Month: June 2011

The Impact of Wall Street on Grad School

I don’t need to be an insider to tell you that Wall Street employs lots of PhDs. PhDs of various denominations, but mostly those with backgrounds in Math, Physics and Engineering are employed by various Wall Street firms by the thousand. I don’t think too many of them exactly work on the kind of stuff that they were doing in grad school, but certain general skills that they pick up and hone through their multiple years in grad school are found extremely useful by banks.

So while scores of older scientists and economists and policymakers lament the “loss” of so many bright minds to science, has anyone at all considered the reverse possibility? Of the impact that Wall Street has had on grad schools in the US?

One thing you need to face is that there are not a lot of academic jobs going around. The number of people finishing with PhDs each year is far more than the number of academic jobs that open up each year. I’m mostly talking about “assistant professor” kind of jobs here, and assuming that becoming a post-doc just delays your entry into the job market rather than removing you from the market altogether.

In certain fields such as engineering, there are plenty of jobs in the industry for PhDs who don’t get academic jobs, for whatever reason. Given this, it is “cheaper” to do a PhD in these subjects, since it is very likely that you will end up with a “good job”. Hence, there is more incentive to do a PhD in subjects like this, and universities usually never have a problem in finding suitable candidates for their PhD programs. However, there is no such cushion in the pure sciences (math/physics). There are few “industry employers” who take on the slack after all the academic positions have been filled up. And that is where Wall Street steps in.

The presence of Wall street jobs offers a good backstop to potential Math and Physics PhD candidates. If they aren’t able to do the research that they so cherish, they needn’t despair since there exists a career path which will enable them to make lots of money. And knowing the existence of this career option means more people will be willing to take the risk of doing a PhD in these subjects (since the worst case isn’t so bad now). Which in turn enhances the candidate pool available to grad schools.

So even if you were to believe that complex derivatives are financial “weapons of mass destruction”, there is reason for them to exist, to encourage the financial sector to pick up PhDs. For if PhDs were kept out of these jobs, it is real academic research in “real subjects” such as the pure sciences that will suffer. By picking up PhDs in large numbers, the financial sector is making its own little contribution to research in pure sciences.

Wimbledon 92

Currently reading last Saturday’s Mint Lounge Wimbledon special. Was reading this article on the McEnroe-Borg rivalry, and I was taken back to the only McEnroe match that I clearly remember seeing. This was in Wimbledon 1992, which was more like a typical French Open. Upsets left right and centre. Unknown players making it to the latter rounds. Familiar players nowhere to be seen..

Back in the late 80s, when as a small boy, Wimbledon was probably the only Grand Slam I’d watch. Maybe the French Open, too, but I don’t really remember any French Open finals before 1990 (was that when the Ecuadorian Andres Gomez beat Andre Agassi, or was that in 1991? I guess that was 91, since Michael Chang won in 90). And in the 80s, Wimbledon meant just four names to me. Men’s finals had to be Boris Becker versus Stefan Edberg, and the ladies finals between Steffi Graf and Martina Navratilova.

Coming back to 92, there was no Becker, no Edberg. Even Michael Stich, who had come from nowhere to win the previous title wasn’t anywhere to be seen. There was no Navratilova or Graf in the ladies’ tournament, which I think was won by Conchita Martinez (don’t remember the game, but remember seeing a Sportstar pic of her at the Champions’ Ball). As I told you, the 92 tournament was like a French Open (for pre-Nadalian readers, the French Open is supposed to be a tournament where heavyweights all lose in the early rounds, and each year there’s a new unexpected person who wins. It’s not supposed to be the monopoly it’s turned into of late).

In hindsight, looking back at the 1992 tournament, just looking at the semi-final line-up, I realize what a legendary tournament that was! Some names were then unknown, and were to become legendary later. One other was known, and you had reason to feel sorry for him at that point in time. And there was the lovable veteran.

Goran Ivanisevic beat Pete Sampras
Andre Agassi beat John McEnroe

No one had heard of the first two (Sampras had won the US Open in 1990, but we didn’t watch him, did we? No one watched either the Australian or US Opens those days. The timings were inconvenient), but they would show us their greatness in the coming decade. We all remembered Agassi as the guy who had lost two consecutive French Open finals (to Gomez and then to Jim Courier, having been 2 sets to nil up in the latter). And I don’t need to say much about McEnroe, except that perhaps that was the last I saw of him, save the odd appearance in Davis Cup.

Agassi beat Ivanisevic in the finals. 6-7 6-4 6-4 1-6 6-4. I still remember the scorecard. Thanks to the “checksum fact” that the Deccan Herald had published the following day. That both players had won exactly 25 games each.

Think, and tell me, if you can think of any other major tennis tournament with this kind of a semi-final line-up, spawning eras. Don’t throw up tournaments where the top four seeds were in the semis (that’s so increasingly common nowadays I’m losing interest in tennis).

And reading this issue  of Mint Lounge made me long for Sportstar again, for the times before it had become a tabloid. When I would read through pretty much every word of it, and crack sports quizzes.

PS: This post has been written entirely out of what I remember things to have been like, and I haven’t bothered checking the facts. So pliss excuse me, and correct me, if I’m wrong.

Fractal life

Recently I finished reading Mandelbrot’s The (mis)Behaviour of Markets for the second time. Fantastic book. I think it is a must read for people who are interested in financial markets, and especially for those who work in capital markets. While it stays away from equations and “math”, and prefers to use pictures (or cartoons) to illustrate and show concepts (a method I definitely prefer to obscure math), it does raise a lot of very interesting fundaas.

So last week I was feeling stressed out. I realized that I had worked too hard on Wednesday and Thursday hence I got stressed out on Friday. A couple of months back, I took a couple of days of medical leave because I was stressed out. I reasoned that was because I’d pushed myself too hard the earlier two weeks. And thinking about all this today, I thought the incidence of stress has gone up over the last couple of months. This, I reasoned to pushing myself excessively for over a year now. And if I were to analyze my today’s work, I could probably say that I pushed myself too hard in the afternoon and hence got stressed out in the evening.

Same pattern, you see. At different scales.You get the drift, I guess. And stress is just an example I took. If I think about how my louvvu for my wife has evolved, again same pattern. There is a “global pattern”, and that same “global pattern” repeats itself over shorter intervals over the last two years. Irrespective of the quantum of time I look at, I see that same “global pattern” stretched or compressed to the appropriate time scale. In other words, love is also a fractal.

You can see fractals all around you. You can see self-similarity everywhere. And yet, even when you have small samples. you instinctively try to model it as a normal distribution. Without realizing that the “normal” distribution in life is the Power law.

Managing stud work

I begin this post with an apology. About two years back I’d promised that I won’t write any more on Studs and Fighters on this blog, and I’ll save all that for my forthcoming book. Unfortunately, since then I’ve managed not more than one page of my book, and that too has been in the last couple of weeks. I realize that by not writing about studs and fighters here, I’m losing that perspective of thought entirely, because of which I’ve not been able to write my book.

So, Chom (a friend) raised an important point during a discussion earlier today. He said that people who are studs, after they become “managers” (in which case their job is solely to manage other people. Think of someone like a partner in a consulting firm), start angling for more fighter work for their team.  That they seem to forget all their studness, and assume that all the people they manage are fighters.

I had argued earlier that once the partner of a consulting firm stops doing day-to-day work, the quality of work at the firm suffers. This post is an extension of that. So what Chom says inherently makes sense. Here’s why.

Stud work is risky. There is a good probability that it may not be completed. So when your target changes from the “total impact of work done” to “number of pieces of work successfully completed” the whole equation changes. You are not looking for those “big wins” from your team, any more. What you need from your team is a high rate of delivery, and a large number of projects that are completed. If you get big wins, that is just a bonus. But all you care for now is the number of wins.

So you start taking on more fighter work, and letting go of stud work. After all, it is now rational for you to do that. Your own working style can sit aside.

Comparative advantage and competitive advantage

So there are two reasons why you could be employed. Comparative advantage and competitive advantage. Let me explain.

In international trade, there is a concept called “law of comparative advantage“. Let me explain with the classical (and simple) example. Robinson Crusoe is marooned on an island with Friday. Now, let us assume there are two productive activities on the island – catching fish and cutting wood. Now, Crusoe can catch 10 fish an hour, while Friday can catch 5. On the other hand, Crusoe can cut 3 trees an hour, while Friday can cut 2. Clearly Crusoe “dominates” Friday, and the latter is much more inefficient. So does that mean that Crusoe can just have Friday for dinner one day?

While the intuitive answer might be a “yes”, the law of comparative advantage shows otherwise. While Friday might be inferior to Crusoe in both activities, he is “less worse off” at chopping trees than he is at catching fish. For example, let us say that if left to himself, Crusoe would spend 3 hours fishing and 2 hours chopping wood every day. That would produce 30 fish and 6 trees of wood.

Now, if Crusoe were to spend all his 5 work hours exclusively catching fish, he will have 50 fish and no wood. He can trade the extra 20 fish for 8 logs of wood from Friday (Friday demands 5 fish for every 2 logs of wood, since that’s his opportunity cost). So net-net Crusoe is better off by 2 logs of wood. The trade similarly leaves Friday also better off (compared to the situation if he were alone on the island). Now you see why Friday keeps his job.

So in a “comparative advantage” job, you keep the job only because you make it easier for one or more colleagues to do more. You are clearly inferior to these colleagues in all the “components” of your job, but you don’t get fired only because you increase their productivity. You become the Friday to their Crusoe.

On the other hand, you can keep a job for “competitive advantage“. You are paid because there are one or more skills that the job demands in which you are better than your colleagues. You have a “competitive advantage” in those skills, and that is what you are paid for. Here you can expect to be treated better than your comparative advantage colleague would. You can even expect for some of your “comparative advantage” colleagues to be assigned to you to take your load off on those tasks you don’t enjoy a competitive advantage in. And again I’m not saying you need to “dominate” your colleagues.  All you need is one “axis” along which you are clearly superior. And you’ll get the “competitive” treatment.

Pause for a moment and ask yourself why your job exists. Check if you work because you have a competitive advantage, or if it is merely because of the “comparative advantage” – that your presence frees up time for the more efficient people. If your job belongs to the latter category, I think you have reason to be more worried.

Live Music at Wedding Receptions

The problem with live music at wedding receptions is with the volume. If you keep the volume too low, the musicians find it offensive. If you keep the volume high, on the other hand, people can’t hear each other talk and get irritated. And I’ve never really attended a wedding reception where the live music has had the “right volume”.

Hence, at my wedding reception, we dispensed with live music and instead carefully put together a set of trance numbers which were to be played over a CD-speaker system. And two hours before the reception is to begin, we find that there was no music player in the hall, and no one had bothered arranging for one. Thankfully the photographer, who I’d fought with for the duration of the wedding, agreed to arrange for a music system at quick notice. And then, when the reception was about to begin, it turned out that the uncle who had the CDs had gone home to get dressed.

Ultimately, I think they played the music that we’d carefully put together. I don’t know really because it wasn’t audible on stage, but we’re told by a few people it was quite good (they even asked for and “borrowed” the CDs). If you attended my wedding reception, please to be telling me how the music was.

So before my wedding, when I sent the invite to Mammo, he replied asking who was performing at the reception. When I told him my reasons for not having live music at the reception, he explained that performing at a wedding was a good chance for musicians to experiment, and in some ways it was a “paid rehearsal”. And that it really helps in the development of musicians.

On the other hand, I remember, some fifteen years back, my violin teacher being furious that he’d been called to play at a wedding, and there was no one listening to him, and his volume was turned out to be quite low, and he had a really bad experience.

So I don’t know. I still think the best thing to do would be to put recorded instrumental music that isn’t too intrusive. What do you think?

Big Management and Big Picture

One common shortcoming that top management in a lot of companies is accused of is that they give too much attention to details (i.e. sometimes they micromanage), and they are unable to see the big picture.

For example, if you think about the financial crisis of 2007-08, people kept making stupid bets about the mortgage market because they didn’t look at mortgages in the overall context of economy. They looked at their models, made sure they “converged” to a zillion digits, the math was perfect, etc. And priced. And conveniently forgot some of the “big assumptions”.

I think this has to do with the typical promotion procedures in corporations, and an assumption that people who are good at one kind of stuff will continue to be good at other kinds of stuff.

For example, in the early part of your career, in order to move up the “corporate ladder”, it’s important to show your skills at being able to give attention to detail, to be able to see the “little picture”, be careful and precise, and so on. For these are the kind of skills that makes one successful in the lower-level jobs.

Now, my hypothesis is that being good at details and being good at seeing the big picture are at best orthogonal, and at worst negatively correlated. I base this hypothesis on some initial reading on stuff like Attention Deficit & Hyperactivity Disorder and related topics.

So, when you promote people based on their ability to be good at details (which is required at lower levels of the job), you will end up with a top and middle management full of people who are excellent at details, and whose ability in seeing the big picture is at best questionable. Explains well, right?

I don’t know what can be done to rectify this. Promotion is too important to take away as an incentive for good performance at junior levels. Some organizations do institute procedures where for higher promotions you also need to show skills that show your big picture skills. But these are only for people who have already reached middle management, which is people who are good at details, which means that a large part of those who started at the bottom, and who are “big picture people” would have already fallen at the wayside by then.

Does my hypothesis make sense? If it does, what do you think needs to be done to get big picture thinkers at the top?

 

 

College Admissions

Why does the government require colleges in India to have “objective criteria” for admissions? I understand that such criteria are necessary for government-owned or run or aided colleges where there’s scope for rent seeking. But why is it that “private” colleges are also forced to adopt “objective criteria” such as board exam marks or entrance test scores for admission?

Abroad, and here, too for MBA admissions, admission is more “subjective”. While of course this has the scope to introduce bias, and is a fairly random process (though I’d argue that the JEE is also a fairly random process), won’t it reduce pressure on the overall student population, and bring in more diversity into colleges?

As a natural experiment I want to see a few state governments deregulating the admissions process for private colleges, making it possible for the colleges to choose their students based on whatever criterion. So what would happen? Of course, some seats would be “reserved” for those with big moneybags. Some more would be reserved for people who are well connected with the college management. But would it be rational for the college boards to “reserve” all the seats this way?

Maybe some colleges would take a short-term view and try to thus “cash out”. The cleverer ones will realize that they need to build up a reputation. So while some seats will be thus “reserved”, others will be used to attract what the college thinks are “good students”. Some might define “good students” to be those that got high marks in board exams. Others might pick students based on how far they can throw a cricket ball. The colleges have a wide variety of ways in which to make a name, and they’ll pick students accordingly.

The problem with such a measure is that there is a transient cost. A few batches of students might get screwed, since they wouldn’t have figured out the reputations of colleges (or maybe not – assuming colleges don’t change drastically from the way they are right now). But in a few years’ time, reputations of various sorts would have been built. Colleges would have figured out various business models. The willingness to pay of the collective population would ensure that reasonably priced “seats” are available.

And remember that I mentioned that a few states should implement this, with the others sticking to the current system of regulating admissions and fees and all such. In due course of time it’ll be known what works better. Rather, it’ll be known what the students prefer.

It’s crazy that colleges now require students to get “cent per cent” in their board exams as a prerequisite to admission. It’s crazy that hundreds of thousands of students all over India, every year, spend two years of their prime youth just preparing to get into a good college (nowadays the madness is spreading. A cousin-in-law is in 9th standard, and he’s already joined JEE coaching). On reflection, it’s crazy that I wasted all of my 12th standard simply mugging, for an exam that would admit me to a college that I knew little about. Madness, sheer madness.

Maruti Worker’s Stupidity

I just read a long article in today’s Business Standard (how I used to miss the paper until I resubscribed to it last week!) about the ongoing labour struggles at the Maruti Suzuki factory in Manesar. So the workers there want to form a new union, and allow a whopping 33% of the new union’s members to come from outside the factory. And the management is understandably not accepting it.

That workers need a union is understandable. That the Manesar unit wants its own union disjoint from that in Gurgaon is understandable. But a third of its members from outside? What is the average worker in the factory who is supporting this new demand even thinking? How the hell is such a union going to represent him in any way?

Some simple arithmetic. Considering that the “outside third” is going to come from the CPI/AITUC, it can be assumed that they’ll vote in one bloc. So to get something passed, they need a further 1/6 of the total votes in the union. Which amounts to a fourth of the actual workers in the union. So, as long as something is supported by this “outside bloc”, it takes the support of only a fourth, a measly one fourth, of the “real members” to go through.

I understand that the “worker leaders” who are championing this ongoing strike will have some incentives in bringing in AITUC/CPI. But what’s in it for the average worker? If he were to think rationally, this new proposed union makes absolutely no sense for him. I guess (and hope) that the Maruti management knows this, that it is not in the interest of the average worker to join this union. And I hope they’re somehow using this fact in their ongoing negotiations.

Will be fun if the guys who tried to consolidate their own power by bringing in outside representation into the union get shafted.

The Bharadwajs

I’m married to a Bharadwaj. To put it another way, I’ve “bailed out” a Bharadwaj. Let me explain.

There is a concept of “gotras” among “Caste Hindus”. Each person is supposed to have a paternal ancestral line to a rishi, and that rishi’s name is your gotra. For example, I’m supposed to be a descendant of the sage Haritsa (such an obscure rishi he doesn’t even have a Wikipedia page). And so my gotra is “haritsa”. Knowledge of your own gotra is important when you go to a temple to get “archane” (where you pay 10 rupees, give some vital stats and get sugar candy in return) done. It is also important when you are going to get married.

So Hindus have a weird way of defining cousins, especially for the purpose of marriage. Only male ancestry matters, and male brotherhood also. If you examine this further, everyone who has the same gotra as you (and hence are related to you by a paternal line) are your cousins. Sisters and mothers don’t particularly matter in this definition of cousins, hence the widespread incest, especially in Karnataka and Andhra Pradesh. There is one important exception of course – your mother’s sister’s siblings are also your cousins, though no one bothers keeping track of such relationships over more than a generation.

Like in any other good religion, Hinduism doesn’t allow you to marry your cousins. And due to the weird definition of cousin, you effectively can’t marry someone from your gotra. That is supposed to be incestuous. If you have any doubts about this, please travel to Haryana and ask any of the khap panchayats there.

So among Brahmins (due to lack of sufficient data points, I’ll restrict my discourse to Brahmins), the most “popular” gotra is Bharadwaja. It is either the Rishi Bharadwaja himself, or some of his descendants, or all of them collectively, who did a “Genghiz Khan”. Rather, one should say that Genghiz Khan did a Rishi Bharadwaja. Because of this, Bharadwajas constitute a really large proportion of Brahmins. I’m not sure of exact statistics here, but they are easily the largest Brahmin Gotra.

So now, “rules” dictate that you should marry within your caste, but outside of your gotra. And this puts the Bharadwajas at a great disadvantage, for so many other Brahmins are Bharadwajas, that the sample space from which to look for a spouse is severely restricted indeed. I know of a cousin (mother’s father’s sister’s son’s daughter) who is a Bharadwaja, and who spent a really long time in the arranged marriage market. As I told you, restricted sample space. That way, people like me who belong to obscure gotras should consider ourselves lucky, I guess.

So if you are a Brahmin, and not a Bharadwaja, please help out a needy fellow-Brahmin, who may otherwise have to spend a really long time in the marriage market (arranged or otherwise) only because one of their ancestors happened to be particularly prolific. And this is one thing in which I can proudly claim to lead by example.

PS: The proportion of Bharadwajs among Brahmins might be overstated due to the sheer number of them who put the name of their Gotra as their surname. I don’t think putting gotra as surname is common among any other Brahmin gotra.