV is incorrect. The passage mentions his “tranquility in his inner sanctum”. This contradicts the assertion made in the statement that he was spiritually raw.
Statements I and III are correct.
Hence, the correct answer is option 4.
Workspace:
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