The Wife’s Methods

During a particularly acrimonious fight last night, I found that I was losing myself, and had no clue what was happening. Tempers were frayed, voices were raised and a huge towel had become wet from our collective tears and nose-goo. And I was fighting a losing battle, against myself. It seemed like I was consuming myself, and there was no way out.

I walked up to the kitchen and pulled out two New York shot glasses from the shelf. I reached for the top shelf, where we store the stuff, and pulled out the Talisker bottle. And I filled the shot glasses, up to the brim, and we downed it, one glass each. Soon, it seemed like all was going to be fine with the world.

At once we calmed down. We started thinking more rationally now. The fight continued, but the voices got lowered, the collective discharge into the towel ebbed. We weren’t consumed by ourselves any more. Instead, we were now calmly talking to each other, trying to find a way out of the problem we had at hand. Note that we didn’t kiss-and-make-up-and-bury-the-fight like we used to earlier. We didn’t sleep until we’d finished our business and reached an agreement. But life had become so much better.

I must admit that over the last year or more, I’ve consistently underestimated the wife (earlier the girlfriend) and her methods. Sometimes I’ve never understood why she does things in a certain way (and expects me to do things the same way), at other times I’ve been too arrogant in my own thoughts, to give her methods a fair hearing. This was yet another such example.

It was I who had made an irrational decision that Talisker was meant for slow sipping and savouring. It was I who had thought it was “too expensive to be shot down”. And it was I who had made the wife promise she won’t gulp it down before buying the current bottle of Talsker. I admit it, I was wrong. Wrong. The wife, it turns out, had always been right.

Google Plus – Initial thoughts

Hareesh sent me an invite for Google Plus early on Wednesday morning. Thinking it’s another stupid thing like Wave, I ignored it. But feedback from twitter revealed that the product did show some promise, so later that evening I joined it. I’ve got some 150 friends already (god knows how long it took me to get to so many with either Orkut or Facebook), though I haven’t started using it yet. Some initial thoughts:

  • I like the concept of circles, and that it’s so easy to segregate your friends. This has become a huge problem in social networking, especially after all uncles and aunties got on to facebook. So far I’ve made an attempt to classify all my contacts into disjoint circles of “friends” “family” and “acquaintances”. I also like it that circles need not be disjoint, so I can make an exception to my rule and put the wife in both “friends” and “family”
  • I like that it’s a directed graph. That you can follow the public posts of someone without them having to follow you back. I don’t know why but I simply like this. I hate putting friendship requests and waiting endlessly for responses and stuff. So this directed stuff makes a lot of sense for me.
  • I need to find out how to import my blog there. Then I can close my blog feed on facebook which is infested with uncles and aunties. On Plus, they’ll be safely tucked away in the “family” circle which won’t be able to see much.
  • I don’t like being the “cut-vertex”. I don’t like being the one guy who links two subgroups of a larger group. On a similar note, I don’t like to go out simultaneously with disjoint sets of friends (i.e. two groups that didn’t know each other previously). I feel too tense trying to make sure everyone’s comfortable and clued in on what’s happening. Similar with conversations on facebook. So yeah, I’ll probably segregate my circles further and have more cliquey groups.
  • Again, directed graph means I can peacefully put ignore to people, without appearing rude. On FB, if some uncle comments and I don’t respond, he might take offense, and I’ll be cognizant of the fact that he takes offence. And I force myself to reply. On G+, if i”m not following him, I can peacefully put well left. Like I sometimes do to @Replies to me on twitter from people who I don’t follow

So seems promising. Too early to say if it’ll make me give up both twitter and facebook. I’m sure I won’t give up twitter for sure. Let’s wait and see.

Partners and Associates

Last week I’d written this post about managing studs, and while discussing that with some colleagues the other day, I realized that I could reformulate it without touching upon the studs and fighters theory. So let us consider a consulting firm. There is a partner, whose sole job is to solicit business for the firm, and to get the lion’s share of the benefits. And there are associates, trying hard to get noticed and promoted, and working for this partner. It’s the associates who do most of the work. Let’s assume that the firm is in “steady state”, where as long as they don’t mess up, there is a steady stream of business assured.

Under this assumption, all that the partner needs to do is to ensure he and his team don’t “mess up”. He knows that he has the relationships to keep the work flowing, and given that he doesn’t really do any work himself, he doesn’t care about the nature of work, or whether his associates find the work challenging, or interesting, and stuff. As long as the tap is open, and he makes his “partner’s cut”, he’s happy.

Given this, his incentives are towards work that is hard to go wrong. “Steady” work, where expectations are likely to be high, but the downside risk is quite low suits him absolutely fine, and he seeks to find more and more of that kind of stuff. There is little chance that his relationships with his steady clients can go wrong in this kind of a situation, right? So he goes about trying to find work with a “short deep-out-of-money option” payoff.

What about the associates? There will be some of them that are already established, and known to these steady clients. They know that it’s only a matter of time before they get promoted and hit the partnership pot of gold. They’ve made their mark, at a time when they had the opportunity to do so, and now they only need to hold fort till the end of the rainbow. And they hold on, perfectly happy to do work in which things can’t go wrong.

As for the other associates, who are still looking to establish themselves? What they’d ideally like would be the opportunity for “big wins”, which will make them be seen, and noticed, and enable them to make the move up the ladder when the time is right. Given their current standing, they don’t mind taking the risk – they have little to lose in terms of lost reputation. On the other hand they have everything to gain from pulling off improbable big wins. Basically they ideally like the “long deep-out-of-money option” payoff.  But the stream of projects the partners and other associates prefer doesn’t give them the opportunity to go for this kind of payoff! So they are stuck.

So, if you are working in a consulting firm, which is in reasonably steady state, where the partners don’t take part in day-to-day work, and where you are not yet established, you need to think if you’re in the right place.

Models

This is my first ever handwritten post. Wrote this using a Natraj 621 pencil in a notebook while involved in an otherwise painful activity for which I thankfully didn’t have to pay much attention to. I’m now typing it out verbatim from what I’d written. There might be inaccuracies because I have a lousy handwriting. I begin

People like models. People like models because it gives them a feeling of being in control. When you observe a completely random phenomenon, financial or otherwise, it causes a feeling of unease. You feel uncomfortable that there is something that is beyond the realm of your understanding, which is inherently uncontrollable. And so, in order to get a better handle of what is happening, you resort to a model.

The basic feature of models is that they need not be exact. They need not be precise. They are basically a broad representation of what is actually happening, in a form that is easily understood. As I explained above, the objective is to describe and understand something that we weren’t able to fundamentally comprehend.

All this is okay but the problem starts when we ignore the assumptions that were made while building the model, and instead treat the model as completely representative of the phenomenon it is supposed to represent. While this may allow us to build on these models using easily tractable and precise mathematics, what this leads to is that a lot of the information that went into the initial formulation is lost.

Mathematicians are known for their affinity towards precision and rigour. They like to have things precisely defined, and measurable. You are likely to find them going into a tizzy when faced with something “grey”, or something not precisely measurable. Faced with a problem, the first thing the mathematician will want to do is to define it precisely, and eliminate as much of the greyness as possible. What they ideally like is a model.

From the point of view of the mathematician, with his fondness for precision, it makes complete sense to assume that the model is precise and complete. This allows them to bringing all their beautiful math without dealing with ugly “greyness”. Actual phenomena are now irrelevant.The model reigns supreme.

Now you can imagine what happens when you put a bunch of mathematically minded people on this kind of a problem. And maybe even create an organization full of them. I guess it is not hard to guess what happens here – with a bunch of similar thinking people, their thinking becomes the orthodoxy. Their thinking becomes fact. Models reign supreme. The actual phenomenon becomes a four-letter word. And this kind of thinking gets propagated.

Soon the people fail to  see beyond the models. They refuse to accept that the phenomenon cannot obey their models. The model, they think, should drive the phenomenon, rather than the other way around. The tails wagging the dog, basically.

I’m not going into the specifics here, but this might give you an idea as to why the financial crisis happened. This might give you an insight into why obvious mistakes were made, even when the incentives were loaded in favour of the bankers getting it right. This might give you an insight as to why internal models in Moody’s even assumed that housing prices can never decrease.

I think there is a lot more that can be explained due to this love for models and ignorance of phenomena. I’ll leave them as an exercise to the reader.

Apart from commenting about the content of this post, I also want your feedback on how I write when I write with pencil-on-paper, rather than on a computer.

 


Hottie or cutie?

So if you’re in the “market” (which I got out of close to two years back), it is possible that you might not be able to decide whether to give more importance to a girl’s “hotness” or “cuteness”. If you think about it, though they both contribute to the girl’s general beauty and physical attractiveness, they are orthogonal concepts. So should you go for the hottie or the cutie?

Based on careful analysis, which has been approved by the very hot wife, I hereby declare that given this dilemma, you should go for the hottie. The reason is simple. Cuteness has everything to do with one’s genes, and little else. You look cute because your parents decided to pass on a set of “good features” to you. It says nothing at all about you, or the kind of person you are. It’s possible with respect to cuteness that one came up with the proverb “appearances are deceptive”.

Hotness, on the other hand, has very little with the “gifts” that you’ve been given by your parents, and everything about how you carry yourself. You appear hot to people not because of the way you look (or the way your “features” are, to use an aunty-ish term), but because of the way you put them to good use. If you’re able to fashion an attractive version of yourself simply by the way you speak and act, you must be very attractive indeed!

So. Dear Bachelors. Take my word. And go for the hottie. And Dear Cuties. This means the bar for you has been set higher. You must carry yourself so well that people can see beyond your inherent cuteness and recognize your hotness.

PS: you might argue that cute long-term-gene-propagating partner => cute kids. But hot long-term-gene-propagating-partner => excellent trainer for kids to make them hot. Extend the argument in this post, and you know what’s better for you and your genes

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.