Category: arbit

Marginalised communities and success

Yesterday I was listening to this podcast where Tyler Cowen interviews Neal Stephenson, who is perhaps the only Science Fiction author whose books I’ve read. Cowen talks about the characters in Stephenson’s The Baroque Cycle, a masterful 3000-page work which I polished off in a month in 2014.

The key part of the conversation for me is this:

COWEN: Given your focus on the Puritans and the Baroque Cycle, do you think Christianity was a fundamental driver of the Industrial Revolution and the Scientific Revolution, and that’s why it occurred in northwestern Europe? Or not?

STEPHENSON: One of the things that comes up in the books you’re talking about is the existence of a certain kind of out-communities that were weirdly overrepresented among people who created new economic systems, opened up new trade routes, and so on.

I’m talking about Huguenots, who were the Protestants in France who suffered a lot of oppression. I’m talking about the Puritans in England, who were not part of the established church and so also came in for a lot of oppression. Armenians, Jews, Parsis, various other minority communities that, precisely because of their outsider minority status, were forced to form long-range networks and go about things in an unconventional, innovative way.

So when we think about communities such as Jews or Parsis, and think about their outsized contribution to business or culture, it is this point that Stephenson makes that we should keep in mind. Because Jews and Parsis and Armenians were outsiders, they were “forced to form long-range networks”.

In most cases, for most people of these communities, these long-range networks and unconventional way of doing things didn’t pay off, and they ended up being worse off compared to comparable people from the majority communities in wherever they lived.

However, in the few cases where these long-range networks and innovative ways of doing things succeeded, they succeeded spectacularly. And these incidents are cases that we have in mind when we think about the spectacular success or outsized contributions of these communities.

Another way to think of this is – denied “normal life”, people from marginalised communities were forced to take on much more risk in life. The expected value of this risk might have been negative, but this higher risk meant that these communities had a much better “upper tail” than the majority communities that suppressed and oppressed them.

Given that in terms of long-term contributions and impact and public visibility it is only the tails of the distribution that matter (mediocrity doesn’t make news), we think of these communities as having been extraordinary, and wonder if they have “better genes” and so on.

It’s a simple case of risk, and oppression. This, of course, is no justification for oppressing swathes of people and forcing them to take more risks than necessary. People need to decide on their own risk preferences.

10X Studs and Fighters

Tech twitter, for the last week, has been inundated with unending debate on this tweetstorm by a VC about “10X engineers”. The tweetstorm was engineered by Shekhar Kirani, a Partner at Accel Partners.

I have friends and twitter-followees on both sides of the debate. There isn’t much to describe more about the “paksh” side of the debate. Read Shekhar’s tweetstorm I’ve put above, and you’ll know all there is to this side.

The vipaksh side argues that this normalises “toxicity” and “bad behaviour” among engineers (about “10X engineers”‘s hatred for meetings, and their not adhering to processes etc.). Someone I follow went to the extent to say that this kind of behaviour among engineers is a sign of privilege and lack of empathy.

This is just the gist of the argument. You can just do a search of “10X engineer”, ignore the jokes (most of them are pretty bad) and read people’s actual arguments for and against “10X engineers”.

Regular readers of this blog might be familiar with the “studs and fighters” framework, which I used so often in the 2007-9 period that several people threatened to stop reading me unless I stopped using the framework. I put it on a temporary hiatus and then revived it a couple of years back because I decided it’s too useful a framework to ignore.

One of the fundamental features of the studs and fighters framework is that studs and fighters respectively think that everyone else is like themselves. And this can create problems at the organisational level. I’d spoken about this in the introductory post on the framework.

To me this debate about 10X engineers and whether they are good or bad reminds me of the conflict between studs and fighters. Studs want to work their way. They are really good at what they’re competent at, and absolutely suck at pretty much everything else. So they try to avoid things they’re bad at, can sometimes be individualistic and prefer to work alone, and hope that how good they are at the things they’re good at will compensate for all that they suck elsewhere.

Fighters, on the other hand, are process driven, methodical, patient and sticklers for rules. They believe that output is proportional to input, and that it is impossible for anyone to have a 10X impact, even 1/10th of the time (:P). They believe that everyone needs to “come together as a group and go through a process”.

I can go on but won’t.

So should your organisation employ 10X engineers or not? Do you tolerate the odd “10X engineer” who may not follow company policy and all that in return for their superior contributions? There is no easy answer to this but overall I think companies together will follow a “mixed strategy”.

Some companies will be encouraging of 10X behaviour, and you will see 10X people gravitating towards such companies. Others will dissuade such behaviour and the 10X people there, not seeing any upside, will leave to join the 10X companies (again I’ve written about how you can have “stud organisations” and “fighter organisations”.

Note that it’s difficult to run an organisation with solely 10X people (they’re bad at managing stuff), so organisations that engage 10X people will also employ “fighters” who are cognisant that 10X people exist and know how they should be managed. In fact, being a fighter while recognising and being able to manage 10X behaviour is, I think, an important skill.

As for myself, I don’t like one part of Shekhar Kirani’s definition – that he restricts it to “engineers”. I think the sort of behaviour he describes is present in other fields and skills as well. Some people see the point in that. Others don’t.

Life is a mixed strategy.

Periodicals and Dashboards

The purpose of a dashboard is to give you a live view of what is happening with the system. Take for example the instrument it is named after – the car dashboard. It tells you at the moment what the speed of the car is, along with other indicators such as which lights are on, the engine temperature, fuel levels, etc.

Not all reports, however, need to be dashboards. Some reports can be periodicals. These periodicals don’t tell you what’s happening at a moment, but give you a view of what happened in or at the end of a certain period. Think, for example, of classic periodicals such as newspapers or magazines, in contrast to online newspapers or magazines.

Periodicals tell you the state of a system at a certain point in time, and also give information of what happened to the system in the preceding time. So the financial daily, for example, tells you what the stock market closed at the previous day, and how the market had moved in the preceding day, month, year, etc.

Doing away with metaphors, business reporting can be classified into periodicals and dashboards. And they work exactly like their metaphorical counterparts. Periodical reports are produced periodically and tell you what happened in a certain period or point of time in the past. A good example are company financials – they produce an income statement and balance sheet to respectively describe what happened in a period and at a point in time for the company.

Once a periodical is produced, it is frozen in time for posterity. Another edition will be produced at the end of the next period, but it is a new edition. It adds to the earlier periodical rather than replacing it. Periodicals thus have historical value and because they are preserved they need to be designed more carefully.

Dashboards on the other hand are fleeting, and not usually preserved for posterity. They are on the other hand overwritten. So whether all systems are up this minute doesn’t matter a minute later if you haven’t reacted to the report this minute, and thus ceases to be of importance the next minute (of course there might be some aspects that might be important at the later date, and they will be captured in the next periodical).

When we are designing business reports and other “business intelligence systems” we need to be cognisant of whether we are producing a dashboard or a periodical. The fashion nowadays is to produce everything as a dashboard, perhaps because there are popular dashboarding tools available.

However, dashboards are expensive. For one, they need a constant connection to be maintained to the “system” (database or data warehouse or data lake or whatever other storage unit in the business report sense). Also, by definition they are not stored, and if you need to store then you have to decide upon a frequency of storage which makes it a periodical anyway.

So companies can save significantly on resources (compute and storage) by switching from dashboards (which everyone seems to think in terms of) to periodicals. The key here is to get the frequency of the periodical right – too frequent and people will get bugged. Not frequent enough, and people will get bugged again due to lack of information. Given the tools and technologies at hand, we can even make reports “on demand” (for stuff not used by too many people).

Good vodka and bad chicken

When I studied Artificial Intelligence, back in 2002, neural networks weren’t a thing. The limited compute capacity and storage available at that point in time meant that most artificial intelligence consisted of what is called “rule based methods”.

And as part of the course we learnt about machine translation, and the difficulty of getting the implicit meaning across. The favourite example by computer scientists in that time was the story of how some scientists translated “the spirit is willing but the flesh is weak” into Russian using an English-Russian translation software, and then converted it back into English using a Russian-English translation software.

The result was “the vodka is excellent but the chicken is not good”.

While this joke may not be valid any more thanks to the advances in machine translation, aided by big data and neural networks, the issue of translation is useful in other contexts.

Firstly, speaking in a language that is not your “technical first language” makes you eschew jargon. If you have been struggling to get rid of jargon from your professional vocabulary, one way to get around it is to speak more in your native language (which, if you’re Indian, is unlikely to be your technical first language). Devoid of the idioms and acronyms that you normally fill your official conversation with, you are forced to think, and this practice of talking technical stuff in a non-usual language will help you cut your jargon.

There is another use case for using non-standard languages – dealing with extremely verbose prose. A number of commentators, a large number of whom are rather well-reputed, have this habit of filling their columns with flowery language, GRE words, repetition and rhetoric. While there is usually some useful content in these columns, it gets lost in the language and idioms and other things that would make the columnist’s high school English teacher happy.

I suggest that these columns be given the spirit-flesh treatment. Translate them into a non-English language, get rid of redundancies in sentences and then  translate them back into English. This process, if the translators are good at producing simple language, will remove the bluster and make the column much more readable.

Speaking in a non-standard language can also make you get out of your comfort zone and think harder. Earlier this week, I spent two hours recording a podcast in Hindi on cricket analytics. My Hindi is so bad that I usually think in Kannada or English and then translate the sentence “live” in my head. And as you can hear, I sometimes struggle for words. Anyway here is the thing. Listen to this if you can bear to hear my Hindi for over an hour.

Ramayana and Weight Training

There are several interpretations of the Ramayana. As AK Ramanujan compiled, there are more than “three hundred ramayanas“. In some versions, Ravana is Sita’s father. In others, he is her brother. Yet others have been written from Sita’s point of view. And some from Hanumantha’s. And some from Ravanas.

In fact, the Ramayana (contrary to the sanitised Ramanand Sagar version we were fed by Doordarshan) is a fascinating enough epic that there can be millions of interpretations of the story. So let me add mine.

In my opinion, the Ramayana is a shining example of the virtues of Strength Training, especially barbell training. I’ll illustrate this with two key episodes from the epic.

The first is Sita’s swayamvara, where Rama beats off all competition to be able to marry Sita. The test is rather simple. There is a rather heavy bow that the suitors should lift and then string. My interpretation is that most other suitors who had come to the swayamvara were “convenational gymmers” who spent hours every week honing their biceps and triceps and ignoring training their large muscles.

Basically, like most “gym rats” you see at most conventional gyms, these suitors focussed on the lifts that made them look good rather than those that gave them real strength. Rama, on the other hand, practiced simple barbell lifts, and was especially adept at the deadlift. So after all the shower-offs had failed, Rama walked up and deadlifted the bow (the weight was such that no other lift was possible) and strung it. And married Sita.

The other episode comes much later in the epic, when the scene of action has shifted to Sri Lanka. Angada, the monkey prince, has gone to Ravana’s court in the form of an advance party to negotiate Sita’s release before Rama declared war on Lanka. Ravana insulted him, and so Angada refused to budge until he had had an audience. Various members of Ravana’s court tried to physically dislodge him (as Angada had challenged them to do so), but Angada remained firm, with his feet firmly planted in the ground.

Clearly, Angada did squats, and members of Ravana’s army who fooled themselves into strength by solely concentrating on the arms didn’t realise that someone (who squatted) could have such heavy and firm feet. And so they failed to dislodge him.

Now to find episodes from the epic that show the virtues of the press and the bench press.

Couples on trains

When I first visited London in 2005, the way some couples travelled on the underground caught my fancy. The usual algorithm would be that the taller partner (usually the guy) would hold on to the bar on top, and the other partner (usually the girl) would stand holding him. I clearly remember seeing this enough times back then for it to be a pattern.

I returned to London in 2017 to live there, and interestingly, this way of couple travel had gone missing. I don’t know if there was a cultural shift in the way that people travelled. My best guess is that it’s due to carriage redesign – in 2005, most of my travel (and thus observation) was on the District Line, and the District Line had got a whole new (and modern) set of carriages by 2017.

Perhaps it was the design of the old carriage (which possibly had too few railings to hold on to) that encouraged this couple behaviour. And the better designed new carriage meant that this way of one partner holding on to the other wasn’t that necessary.

The other explanation I have for this is personal – in 2005 I was a much under-exposed 22 year old who would notice every single act of public display of affection. And so every time I saw a couple travel this way (or kiss on escalators at tube stations) I would notice. By 2017, I was much better exposed, and didn’t find PDA all that fascinating and so didn’t notice even though I did many many train journeys.

In any case, the reason this observation about London trains becomes pertinent now is because of the Bangalore Metro, which seems to be showing shades of London 2005 behaviour. At least on four or five occasions in the last one month I’ve seen couples travel this way on the Bangalore metro – one holds the handrail on the ceiling, and the other holds the partner.

I begin to wonder if this is a necessary step in the evolution of any city’s metro system.

Tourist experiences

The big trend nowadays is to do tourism without doing “touristy stuff”. What counts for social currency is to do “authentic stuff” and to avoid things that are “made for tourists”. So tourists try to not visit places with too many other tourists, and go out of their way to find “authentic experiences”.

However, our recent holiday in Lisbon showed us that not all “touristy things” are the same. There were  tourist experiences we liked, and those that we abhorred. Marginal differences made a huge difference in how we experienced places, and not all “tourist experiences” were bad.

For example, on each of the three days we had breakfast in restaurants that seemed to almost wholly cater to tourists. It was possibly a function of living in a part of town (Alfama) that is now host to a lot of tourists. Each day we would check on google for places to have breakfast at, pick one and go.

All of these places had brunch menus, which were pretty good. All of them seemed overpriced given what I’d heard of Lisbon’s price levels. Waiters all spoke very good English. And people at other tables seemed to be tourists. But the food was generally of a good quality, though coffee was bad.

On the other hand, there were these restaurants where we ended up for lunch at clearly touristy places, where you knew very quickly that the food wasn’t up to the mark. One Asian restaurant we went to (we’d been walking for a while and went in desperation) served Indian Chinese food – not something you’d expect in Europe. The pork belly was cooked excellently, but then slathered with sriracha! The previous day, a restaurant close to the Cathedral had charged a fortune for a bottle of water after denying tap water. The food there was rather ordinary as well.

The contrast in tourist experiences wasn’t just about food. As I mentioned earlier, we were in a touristy part of town called Alfama, but it was a nice touristy part of town. Lines (at the castle, for example) were never too long. No place was that crowded (admittedly we went in the off season, and on weekdays). You never got intimidated. And there was the occasional smile or nod to people you came across.

On the middle day of our trip, though, we headed to Belem (another touristy part of town), to Jeronimo’s Monastery. The tourist experience there was something else. The crowds were massive everywhere. Lines to buy tickets were long. The feeling one got was that if we weren’t careful we might be robbed. There were lots of beggars around. The entire atmosphere was intimidating. It was as if we were longing for “our touristy places”. And in very quick time we had made our way back towards Alfama.

So through the trip I decided that avoiding “touristy places” isn’t a good strategy during holidays – touristy places are touristy for a reason, and the effort to avoid them can be significant. Instead, what we should avoid are tourist traps. We need to do some research and go to places that are well rated. There is nothing wrong in doing touristy stuff. All we need to do is to do the “good touristy stuff”.

Why coffee in Portugal is so bad

The title of this blog post is the text I entered into my google search bar at Lisbon airport, on my way back to London last weekend. What Google showed me on top was a blog post titled “why coffee in Portugal is so good“. The contents of the post, though, had given me the answer.

In terms of coffee cultures, Spain and Portugal are rather similar. Coffee shops usually double up as bars, unlike in England for example. This means that the baristas aren’t particularly skilled, and so you don’t get fancy latte art. The coffees you get are thus espresso, espresso with some milk and espresso with lots of milk. The milk being foamed gives the coffee a good taste, in Spain that is.

The reason coffee in Portugal tastes bad is the same reason that coffee in France tastes bad – it is a result of colonialism.

During the years of the Salazar dictatorship, Portugal was economically isolated. This meant that it could only turn to its colonies for coffee. And the Portuguese colonies (not sure if Brazil is included in this since it became independent way back in the 1800s) exclusively produced Robusta coffee. And Robusta coffee, being inferior to Arabica, is roasted slowly, and produces a bitter brew. Which is what we uniformly got in our trip to Lisbon.

France had a similar story. Though there was no economic isolation, imports from its colonies were subsidised, and this was again largely Robusta coffee. And so, as the roads and kingdoms post linked above explains, coffee in France is bad.

I’m not sure if Spain got/gets most of its colonies from its erstwhile colonies. If it does, it goes a long way in explaining the quality of coffee in Spanish cafes, despite them doubling up as bars and not necessarily having skilled Baristas. For the likes of Colombia and Ecuador and Honduras produce absolutely brilliant Arabica coffee.

 

Mixing groups at parties

I normally don’t like mixing groups at parties I host – that sometimes leaves me as a “cut vertex” meaning that I have to personally take it upon myself to entertain one or more guests and can’t leave them to be “self-sufficient”. You might recall that a bit over two years ago, I had tried to use social network analysis to decide who to call for my birthday party.

However, for unavoidable reasons, we had to call a mixed set of friends to a party yesterday. We’re “putting BRexit” later this week (moving back to Bangalore), and considering that there were so many people we wanted to meet and say goodbye to, we decided that the best way of doing so was to call them all together to one place.

And so we ended up with a bit of a mixed crowd. The social network at yesterday’s party looked like this. For the sake of convenience, I’ve collapsed all the “guest families” into one point each. The idea is that while a guest family can “hang out among themselves”, they needn’t have come to the party to do that, and so it fell upon us hosts to talk to them. 

So the question is – with three hosts, one of whom was rather little, how should we have dealt with this assortment of guests?

Note that pretty much everyone who RSVPd in the affirmative came to the party, so the graph is unlikely to have been more connected than this – remove my family and you would have a few islands, including a couple of singletons.

Should we have spent more time with the families that would’ve been singletons than with those who knew other guests to interact with? Or was it only fair that we spent an equal amount of time with all guests? And considering that we could deal with guests on the right side of the graph “in twos”, did that mean we should have proportionately spent more time with those guys?

In any case, we took the easy way out. Little Berry had an easy time since there were two entities she knew, and she spent all her time (apart from when she wanted parental attention) with them. The wife and I were taking turns to buy drinks for freshly arrived guests whenever they arrived, and on each occasion we helped ourselves to a drink each. So we didn’t have to worry about things like social network dynamics when we had more important things to do such as saying goodbye.

I just hope that our guests yesterday had a good time.

Oh, and way too many conversations in the last two weeks have ended with “I don’t know when I’ll see you next”. It wasn’t like this when we were moving the other way.

 

Monetising the side bets

If you were to read Matt Levine’s excellent newsletter regularly, you might hypothesize that the market for Credit Default Swaps (CDS) is dying. Every other day, we see news of either engineered defaults (companies being asked to default by CDS holders in exchange for cheap loans in the next round), transfer of liability from one legal entity to another (parent to subsidiary or vice versa), “orphaning” of CDSs (where on group company pays off debt belonging to another) and so on.

So what was once a mostly straightforward instrument (I pay you a regular stream of money, and you pay me a lumpsum if the specified company defaults) has now become an overly legal product. From what seemed like a clever way to hedge out the default risk of a loan (or a basket of loans), CDSs have become an over-lawyered product of careful clauses and letters and spirits, where traders try to manipulate the market they are betting on (if stuff like orphaning or engineered default were to happen in sports, punters would get arrested for match-fixing).

One way to think of it is that it was a product that got too clever, and now people are figuring out a way to set that right and the market will soon disappear. If you were to follow this view, you would thin that ordinary credit traders (well, most credit traders work for large banks or hedge funds, so not sure this category exists) will stop trading CDSs and the market will die.

Another way to think about it is that these over-legalistic implications of CDSs are a way by the issuer of the debt to make money off all the side bets that happen on that debt. You can think about this in terms of horse racing.

Horse breeding is largely funded by revenues from bets. Every time there is a race, there is heavy betting (this is legal in most countries), and a part of the “rent” that the house collects from these bets is shared with the owners of the horses (in the form of prizes and participation fees). And this revenue stream (from side bets on which horse is better, essentially) completely funds horse rearing.

CDSs were a product invented to help holders of debt to transfer credit risk to other players who could hedge the risk better (by diversifying the risk, owning opposite exposures, etc.). However, over time they got so popular that on several debt instruments, the amount of CDSs outstanding is a large multiple of the total value of the debt itself.

This is a problem as we saw during the 2008 financial crisis, as this rapidly amplified the impacts of mortgage defaults. Moreover, the market in CDSs has no impact whatsoever on the companies that issued the debt  – they can see what the market thinks of their creditworthiness but have no way to profit from these side bets.

And that is where engineered defaults come in – they present a way for debt issuers to actually profit from all the side bets. By striking a deal with CDS owners, they are able to transfer some of the benefits of their own defaults to cheaper rates in the next round of funding. Even orphaning of debt and transferring between group companies are done in consultation with CDS holders – people the company ordinarily should have nothing to do with.

The market for CDS is very different from ordinary sports betting markets – there are no “unsophisticated players”, so it is unclear if anyone can be punished for match fixing. The best way to look at all the turmoil in the CDS market can thus be looked at in the same way as horse rearing – an activity being funded by “side bets”.