Are We Being ‘Penny Wise and Pound Foolish’?

Story 1:

Year 1998 – Mr Alok Sharma had borrowed Rs. 4 Lakhs from Mr. Dinesh Patnayak. He promised to return it in 2 years and also promised to pay 12% interest p.a. on the same.

However, Mr Sharma refused to pay after 2 years and after negotiating for 2 more years, Mr Patnayak decided to approach a lawyer to file a civil case against Mr Sharma.

Year 2002 – Mr. Patnayak approached Adv. Khatri who asked for a base fee of Rs. 5,000 and a success fee equal to 10% of the total amount in case of winning. He also assured Mr Patnayak that he will try his best to recover this success fee from Mr Sharma in the court proceeding.

Mr Patnayak found this fees pretty hefty. He approached another lawyer, Adv. Deshmukh who agreed to fight this case for Rs. 1500. Mr Patnayak found this deal attractive. He hired Adv Deshmukh for fighting this case.

Year 2017 – The Case is still in court. Adv. Deshmukh thinks he has delivered enough service by fighting a case for 15 years for a meagre Rs. 1500. Thus, he is not putting lot of time in this case. He more than often sends his assistant to be present on the hearing date and prolong the case.

The ultimate loser in this story is Mr Patnayak who is retired now. He is regretting that if he had agreed to Adv. Khatri’s success fee style, he would have had brighter chances of winning the case long back (because the advocate would be actively involved in it). He would have grown his money into more than Rs. 21 Lakhs by doing good investments. He doesn’t know whether he will get this money in his lifetime. And his sons are too busy to fight this case.

To save Rs. 3500 as upfront fees and Rs. 40,000 – Rs. 50,000 as success fee (which was anyways not to be paid from his pocket), he is losing almost Rs. 16-17 Lakhs.


Story 2:

Year 2012 – Mr Vivek Dasgupta (A 65 Years old retired individual) has a 5 Acre land in the outskirts of a tier 2 City. He is expecting a price of Rs. 60 Lakhs per acre. He approaches a real estate broker Mr Shah who came to see this land. Mr Shah has a big NRI client Mr Parekh who has full trust on Mr Shah, so much so that he is ready to buy the land only on Mr Shah’s words.

Mr Shah quotes a price of Rs. 65 Lakh per acre to Mr Parekh on phone, to which Mr Parekh agreed happily. Unfortunately, this phone call discussion happened in presence of Mr. Dasgupta.

Mr Dasgupta was unhappy about the price quoted by Mr Shah. He said that Mr Shah should have quoted only Rs. 60 Lakhs per acre and should be happy with his brokerage of 1-2%. According to Mr Dasgupta, Mr Shah has not done anything so great that he deserves to get Rs 5 Lakh per acre in the deal.

As a result, Mr Dasgupta said that he doesn’t want to deal with Mr Shah for this property. He decided to approach other real estate brokers for his property.

Mr Shah was hurt with this behaviour. He shared this story with his real estate brokers network and requested them not to entertain Mr Dasgupta.

Year 2017 – Mr Dasgupta is still not able to sell the property. Forget about getting price appreciation, he is not even able to find a buyer. He has turned 70 years old now. He has exhausted all his energy and almost all other liquid investments. If he is not able to sell this property now, he will be in a tough situation to even run his household.

Had he agreed to sell the property at Rs. 3 Crores in 2012 (Rs. 60 Lakhs x 5 Acre = Rs. 3 Crore), even a safety oriented product would have grown this amount to around Rs. 4.40 Crores. This could have easily generated a monthly cashflow of more than Rs. 2-2.25 Lakhs.

Only to prevent Mr Shah from making Rs. 25 Lakhs (which was not really going from his pocket as he was getting his full expected price), he not only made a loss of Rs. 1.4 Crores to himself, but he has risked his remaining life on the mercy of others.

Price is What You PayValue is What you Get.- Warren Buffet


In Both the stories above, we have some lessons to be learnt. Most of us only focus on the price and not on the value.

As Warren Buffet Says, “Price is What you Pay and Value is What you Get”

When we focus too much on price, we miss out on the value we are getting. We are more concerned about, what the other person is making, than looking at what is our benefit in availing his / her services.

We need to accept that we are not Super-humans who can do everything on our own. When we accept this, we will automatically acknowledge the professional expertise of others. We are definitely good at something, but not good at everything.

So whatever WE are good at, should be OUR business / profession ; And for other things, we need to be willing to hire the professional expertise which proves to be a better deal as we get more value than the price we pay.

To save the professional cost, if we hire a lower expertise professional, it can prove to be a costly affair as we might lose out big time on “value”.

Best example would be to look at your own business / profession and ask yourself these 3 questions,

“Am I doing something valuable for my client?”

“Am I doing something which the client wont be able to do with as much expertise as I am doing?”

“Do I deserve this much fees / compensation for the services I am providing?”

If the answer to all 3 questions is Yes, then lets understand that for fields outside our expertise, we would also need the help of experts. And thus, we need to be willing to pay for the same.

If we look at it, Global Giants like Google, Microsoft, MasterCard are headed by Indian CEOs. But we have not been able to produce a Google, Microsoft or MasterCard in India. The reason being, the promoters of these companies have been able to hire people who are smarter than them. When it comes to us, we hate to admit that someone else is smarter than us. Thus, we would only like to pay a mediocre compensation and mediocre talent stays with us.

If we want to make it big, we need to have smarter guys in our team.

Lets not be penny wise and pound foolish and learn to respect expertise.

We look forward to your feedback and comments on the above article.

The Author Prof. Saurabh Bajaj (BE, MBA, FRM, CFGP) is CEO with Nidhi Investments, Mumbai. His articles have a readership from 78 Countries across the Globe. He may be contacted on if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are real with names changed).








Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of and as Investment Expert. He is actively involved in investor education through his blog which has a readership from 78 Countries all over the world. His articles are also regularly published in , , ,, and . He has been awarded the title of “Best Article Writer” from in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

12 thoughts on “Are We Being ‘Penny Wise and Pound Foolish’?

  1. Very truly said Saurabh Bhaiya.. The Moral of the Law Case States that we should not compromise with the Quality over price which we are getting from the experts as sometimes saving penny money costa a lot than the actual value. And the 2nd story I got to know From Your Seminar held in Borivali on Capital Markets. Tysm again Bhaiya🙂

  2. It’s eye opening article for those who wants save small amount money as a expert’s fee without considering long term gain of his or her advice

    1. Thanks for the valuable feedback.

      Yes, we all need to get more matured so that we shift our focus from expert’s fee to the value of the advice we get from him / her.

      Looking forward to more visits and feedback in future.

  3. Perfect topic heading & excellent examples.
    Most times people don’t understand what they loose by bargaining.
    Truly becoming penny wise pound foolish.

    Keep writing .

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