Turning Twenty Four

Today my wife Pinky turns twenty four. Thinking about it, twenty four seems such a long time ago. Or maybe not. I don’t think there has been any other significant age-landmark for me since then. I remember that when I turned twenty four, I got a feeling that I’d become old.

The premise was based on sport, and more specifically the Indian cricket team. Anyone who was twenty three or younger was referred to as a “promising youngster”. As soon as you turned twenty four, though, you lost that tag! Of course the story is different in different countries, and in different sports. For example, KP Pietersen was 24 when he made his debut. For England, he was “young”. Not for the Indian press, though.

Given that I faced such a step up (in terms of self-perception ) when I was twenty four, it seems like a breeze after that. Completing quarter of a century of existence didn’t trigger any emotion. Neither did going into the “late twenties” (when I turned 28) have that kind of an impact. I don’t know what it is, but it was when I turned twenty four that I suddenly felt grown up, and old. And I’ve felt that way ever since.

I mentioned this “growing old” to Pinky first thing this morning, but she dismissed it saying she feels no such thing. She also said that she’s really happy that she’s turned twenty four. She hates prime numbers, she says.

Charades of obscurity

Having “played” dumb-charades (DC for short) competitively at a school and college level, I don’t particularly enjoy playing it casually. I’m prone to getting annoyed when people around me (either on a picnic, or a party) exclaim with great enthusiasm that we should play DC. Till recently I used to think it was like chess – where my enthusiasm for the game has been killed purely because I played it competitively, but now I realize there are more reasons.

The challenge with “competitive” DC is that it is a timed game. You are judged based on how fast you can act out a certain name/place/animal/thing/. Because of this the clues need not be too hard, and there is a fair degree of challenge in acting out even simple things. Apart from this, the clues are set by a neutral third party which means they can all be trusted to be of approximately similar standard, so there is some sort of a level playing field there. Then, you have teams that have practiced well together, and have clues for all the trivial stuff, and you have a game!

With casual DC, there are several problems. Firstly, the games are not timed. Secondly, the teams haven’t practiced together at all, so it takes ages to communicate even straightforward stuff (which is why the games aren’t timed). And then the clues are usually given to you by your competitor. And for some reason, casual DC always has to be movies. No books, no places, no animals, no personalities, nothing.

The f act that the games are not timed, combined with the fact that the clues are given by the competitor, means that the game usually gets into a downward spiral of obscurity. You don’t want your competitor to guess the movie easily, so you give a vague movie. And they reply with something vaguer. And so forth, until teams have to check IMDB to find out if the movies actually exist. By which time all the enthusiasm for the game is lost.

On a recent trip (with colleagues, as part of our CSR initiative. more on that in another post) we played casual DC, and after some 10 clues it had gotten so obscure that nothing was guessable. I’d lost interest when someone suggested we do Kannada movies! Now, that’s something few people would’ve played – DC with Kannada movies as clues, because of which we could give clues while not keeping them too obscure (but it was hard. I completely bulbed trying to act out “Kalasipalya”).

Still, my hatred for casual DC remains, and I try as much as possible to not play it. Maybe next time I’ll impose conditions (like timing, choice of subjects, etc.), and refuse to play if they want to do English movies with infinite time.

Relationships and the Iterated Prisoner’s Dilemma

It was around this time last year that something snapped, and things have never been the same again. Until then, whenever she threw some tantrums, or we had some fight, I’d always give her the benefit of doubt, and unconditionally apologise, and make an effort to bring the relationship back on track. But since then, I don’t feel the same kind of sympathy for her. I don’t feel “paapa” for her like I used to , and have questioned myself several times as to why I even aoplogise, and not expect her to do that.

The optimal strategy for Iterated Prisoner’s Dilemma has been shown to be a strategy called “Tit for tat”. To explain the problem, you play a series of games against an “opponent”, and in each iteration, each of you choose to either “cooperate” or “defect”. For each combination of choices, there is a certain payoff. The payoff looks similar to this, though the exact numbers might be different. In this table, the first value refers to the first player’s payoff and the second represents the second player’s.

Player 1/ Player 2 Co-operate Defect
Co-operate 1 / 1 2 / 0
Defect 0 / 2 0.5/ 0.5

So you play this game several times, and your earnings are totalled. There was a tournament for computer programs playing this game sometime in the 1960s, where the winner was “tit for tat”. According to this strategy, you start by co-operating in the first iteration, and in every successive iteration you copy what your opponent did in the previous iteration. Notice that if both players choose this strategy, both will co-operate in perpetuity, and have identical payoffs.

Relationships can be modelled as an iterated prisoner’s dilemma. You can either choose to be nice to your partner (co-operate) for which you get a steady return, or you can choose to be nasty (defect), in which case you get a superior payoff if your partner continues to be nice. If both of you are nasty simultaneously both of you end up getting inferior payoffs (as shown by the Defect-Defect box in the above matrix).

Early on in the relationship, I was very keen to make things work and did my best to prevent it from falling into any abyss. I played the “Gandhi strategy”, where irrespective of her play, I simply co-operated. The idea there was that whenever she defected, she would feel sympathy for my co-operative position and switch back to co-operate.

So something snapped sometime around this time last year, which led me to change my strategy. I wasn’t going to be Gandhi anymore. I wasn’t going to unconditionally defect, either. I switched to playing tit-for-tat. You can see from the above table that when both players are playing tit-for-tat, you can get into a long (and extremely suboptimal) sequence of defect-defects. And that is what happened to us. We started getting into long sequences of suboptimality, when we would fight way more than what is required to sustain a relationship. Thankfully it never got so bad as to ruin the relationship.

Periodically, both of us would try to break the rut, and try to give the relationship a stimulus. We would play  the co-operate card, and given both of us were playing tit-for-tat we’d be back to normal (Co-operate – Co-operate). Soon we learnt that long defect-defect sequences are bad for both of us, so we would quickly break the strategy and co-operate and get things back on track. We weren’t playing pure tit-for-tat any more. There was a small randomness in our behaviour when we’d suddenly go crazy and defect. In the course of the year, we got formally engaged, and then we got married, and we’ve continued to play this randomized tit-for-tat strategy. And the payoffs have been a roller coaster.

Today I lost it. She randomly pulled out the defect card twice in the course of the day, and that made me go mad. While in earlier circumstances I’d wait a few iterations before I started to defect myself, something snapped today. I pulled out the defect card too. Maybe for the first time ever, I hung up on her. Do I regret it? Perhaps I do. I don’t want to get into a prolonged defect-defect sequence now.

And I hope one of us manages to give the relationship enough of a stimulus in the coming days to put us on a sustained co-operate co-operate path.

Degree Coffee

During my experiments to make hot chocolate of various degrees of chocolate-milk combination revealed that the higher the milk-to-water ratio, the more frothy the chocolate became. That was when I realized why restaurants (especially in Bangalore and Madras) try to make their coffee frothy – it’s a sign of  quality, that they’ve used sufficient milk and not diluted it with water. Hence you get “degree coffee”. The “fat concentration” in the milk, that provides the froth, needs to be above a certain limit, which is measured using this instrument with the reading in “degrees”.

The  quality of a good hot cup of “milk coffee” comes from two ingredients – the coffee powder and milk. If there were a way in which coffee beans could lend their flavour to milk directly, that would have been the ideal coffee. Unfortunately, since this is not possible, you need to add water. Water adds nothing to the taste of coffee. It only dilutes it. However, it is critical because it is the passing of hot water or steam that allows the flavour of the coffee beans to be released.

Given this, the ideal coffee is one where the concentration of coffee flavour and milk are maximized for a unit volume of coffee (ok concentration of flavour varies according to taste (I prefer “strong” coffee) but milk is important). This implies that to make good coffee you need to make a very concentrated decoction (one that maximizes flavour per unit volume) and then “dilute” it with an appropriate amount of milk.

Which is why you see that in “darshini” restaurants in Bangalore, they put very little “decoction” in the cup and pour a large quantity of milk. And the coffee in most darshinis is invariably tasty. Similarly in the small restaurants of Madras. Similar algo. And in the cafes of Rome, where they make a concentrated espresso and then add foamed milk to produce absolutely stunning cappuccino.

Working further backwards, the trick is to extract as much flavour as possible using as little water as possible. This is why “decant coffee” and “brewed coffee” (that you get in America) suck. They use way too much water for way too little flavour. Espresso is designed towards extracting a lot of flavour using very little water (or steam). Also, there is an “espresso roast” – coffee beans are roasted more than usual in order to make espresso. Unfortunately the technology is too expensive to keep in the homes.

In India the traditional method is “filter coffee”, where hot water passes through a bed of coffee powder. I prefer, however, to use a percolator, which uses steam rather than hot water, and which works against the direction of gravity (steam moves up while collecting coffee flavour and then condenses in a jar above). Unfortunately the percolator I use (purchased from Coffee Day) is unstable and prone to falling off and ruining the kitchen.

What’s the best coffee you’ve had? How do you prepare coffee to get strong decoction? Do you swear by the filter? Or do you get reasonably priced espresso machines? Let me know.

Issuing in stages

I apologise for this morning’s post on IPOs. It was one of those posts I’d thought up in my head a long time ago, and got down to writing only today, because of which I wasn’t able to get the flow in writing.

So after I’d written that, I started thinking – so if IPO managers turn out to be devious/incompetent, like LinkedIn’s bankers have, how can a company really trust them to raise the amount of money they want? What is the guarantee that the banker will price the company at the appropriate price?

One way of doing that is to get the views of a larger section of people before the IPO price is set. How would you achieve that? By having a little IPO. Let me explain.

You want to raise money for expansion, or whatever, but you don’t need all the money now. However, you are also concerned about dilution of your stake, so would like to price the IPO appropriately. So why don’t you take advantage of the fact that you don’t need all the money now, and do it in stages?

You do a small IPO up front, with the sole purpose of getting listed on the country’s big exchanges. After that the discovery of the value of your company will fall into the hands of a larger set of people – all the stock market participants. And now that the market’s willingness to pay is established, you can do a follow on offer in due course of time, and raise the money you want.

However, I don’t know any company that has followed this route, so I don’t know if there’s any flaw with this plan. I know that if you do a small IPO you can’t get the big bankers to carry you, but knowing that some big bankers don’t really take care of you (for whatever reason) it’s not unreasonable to ditch them and go with smaller guys.

What do you think of this plan?

IPOs Revisited

I’ve commented earlier on this blog about investment bankers shafting companies that want to raise money from the market, by pricing the IPO too low. While a large share price appreciation on the day of listing might be “successful” from the point of view of the IPO investors, it’s anything but that from the point of view of the issuing companies.

The IPO pricing issue is in the news again now, with LinkedIn listing at close to 100% appreciation of its IPO price. The IPO was sold to investors at $45 a share, and within minutes of listing it was trading at close to $90. I haven’t really followed the trajectory of the stock after that, but assume it’s still closer to $90 than to $45.

Unlike in the Makemytrip case (maybe that got ignored since it’s an Indian company and not many commentators know about it), the LinkedIn IPO has got a lot of footage among both the mainstream media and the blogosphere. There have been views on both sides – that the i-banks shafted LinkedIn, and that this appreciation is only part of the price discovery mechanism, so it’s fair.

One of my favourite financial commentators Felix Salmon has written a rather large piece on this, in which he quotes some of the other prominent commentators also. After giving a summary of all the views, Salmon says that LinkedIn investors haven’t really lost out too much due to the way the IPO has been priced (I’ve reproduced a quote here but I’d encourage you to go read Salmon’s article in full):

But the fact is that if I own 1% of LinkedIn, and I just saw the company getting valued on the stock market at a valuation of $9 billion or so, then I’m just ecstatic that my stake is worth $90 million, and that I haven’t sold any shares below that level. The main interest that I have in an IPO like this is as a price-discovery mechanism, rather than as a cash-raising mechanism. As TED says, LinkedIn has no particular need for any cash at all, let alone $300 million; if it had an extra $200 million in the bank, earning some fraction of 1% per annum, that wouldn’t increase the value of my stake by any measurable amount, because it wouldn’t affect the share price at all.

Now, let us look at this in another way. Currently Salmon seems to be looking at it from the point of view of the client going up to the bank and saying “I want to sell 100,000 shares in my company. Sell it at the best price you can”. Intuitively, this is not how things are supposed to work. At least, if the client is sensible, he would rather go the bank and say “I want to raise 5 million dollars. Raise it by diluting my current shareholders by as little as possible”.

Now you can see why the existing shareholders can be shafted. Suppose I owned one share of LinkedIn, out of a total 100 shares outstanding. Suppose I wanted to raise 9000 rupees. The banker valued the current value at $4500, and thus priced the IPO at $45 a share, thus making me end up with 1/300 of the company.

However, in hindsight, we know that the broad market values the company at $90 a share, implying that before the IPO the company was worth $9000. If the banker had realized this, he would have sold only 100 fresh shares of the company, rather than 200. The balance sheet would have looked exactly the same as it does now, with the difference that I would have owned 1/200 of the company then, rather than 1/300 now!

1/200 and 1/300 seem like small numbers without much difference, but if you understand that the total value of LinkedIn is $9 billion (approx) and if you think about pre-IPO shareholders who held much larger stakes, you know who has been shafted.

I’m not passing a comment here on whether the bankers were devious or incompetent, but I guess in terms of clients wanting to give them future business, both are enough grounds for disqualification.

Dropping out

Less than a semester into my undergrad (Bachelor of Technology in Computer Science and Engineering at IIT Madras) I wanted to drop out, and start work. I didn’t want to be an “engineer”.

I didn’t know why I’d to spend all my Thursday and Friday afternoons filing away at some piece of iron in the “fitting workshop”. I didn’t have the patience to draw three views of a random object in “engineering drawing”.

And I had the reputation of being one of the studdest programmers in my school. Apart from winning competitions here and there and doing well in acads, I had enormous respect from peers for my programming skills. Given that it was a “high-performance school” (which subjected its own 10th standard students to a test before admitting them to 11th) I guess this peer respect does carry some weight.

So, being good at math, and having the reputation of being a stud programmer, I didn’t know what I was doing studying “engineering”. I wanted to be a programmer, and I wanted to drop out and take up a job. My JEE rank counted almost as much as an IIT degree, I thought. I didn’t have the balls, and I continued.

In hindsight, I’m happy I didn’t drop out. By the end of my second year, I knew for sure that I DIDN’T want to be a programmer. While the theoretical aspects of Computer Science excited me (algo analysis and stuff), I had absolutely no patience for “systems”, or “computer engineering”. I was perhaps alone in my class in my love for Microsoft products (easy to use).

I realized then that I liked only the algorithmic aspect of programming, where one solves a (mostly math) problem and codes it up in a simple program. Huge complicated systems-intensive programming, making GUIs etc. didn’t inspire me at all.

Looking back, all that “major” (i.e. Computer Science and Engineering) stuff that I’ve learnt and internalized was learnt in my first two years of engineering. Of course several concepts that are part of CS&E are taught in the last two years, but I ended up not liking any of that.

Looking back, I do find it positive that I did all those “general engineering” courses. I do find it really positive that we had to do 12 compulsory credits in Humanities and Social Sciences, for that allowed me to discover what I was really interested in, and indirectly led me to doing my MBA.

I have only one regret. That I wasn’t able to switch streams sooner than I could. That IIT, being a one-dimensional technology oriented university, didn’t allow me to transfer credits to a course that I would’ve liked better, simply because it offered undergrad courses only in engineering.

There was a humanities department, where I discovered what I was interested in, but unfortunately it was a “minor” department. It’s been partly rectified now, with the setting up of integrated MA courses, in Economics, etc. (if that course existed back when I was studying, there’s a good chance I’d’ve transferred to it from CS&E). But it’s not enough.

Kids at 17 have no clue what they want to do. What we need are flexible full-scale universities, which allow you to switch from any branch to any other branch after two years of reasonably generalized study (the earlier branch can then contribute to “minor” credits). We need to stop putting our colleges in silos such as “engineering”, “arts and science”, etc. Only then would our universities be truly world class, even from an undergraduate point of view.

And looking back, I’m really happy I didn’t drop out.

The Basavanagudi Food Arrangement

  • Vidyarthi Bhavan has its weekly holiday on Friday
  • Mahalakshmi Tiffin Room doesn’t open for business on  Saturday
  • Brahmins Coffee Bar is closed on Sunday
  • Upahara Darshini used to be closed on Mondays, though in the last few years they’ve been open 7 days a week
  • Dwaraka and the Gandhibazaar branch of Adigas are closed on Tuesdays (not sure of Adigas anymore, Dwaraka still closed on Tuesdays)

A wonderful arrangement by the different restaurants in Basavanagudi to ensure that they all get their weekly off, and yet not deny food to the residents of the area!

Written after a leisurely and sumptuous breakfast at Mahalakshmi. Idli-vade-khalidose-coffee.

PS: “Plain dose” and “khali dose” mean different things in Bangalore, though they literally mean the same thing. Khali dose is soft and fluffy. Plain dose is dark brown and crisp, basically masale dose without the masale.

Red wine and mirchi

is such an awesome combo. As we just discovered, here in Monastiraki square in Athens. It was this restaurant called Savas. Specializing in one “Sauvlaki”.

So over the last week or so of vacation, the girlfriend has been complaining of not eating spicy enough food. So as we settle down today, and get our can of wine (yeah, you get half a litre of wine in an aluminium can here. Awesome it is), I see this “spicy hot peppers” on the menu.

And given that the girlfriend has been deprived of spicy food, and I like peppers it doesn’t take long for me to order it. And boy was it hot.

I gave up after a couple of bites of the pepper. No amounts of pita bread and Tzatziki (the Greek version of raita – with cucumber and garlic blended into curd) could cure the hotness on my tongue. With there being no water on the table, I went straight for the wine.

I’ve always suspected it when the girlfriend has claimed to have Gult roots. Of course, I’ve seen a lot of Gult being spoken in her family, and had half my pre-wedding dance party inundated with Gult songs, but still find it hard to accept she’s Gult. And did she prove it! She ate four whole peppers, as I struggled to finish half..

A couple of minutes back, we staggered back to the hotel. Absolutely drunk. We’d had 250 ml of red wine each, “house wine” according to the restaurant. And mirchi. Whatta combo. Surprised the “shady bars” of Bangalore haven’t exploited it yet. Maybe no one drinks wine there.