SK – Page 82 – Pertinent Observations

Shorts

So I’ve been trying to overcome my self-imposed taboos on online shopping, and trying to buy things online, especially brands and sizes that I already know and items that offline shops don’t stock much of.

As the title of this post might suggest to you I’m trying to buy shorts. I’ve had to decommission several pairs over the last couple of years for a number of reasons – some became too loose, some too tight, others wore out, more are fading away. And the lack of inventory of shorts in my wardrobe means that I end up wearing this one red pair pretty much everywhere.

While the beauty of online shopping is supposed to be that you get massive variety, and the long tail can get served, the problem is that the way sites are designed makes it hard to discover them. Here are two images, one each from Amazon and Jabong.

So I have two basic problems with the shorts that are available for sale online, based on these two sites.

Too long: Check out the Jabong picture here. First of all, Jabong groups shorts and “3/4ths” (when did those abominations even become a thing) in the same category. But they are nice and allow you to specify length. I said “thigh length” and this is what they show me:

I mean, shorts by definition are supposed to be short right? I grew up in an era when Pete Sampras was bossing Wimbledon and shorts of this length were classified as “bermudas”. If you look at the image above, save a couple of “sports shorts” (it’s sad that Jabong doesn’t even allow me to filter those out, since I’m not looking for them), they’re all knee length! Which is too long for a pair of shorts!
Too narrow: Jabong refuses to admit that there is something called “relaxed fit” (even for cargos). Amazon has no fit filters for shorts. And the shorts all look like they’re just truncated pants rather than shorts. The difference between shorts and pants (apart from the extent of leg they cover of course) is that while the latter are narrow, shorts are more relaxed, and shouldn’t stick to your leg! And this is what Amazon shows me (while Amazon has a separate sportswear section, it continues to show sports shorts along with the regular shorts. They even showed boxers. There is no option to specify I want the button-zip-belt kind of “casual wear” shorts):

All of them are way too narrow! Of the radius where they get stuck to the thigh when you sit down leaving you with the potential embarrassment of pulling them down when you get up.

I had ranted during an earlier attempt to buy online about the difficulty of sorting through inventories so I won’t go into that here.

All I have to say here is that it seems like “shorts” don’t mean what they used to, and I’m extremely unhappy about it.

Should USP be part of MVP

First of all, my apologies for the jargon, but this is a way to get attention of those corporate types who I hope to sell to. The MVP here in question is the startup-wala MVP (minimum viable product) and not the sports-wala MVP (most valuable player). There is no ambiguity to USP.

So it’s an accepted mantra in the startup world that product development should follow the “agile model” rather than the “waterfall model” (borrowing from software engineering paradigms). It is recommended that you put out a “minimum viable product” (MVP) out early into the market and get continuous feedback as you continue to hone your product. This way, you don’t end up wasting too much time building stuff the market doesn’t want, and can pivot (change direction to another product/service) if necessary.

The question is how “minimum” the “minimum viable product” should be. Let’s say that your business isn’t something that creates a new market but something that improves upon an existing product or service. In other words, you are building a business around “a better way of doing X” (it doesn’t matter here what X is).

The temptation in this case is to copy X and release it as your minimum viable product. This is rather easy to do, since you can just reverse engineer X, and put out a product quickly. That’s the quickest way to get to the market.

The problem with this approach, however, is that your initial set of users who experience your MVP will fail to see what the big deal about your product is – while they might hear your promises that this is only a start and you intend to do X in a “new improved way”, the first version as they see it shows no indication of this promise.

Worse, when your product is branded as a “new improved X”, it automatically gets anchored in your users’ minds with respect to X. Irrespective of what your product looks or feels like, once you’ve branded as a “new improved X”, comparisons to X are inevitable. And when your MVP is not very different from X, people might lose interest.

On the other hand, if you need to build in your USP into your MVP, it results in a longer product development cycle. In such cases, if the market doesn’t really want your “new improved X”, a lot more effort would have been expended, leading to higher risk (of market not accepting product).

Yet, if your MVP is nothing like what your “real product” is, then you are not really getting feedback from the market on your “real product” – only feedback on your MVP. And the MVP should be something such that you can make use of any feedback you get on it in terms of superior product design.

Taking the easy way out

Taking the easy way out is a concept that is much frowned upon, especially in India (though I must confess I don’t have enough exposure to other cultures to have noticed this). When you take the easy way out on something, people assume that you’re cheating – like you’re using a cheat code in a computer game.

For example, purists believe that if one were to get the good karma that one deserves by going to Tirupati, it will accrue if and only if you were to walk up the hill on foot. People who take the easy way out by taking a cab or bus uphill apparently don’t get as much good karma.

During festivals such as Sankranti, people who buy the sugar candies and the eLL (sesame) mixture from a shop are again frowned upon, given they are taking the easy way out rather than preparing them at home. Employing a cook is similarly frowned upon, as is taking an auto rickshaw or a cab rather than a bus.

And to take an example that long-time readers of this blog might appreciate, fighters tend to view studs with derision since the latter seemingly get things done without putting in the same amount of effort as the former.

Ok I might have claimed in the past that my pieces are usually long on analysis and short on rhetoric, but as you can see, this is not one of those pieces. All I’ve done so far is to give examples of something that I don’t agree with.

And the reason I don’t agree with the view that taking the easy way out is wrong is because it is done if and only if it’s optimal. Notice that in all the above examples, there is no free lunch. Taking the easy way out comes at a cost, and reflects a set of trade offs. To take the car up Tirupati costs money, and the opportunity of experiencing the supposedly electric hillsides – and benefits are uncertain anyway in religious matters. Employing a cook or taking an auto are efficient if you value time and convenience, for example.

While I agree that there might be some cases where taking the easy way out might be short-termist (you might be ignoring “tail risks”, for example, which allows you to use an easy pricing model, or by using a calculator you may not develop your long-term arithmetic skills), in most cases it is considered decision.

In other words, there is no problem with taking the easy way out as long as you have fully understood the costs and benefits (including any tail risks) of the method that you’ve chosen to adopt. There is no absolute virtue attached to labour – labour is always a means to get to an end. Once you digest this, you will have no hesitation in taking the easy way out.

Sudden death and the discount rate

It’s six years today since my mother passed away. She died in the early hours of Friday, 23rd October 2009 following a rather brief illness. The official death summary that the hospital issued reported the cause of her death as “sepsis”. She only officially died on the 23rd. As far as I’m concerned, I’d lost her two Mondays earlier, on 12th October 2009, when she complained of extreme breathing difficulty and was put on ventilator in the ICU.

Looking back (this year’s calendar is identical to that of 2009, so memories of that year have been coming back rather strongly this year), I realise that the suddenness with which it all happened have left me with a deep sense of paranoia, which can be described in financial terms as a “high discount rate”.

Having moved back from Gurgaon in June of that year, my mother and I had settled down in a rented house in Tata Silk Farm (she didn’t want to go back to our own house in Kathriguppe where we’d lived until 2008). She had settled well, and living not far from her sisters, had developed a nice routine. There were certain temples she would visit on certain days of the week, for example.

And then suddenly one day in September she complained of breathing trouble (she took thirty minutes to walk from our then house to my aunt’s house, which is only a ten minute walk away). Initial medical tests revealed nothing. More tests were prescribed, as her breathing got worse. There was no diagnosis yet.

She started seeing specialists – a pulmonologist and her cardiovascular surgeon (she had had trouble with some veins for a few years). More tests. Things getting worse. And before we knew it, she was in hospital – for a “routine three day admission” for an invasive test. The test got postponed, and the surgery finally done a week later. She got out of the ICU and remained there for hardly two days before she complained of insane breathing trouble and had to be put on ventilator – the only purpose the 12 days she spent on that served was to help me prepare for her impending death.

In all, it took less than a month end to end – from initially complaining of breathlessness to going on ventilator. What seemed to be a harmless problem leading to death.

I realise it’s caused insane paranoia in me which I’m yet to come out of. Every time I, or a relative or a friend, show minor signs of sickness, I start fearing the worst. I stop thinking about the symptoms in a Bayesian fashion – by looking at prior probabilities of the various illnesses that could be causing them – and overweight the more morbid causes of the symptoms. And that adds paranoia and anxiety to what I’m already suffering from.

Like two weeks back I had a little trouble breathing, but no apparent cold. It wasn’t something that happens to me normally. A quick Bayesian analysis would have revealed that the most probable cause is a sinus (which it was), but I spent half a day wondering what had become of me before I applied Vicks and quickly recovered. When my wife told me a week after she reached the US that she had got a high fever, I got paranoid again before realising that the most probable cause was a flu caused due to a change of seasons (which it was!).

Another consequence of my mother’s rather sudden death in 2009 (and my father’s death in 2007, though that was by no means sudden, as he had been diagnosed with cancer two years earlier) was that I suddenly stopped being able to make plans. I started overestimating the odds of something drastic happening, and planning didn’t make sense in such scenarios, I reasoned. As a consequence I became extremely short-term in my thinking, and couldn’t see beyond a few days away.

There have been several occasions where I’ve left a decision (such as booking tickets for something, for example) until it has been too late. There have been times when I’ve optimised for too short a term in some of my decisions, effectively jacking up my “discount rate”.

I’d written a while earlier about how in case of rare events, the probabilities we observe can be much higher than actual probabilities, and how that can lead to impaired decision-making. Thinking about it now, I’ve seen that playing out in my life over the last six years. And it will take a considerable amount of effort to become more rational (i.e. use the “true” rather than “observed” probabilities) in these things.

India as a Triangle Power

In the course of a “thinktanki” discussion at the Takshashila office on Monday, I came up with the concept of the “triangle power”. As it might be intuitive to guess, the concept stems from Indian cinema, which has championed the cause of the “love triangle” plot formula.

The trigger for this post is this post by Takshashila scholar Kabir Taneja on India’s management of relationships with Africa, and specifically about India’s investments in Sudan. They key line in Taneja’s piece is this:

Even after the carving out of South Sudan from Sudan, New Delhi has managed to keep close relations with both Juba and Khartoum, even though the near war conditions between the two states do keep India’s Foreign Ministry on its toes.

Sudan and South Sudan don’t particularly see eye to eye with each other, since the latter broke away from the former following a protracted struggle. Yet, India maintains good relations with both of them. This has its own troubles, as Taneja’s piece mentions – South Sudan is seeking India’s help to bypass Sudan, but India is not too willing since that might anger Sudan. Despite these irritants, being a triangle power there puts India in a unique position.

India, in fact, has had a rich history of being a triangle power. The most prominent example is its continued maintenance of excellent relations with most countries in West Asia, which have had a strong history of mutual bickering. If we look at the current geopolitical theatre in Central and West Asia, India has great diplomatic and economic relationships with Iran, Iraq, Saudi Arabia, Israel, UAE, USA and Russia, to name a few. In other words, India helps complete many a triangle, with not too many other countries being in this position.

Yet, historically India has hesitated to use its position as a triangle power to further its national interest. For example, India was excellently placed to broker talks between the USA and Iran a few years ago, but that opportunity was passed on, and USA and Iran made up elsewhere (in Switzerland). India could also potentially help broker some inter-state conflicts in the gulf region, yet isn’t doing much on that front.

The great thing about India is that it has slowly and steadily built up a reputation of a triangle power in several theatres, but much needs to be done in order to utilise this to further national interest.

Darwin Awards in Investment Banking

Some 20 analysts from Goldman Sachs and 10 from JP Morgan have been dismissed after it emerged that they were cheating during some mandatory tests during their analyst training program.

As the article says, it is not unusual for bankers to assist each other when it comes to tests in mandatory training and compliance, since they are seen as being time consuming and repetitive.

In that sense, that these guys copied or helped each other is not news. What matters, though, is that they got caught in the process. And that is unacceptable for a banker.

If you look at how investment banking has been shaped over the last decade or so, there have apparently been several people who have fudged stuff – from financial results to key rates to benchmarks, and gotten away with it because they haven’t got caught. And they continue to remain successful bankers.

So in the banking culture, fudging is okay, but getting caught isn’t. By getting caught fudging in tests during their training program, these analysts have betrayed the one skill that is necessary for being a successful banker, and for this reason they have been rightly weeded out.

It’s like the Darwin awards, except that for these guys it is only the end of their careers in banking.

Sweet nothings

The problem with a long-distance relationship is that there is only one way you can spend time with each other – by talking to each other. Of course there are many ways of doing this now, given the advances in communication technologies – text chat, voice chat, video chat, …

But as you can see, the common thing to all this is chat. And to chat, you need things to chat about. Which means that the amount of time you spend with each other is limited by how interesting your days have been and what you have to say to each other.

It is a rather common occurrence that you want to spend more time with each other than what what you have to say to each other dictates, and in such times, you have a few options.

You could talk about everyday happenings like the weather or some news or sports (extremely unlikely, though, that a couple will spend time discussing sports). Another popular option is repeatedly saying lovey-dovey things such as “I love you” or “I miss you”, so that you prolong the conversation. You could even tell each other the mundane details of your lives that day, like “and then I got into bus 37 and … “. Else you could talk about your respective mental states, like “I got so psyched out while writing this algorithm this morning” or “I felt so happy I answered that question in class”. And so forth.

While all of these make for excellent fillers, and help you spend more time with each other by way of creating things to talk about, the problem is that they seldom add value (except perhaps for small doses of lovey-dovey talk). And when you over-indulge in filler conversations, they end up subtracting value from your conversation by overemphasising attention on the mundane at the cost of talk with positive information content.

Contrast this with a “normal” relationship where there are so many other ways of spending time with each other other than talking – I don’t need to enumerate them here.

In other words, when you do long distance, you only have access to a small subset of your relationship. Which makes long distance hard. And occasionally makes you go mad.

PS: tools such as FaceTime allow you to “virtually be with each other” by dialling and then going about with your own lives. But you are still stuck to the fixed point which is the computer, and that means whatever life you go about is unreal, and that can further add to the pressure! And hence subtract value.

On people returning awards

So it seems to have become a fashion nowadays for writers to return any awards they’ve received from the government. It all started with Nayantara Sahgal, and it has set off a virtual procession. Maybe I don’t follow the right kind of people but one in twenty tweets or so on my timeline talks about someone who is rejecting some award or the other, all in protest against the “intolerance” of the government. There’s even a 16 year old who has returned some award.

I must admit I don’t read much fiction, but I must mention I haven’t heard of too many of the people who have returned an award. Maybe the first few returns in Sahgal’s wake were an attempt at cashing in on the free publicity this would get them, but now I think the marginal utility (in terms of publicity) of returning an award has fallen far enough to this to not be the primary reason for the return.

At a more fundamental level, I don’t know what gives these writers legitimacy in making a political statement. I mean everyone has the right to make any statement they want, but I don’t know why we should take these guys’ political views seriously only because they are writers.

While politics forms a significant portion of several novels (for example, my entire understanding of the Islamic Revolution in Iran comes from reading Marjané Satrapi’s Persepolis), that someone has written a political novel doesn’t make them an authority on politics.

As I mentioned on twitter the other day, the core competence of a writer is command over language and power of communication, and so whatever statements they might make they make powerfully. Yet, the fact that they communicate their stand well doesn’t necessarily mean that their stand is right, and give us any reason for trusting them more than we might trust a layperson with their political views.

And in this case, they are not even communicating in the means they have established competence in – what you might have expected from a writer when they are concerned about the social situation around them is to have written about it, and used their usual powers of verbal persuasion to make their case for spreading their agenda. Instead, what we have is a blatantly political message in terms of returning their awards.

I’m not saying they’re wrong to return their awards – they’re well within their rights to do so, and maybe they think it will have an impact. All I’m saying is that we shouldn’t read much into this, and not given them credit for their political views.

Putting it another way, understanding of politics is uncorrelated with literary ability, so the latter should not be conflated with the former. I’m not denying that there are authors who have excellent political insight – all I’m saying is that the probability of an author having excellent political insight is no different from the probability of a non-author having such insight.

So for the purpose of crafting government policy in response to these protests, they should be given no greater weight than similar protests by the same number of laypeople. And looking at Arun Jaitley’s response, it seems like the government has internalised this, and it is a good thing.

Revisiting IPOs

I’ve written several times (here, here and here) that the IPO pop is unfair to existing shareholders since they end up selling the stock cheaper than necessary. Responses I’ve received to this (not all on the blog comments) have mostly been illogical and innumerate, talking about how the pop “increases the value of the entrepreneurs’ holdings”, and that the existing shareholder “should be happy that the value has gone up” rather than wondering why he sold his shares at the low value.

Thinking about this in the context of the impending Cafe Coffee Day IPO, I realised that a pop is necessary (though not maybe to the extent of the MakeMyTrip and LinkedIn pops), because investors need some incentive to invest in the IPO rather than buying the stock in the secondary market after listing.

Secondary markets have superior price discovery compared to primary markets since the former have several (close to infinite) attempts at price discovery, while the latter have only one attempt. Also, prices in the secondary market change “slowly” (compared to the price difference between primary and secondary market), so even if someone has invested at a price they later have dissonance with, they can reverse the investment without incurring a high cost.

For this reason, if you want to invest in a company and want to know that you are paying a “fair price”, investing in secondary markets is superior to investing in primary markets. In other words, you need a higher incentive in order to buy in primary markets. And this incentive is provided to you in the form of the IPO pop.

In other words, the IPO pop is an incentive paid to the IPO buyer in exchange for investing at a time when the price discovery is in a sense incomplete and cannot be particularly trusted. Rather than pricing the IPO at what bankers and bookbuilders think is the “fair price”, they will price it at a discount, which offers IPO investors insurance against the bankers having made a mistake in their pricing of the IPO.

And how much to underprice it (relative to any “fair price” that the bankers have discovered) is a function of how sure the bankers are about the fair price they have arrived at. The greater their confidence in such a price, the smaller the pop they need to offer (again, this is in theory since investors need not know what fair price bankers have arrived at).

The examples I took while arguing that the IPO pop is unfair to existing shareholders were MakeMyTrip and LinkedIn, both pioneers in some sense. LinkedIn was the first major social network to go public, much before Facebook or Twitter, and thus there was uncertainty about its valuation, and it gave a big pop.

MakeMyTrip was a travel booking site from India listing on NASDAQ, and despite other travel sites already being public, the fact that it was from an “emerging market” possibly added to its uncertainty, and the resulting high pop.

So I admit it. I was wrong on this topic of IPO pops. They do make sense, but from a risk perspective. Nothing about “wealth of existing shareholders increases after the pop”.

Some initial thoughts about Vigyapanti

It’s great in theory but soon law of diminishing marginal utility will hit, so the model is not scalable

There are two kinds of content – content that people want to consume and content that people are forced to consume if they want to consume something else. Such content can come in various forms – text, photos, videos, audio or whatever. For example, this post is an example of the former kind of content – you’ll read it only if you want to. It doesn’t come bundled with other content you want to consume.

I don’t make money directly from this blog, but if I wanted to, I’d do so by inserting advertisements. For example, I might put a popup when you reached this page so that you couldn’t read this post unless you read that popup and dismissed it. The popup would then pay me everytime you read it, and you are paying me for reading this with your attention. That’s the traditional model of advertising.

The buzz in the advertising world nowadays is all about “native” advertising. In such advertising, you can’t easily distinguish between content you want to consume and content you’re getting paid (directly or indirectly) to consume. Like I might plug a product in this blog post, for example, for which I get paid.

The reason Vigyapanti, the new venture by comedy group All India Bakchod, is making waves is that it fits right in into native advertising. Their first output, shown below, has been commissioned by dating site TrulyMadly.

In an earlier era, this would have been presented slightly differently. There would have been a song or a sketch or whatever by AIB, and before you watched that, you would be forced to watch a TrulyMadly commercial for 30 seconds or so. In the process you may not have paid the commercial sufficient attention, and so whatever TrulyMadly would have paid AIB (via Youtube) might not have had its necessary impact. So that’s the good thing about native advertising, which has got everyone quite excited about this format.

The problem, in my opinion, is that it is going to be hard to scale. A friend I met yesterday talked about talent to produce such content being hard to scale. That is not at all a concern for me. My concern is that this one works currently mainly because of its novelty value. Once you have plenty of such content around, the impact without the novelty value will be questionable.

As a parallel, think of celebrity endorsements. Back when they started, a celebrity endorsing a product meant a credible message that he/she actually used it, and since people look up to celebrities, this would drive sales. Over time, however, as celebrity endorsements increased, this link got broken, even in the viewer’s minds.

Now the chief value of celebrity endorsement, in my opinion, is that it makes the commercials more watchable. No one believes that celebrities who endorse a particular product are loyal to it. For example, it is fairly common for celebrities to tweet their endorsement for a particular phone brand using a phone made by a competitor!

I think the same thing will happen to these “native comedy advertisements”. After a while, this Creep song will start being recognised as “that TrulyMadly ad” – which I’m not sure is a good thing as far as TrulyMadly is concerned. Then, when AIB do more such ads, the law of diminishing marginal utility will hit. They might control supply and strike exclusive deals, but nothing prevents competition from moving fast to make similar ads.

In conclusion, this is an innovative format, but don’t expect it to scale too much!