On Walking out of a play

Last night the wife and I went to watch what we thought was going to be a play at KH Kala Soudha in Hanumanthanagar. It was supposed to be “directed” by RJ Vinayak Joshi and “starring” among others TN Seetharam, Master Hiriyannaiah and others. It turned out to be more like a talk show, where Joshi attempted to ‘interview’ these worthies, and they came up on stage and sat on a bench and put senti. And talked on, and on, and on.

I’m not saying it was a total ripoff. The band that was playing at the side was pretty good, with the singers having quite distinctive voices and the music also being quite nice. There was this little standup piece by this guy called Nagaraj Kote, which was probably the only part of the evening that lived up to the announced title ‘Simple is difficult’. Then, there was this frequent dialogue between Joshi, playing “naanalla” (not me) and this other guy playing “gottilla” (i don’t know). And they invited this really old couple to talk about their 50-year-old marriage, and they turned out to be quite funny!

Actually, despite some 15-20 mins of senti by Seetharam sometime in the middle, everything seemed to be going quite well. It was 9 o’clock and time for the “play” to be over. And then Master Hiriyannaiah came up on stage. And started talking. And talking. And talking. He was supposed to be taking a dig at politicians, and he ended up talking just like one of them. Rambling on and on and on. And on and on and on. The band had by then gone off stage, else they could’ve played LedZep’s Ramble On and salvaged the evening.

So there was this debate between the wife and I about whether it was ethical to walk out. A few minutes after Hiriyannaiah started rambling, I thought the theatrepeople had broken their part of the contract – as long as they were within the time that they advertised, they were good. And we were obliged to hold up our end of the contract. But once they overshot, I felt no need to hold up my end of the contract, and having given them the gate money, and my promised 90 minutes, I was now free to walk out.

Of course, I wasn’t going to do something outrageous – like shouting or screaming or talking on my mobile or anything else that might cause disrespect to the performers. All I wanted to do was to walk out.

The wife, on the other hand, felt it would be insensitive on our part to walk out, and that it too would amount to disrespect, and we ought to stay till the end of the show. Her thinking reminded me of what happens in an interest rate swap when one party goes bankrupt – the counterparty is obliged to continue paying it’s share of the swap, and hold up its end of the contract.

I think there’s merit in both sides of the argument, and I kept debating that as I waited until the end of Hiriyannaiah’s rambles when I really couldn’t take it any more and I walked out. So what do you think of this? Do you think it’s ok for performers to expect perfect behaviour from the audience even after they’ve not held up their end of the contract? Do you think it’s ethical for people to quietly walk out of a play that they’re not enjoying at all, as a means of protest? Don’t you think it helps having this part of the feedback loop?

Comments, please.

Floor Space Index

In an extract  from his latest book Triumph of the City Ed Glaeser argues that one way to improve urban living would be to increase the floor space index, and allow higher buildings. In another recent article, Ajay Shah argues that the presence of army land in the middle of cities is again hampering urban growth and development by increasing intra-city distances and reducing space for the common man inside the cities. I was thinking about these two concepts from the point of view of Bangalore.

Floor space index (FSI) is a metric that controls the total supply of residential area within a city. It is defined as the ratio of built-up area of the house to the area of the plot it stands on. Currently, in Bangalore it is capped at 1.5. This means that if I own a site measuring 60′ by 40′, the maximum area of the building I can build on it is 3600 sq ft. Clearly, by capping FSI, the total supply of residential area in a city is capped (assuming cities don’t expand outwards, of course). Currently, a lot of the development going on is of the type of builders acquiring “underutilized property” (old bungalows, say) and then “unlocking the value” by building buildings on it up to the permissible limit.

So I was wondering what were to happen if the government were to tomorrow decide to act on Glaeser’s recommendations and suddenly increase the FSI. For one, it would jack up the value of land – since there is more value in each piece of land that can now be “unlocked”. On the other hand, it would lead to a gradual fall in prices of apartments – since the limit on the supply of “floor space” would go up, that would lead to a fall in prices.

Existing owners of “independent houses” (where they own both the house and the land it’s built on) would be overjoyed – for now the value of the land they own would suddenly go up. Existing owners of apartments wouldn’t – their net worth takes a sudden drop. But all this doesn’t matter since both these groups are highly fragmented and are unlikely to matter politically.

What one needs to consider is how builders and real-estate developers would react to this kind of a move, since they have the ability to influence politics. For one, it would allow them to build additional floors in properties where they already own the land, so they have reason to stay positive. On the other hand, due to the increase in land prices, new development would become much more expensive than it is today, thus making it tough for them to expand. Another thing to note is that increased supply of housing and office space in the city would definitely negatively impact the prices of such holdings on the outskirts, and I’m of the opinion that a large number of real estate companies might actually be “long” housing space on the outskirts and would thus lose out in case the FSI were to be increased.

There are other implications of increasing FSI, of course. One of my biggest nightmares is that density in cities will increase at such a high rate that the sewerages won’t be able to handle the extra “flow”. And then there is the issue of increased traffic – though it can be argued that increased density means that commutes might actually come down. Overall, to my mind at this point of time, the picture is unclear, though given the overall incentives to the powerful real estate community it is unlikely to happen. Though I would definitely welcome any increase in FSI (this has nothing to do with my financial situation; and yes, based on my current holdings I’m “long FSI”).

As for army land, there are vast areas that used to once be on the outskirts which are now inside the city. If the army were to decide to sell them to the city, I’m sure it would be able to make a really large amount of money. But then given that the army is not a profit-oriented institution, it has no need for the money so will not let go of the land. In fact, as I write this, the army in Bangalore has taken up the development of lands around the inner ring road – some townships and football fields have come up. But then, this is not the use that Shah envisaged – for none of this actually integrates enough into the local economy to make an impact. And so for the army to sell the land, the decision would have to come from the central government. And given that increase in in-city floor space is likely to negatively impact the powerful real estate companies, don’t be surprised if they were to lobby against the sale of urban army land.

Tailpiece : A while back there was this issue of Transferable Development Rights. When the BBMP wanted to widen roads it announced that people losing land would be compensated in the form of tradable TDRs. For that to be effective, a necessary condition is that the cost of violating the building code is actually high.

Career Development

I realize that in my close-to-five-years professional career, across four companies, the only time I’ve been really happy with my job has been when I’ve abandoned thoughts of “learning”, “career”, “career development” and stuff, and simply worked for the money.

Given that I don’t expect to ever retire completely (though I do plan to “half-retire” sooner rather than later) I think it’s important to focus on stuff like career development. But given that sometimes I believe I only want to build up a big enough base that after that I can take chances, short-term cash flow is important, too.

Oh, and in other news, I recently discovered that I’ve spent more time in my current job than in any of my earlier jobs.

On working in a consulting firm

Ok so my hypothesis is that a consulting firm is a good place to work at if and only if the partners are involved in day-t0-day business.

Once the partners move on from doing day-to-day work into purely managerial roles – where they only manage their teams and interact with clients, they are no longer concerned about the quality of work, or the career development of their employees. All they are concerned about is the billing, and as long as they can sell their team to the client, and keep the client happy, that is all they care for.

Sooner or later, I hope to start a consulting firm. The basic idea has taken seed in my head, and once it’s firmed up enough I’ll let people know. However, at this point in time, I want to assure whoever will be my future employees that I don’t intend to grow the firm too large. I don’t have that much of a passion for managing people, so the thrill for me will be in doing the work that I want my consulting firm to do. And that way, the proud and arrogant man that I am, I’ll ensure that the quality of work at my firm doesn’t dip.

 

Moron the corruption issue

Following my previous post and comments and countercomments and discussions on twitter and facebook and google groups and various other forums, I’ve been thinking about this whole corruption thing. Random thoughts. The kind that comes to you when you’re traveling across the city by auto on a hot summer day, watching the world go by.

Ok so this is for the people who claim that the supporters of Anna Hazare are a large enough group that they probably represent “most of the people”. If this were the case, we have a simple solution to corruption – all these worthies can band together in the form of an “anti corruption party” (when was the last time we had a political party being formed on a solid ideology?) and contest the next elections. And if they can work hard, and ensure that they keep up the kind of efforts they’ve started, they’ll soon be ruling us. And hopefully they’ll continue with their zeal and be actually able to eradicate corruption. (on my end, I promise that if a credible party gets formed with an anti-corruption stand, I’ll get over my NED, get myself registered as a voter and vote for them).

But there are reasons to doubt something like this will happen. A look at the list of nominal supporters Anna Hazare got suggests that a lot of people were there just to be seen and get footage, rather than really wanting to weed out corruption. Again, given the political spectrum across which Hazare’s supporters last week came from, it might not be that easy an idea to form this “anti-corruption party” that I suggested.

Thinking about it further, there is a scary thought – that a large part of our population is actually pro-corruption. And looking at the political parties across the spectrum, it doesn’t sound implausible. So if a large number of people are actually pro-corruption, what are we to do?

Let me put it another way. How many people do you think are really anti-corruption? On all fronts? How many people do you think exist in India who haven’t paid or received a single bribe, however small that might be? Basically I want to estimate the number of people who are against corruption of all kinds, and my sense is that this number is likely to be small indeed.

I think one needs to think about this further before actually figuring out how to weed out corruption. From what I’ve read so far the Lok Pal bill simply adds one extra protective layer, and am not sure of its effectiveness. More about this in another post.

Something’s Itching

  • Recently I read this joke, not sure where, which said that the American and Indian middle classes are feeling sad that they cannot take part in a revolution, unlike their counterparts in Egypt, Tunisia, Libya, Yemen and other similar place. Instead, they can only vote
  • There needs to be some sort of an antitrust law for political parties. There is currently little to distinguish between the policies of various political parties. For example, all parties favour a greater role for the government (more govt => more opportunity to make money on the side => more corruption, etc.) .
  • Given the homogeneity in the political spectrum, there is little incentive to vote. This scoundrel may be only marginally better than that scoundrel, so why bother voting. So we have this large middle class which essentially removes itself from the political process (confession: I’m 28, and I’ve never voted. When my name’s in the list I’ve not been in town, and vice versa.)
  • Now this Anna Hazare tamasha has suddenly woken up people who never bothered to vote, and who are pained with excessive corruption. So they’re all jumping behind him, knowing that this gives them the opportunity to “do something” – something other than something as bland and simple as voting.
  • Supporters of Hazare care little about the implications of what they’re asking for. “Extra constitutional bodies”? “Eminent citizens”? Magsaysay award winners? Have you heard of the National Advisory Council? You seriously think you want more such institutions?
  • The Lok Ayukta isn’t as useless an institution as some critics have pointed out. But then again, this is highly personality-dependent. So you have a good person as a “lok pal”, you can get good results. But what if the government decides to appoint a compliant scoundrel there? Have the protesters considered that?
  • Basically when you design institutions, especially government institutions, you need to take care to build it in such a way that it’s not personality-dependent. Remember that you can have at TN Seshan as Election Commissioner, but you can also have a Navin Chawla.
  • So when you go out in droves and protest, you need to be careful what you ask for. Just make sure you understand that.

Useful links:

http://acorn.nationalinterest.in/2008/02/23/grammar-of-anarchy/

http://openthemagazine.com/article/voices/the-anna-hazare-show

http://calamur.org/gargi/2011/04/06/my-issues-with-the-proposed-jan-lok-pal-bill/

http://realitycheck.wordpress.com/2011/04/06/jan-lok-pal-caveat-emptor/

http://www.indianexpress.com/story-print/772773/

http://www.business-standard.com/india/news/the-hazare-hazard-/431045/

 

Priors and posteriors

There is a fundamental difference between version 1.0 of any thing and any subsequent version. In the version 1.0, you usually don’t need to give any reasons for your choices. The focus in that case would be in getting the version ready, and you can get away with whatever assumptions you want to feel like. Nobody will question you because first of all they want to see your product out, and not delay it with “class participation”. The prior thus gets established.

Now, for any subsequent version, if you suggest a change, it will be evaluated against what is already there. You need to do a detailed scientific analysis into the switching costs and switching benefits, and make a compelling enough case that the change should be made. Even when it is a trivial change, you can expect it to come under a lot of scrutiny, since now there is a “prior”, a “default” which people can fall back on if they don’t like what you suggest.

People and products are resistant to change. Inertia exists. So if you want to make a mark, make sure you’re there at version 1.0. Else you’ll get caught in infintely painful bureaucratic hassles. And given the role of version 1.0 into how a product pans out (in the sense that most of the assumptions made there never really get challenged) I think the successful products are those that got something right initially, which made better assumptions than the others.

Addition to the Model Makers Oath

Paul Wilmott and Emanuel Derman, in an article in Business Week a couple of years back (at the height of the financial crisis) came up with a model-makers oath. It goes:

• I will remember that I didn’t make the world and that it doesn’t satisfy my equations.

• Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.

• I will never sacrifice reality for elegance without explaining why I have done so. Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.

• I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension.

While I like this, and try to abide by it, I want to add another point to the oath:

As a quant, it is part of my responsibility that my fellow-quants don’t misuse quantitative models in finance and bring disrepute to my profession. It is my responsibility that I’ll put in my best efforts to be on the lookout for deviant behavour on the part of other quants, and try my best to ensure that they too adhere to these principles.

Go read the full article in the link above (by Wilmott and Derman). It’s a great read. And coming back to the additional point I’ve suggested here, I’m not sure I’ve drafted it concisely enough. Help in editing and making it more concise and precise is welcome.

 

In Perpetual Transition

This post has nothing to do with Ravi Karthik’s blog. It has everything to do with Bangalore’s roads. I can’t recall a single instance in time in the last 15 years when all roads in Bangalore have been in “normal state”. Maybe ever since the KR Market flyover started, there has been one part of the city or the other that has been dug up. And the digging is only increasing. Earlier it would be a handful of places in the city that were dug up. Now, it is tough to find two points over 5 km apart such that you don’t have to take a diversion of some sort to travel between them.

The optimistic among us think that things will become better as soon as these projects get completed. However, what we forget is that there is a small but powerful section of society that survives on the city being in transition. Road-builders, bridge-builders, road-diggers, road-fillers, and all these sundry people make their living based on the premise that the city will be in perpetual transition. And given how critical income from such activities is for their survival, they resort to lobbying and paying “rents” to relevant people in the government to ensure their cash flows continue.

The problem here is one of a small concentrated set of big winners, and a large uncoordinated distributed set of small losers. And the small set of winners can successfully get together and lobby and have things their way, because the other set is too disjointed to do anything about it.

The other (and in my opinion, the bigger) problem is that thanks to lobbying, the government has a natural disposition to spend more than to spend less. And all the spending comes from taxpayer money. So you have the road projects in Bangalore that you think you don’t need. You have the free TVs and Mixies and whatnot in Tamil Nadu. And you have rice and wheat given to the (supposed) poor at rock-bottom prices. And where does the money for all this come from? Your taxes!

I hope sooner rather than later people realize that the only solution to corruption is less government. The problem, however, is that the government has no incentive to reduce its own size – for in that case the kickbacks and  rents that it (to be precise, people who are part of government) can potentially extract come down. You might institute acts like FRBM (fiscal responsibility and budget management, which seeks to put a cap on government spending) but with such a cap in space, what is the guarantee that the government will actually spend that limited money on what is necessary, and not what gives rents for its officers and employees?

Political parties may have different ideologies, and may appear to fight about every little thing. But this is one thing they agree on – that the size of the government be large – that way they all get to (in turns) have a share of the (rental) pie. This equilibrium is stable and I don’t know how we can snap out of this. And till then, our taxes will continue to flow out. And the cities will be in perpetual transition.

Sergei Bubka and Academia

There is this famous story that says that the Soviet government promised pole vaulter Sergei Bubka some huge sum of money “every time he broke the world record”. Being rather smart, Bubka would break the world record each time by one centimeter (the least count for pole vault measurement), utilizing the fact that the nature of the event (where you set the bar and try to clear it, where success in each attempt is binary) to his advantage.

The thing with academia is that ‘paper count’ matters. And it appears that the quality of papers cannot be objectively measured and so the quality of the journals in which they are published are taken as proxy. And I hear that for decisions like getting a PhD, getting tenure, reputation in the community, etc. there is some sort of informal “paper count” that one needs to clear. You don’t progress until you’ve published a certain “number of papers”.

What this does is to incentivize academics to publish more. The degree of “delta improvement” shown in a particular paper over it’s predecessor (assuming each paper can be seen as an improvement over one particular previously known result) doesn’t matter as much as the number of improvements thus shown. Hence, every time the academic notices a small epsilon improvement, he finds it significant – it gets him a paper! The actual practical utility of this improvement be damned.

This is all fine in academia where one doesn’t need to bother about lowly trivialties such as “practical utility”. But it does start to matter when the academic migrates to industry, and there is no shortage of people doing this movement. Now, suddenly, what he needs to think about it practical utility. But that doesn’t come naturally to him. The academic strives for delta improvements. And each time there is a delta improvement he finds it significant – after all, that is what he has been trained to do during his long stint writing papers.

I must confirm I’m not saying here that ex-academics strive only for delta improvements, but just that they find each delta improvement significant, irrespective of the magnitude of the delta. In that way, they are different from Bubka.

But take that out and there is no difference. Both are incentivized by the number of delta improvements they make, rather than their magnitude. In the first case the Soviet Government ended up transferring more than what was perhaps necessary to Bubka. Similar flawed incentives can lead to corporations losing a lot of money.

PS: I must admit I’m generalizing. Of course there exist studmax creatures like Cat, who refuse to publish unless they have something really significant (he told me of one case where he refused to add his name to a paper since he “didn’t want to be known for that work” or something like that). But the vast majority gets its doctorates and tenures by delta publishing, so I guess I’m allowed to generalize.