## Speed, Accuracy and Shannon’s Channel Coding Theorem

I was probably the CAT topper in my year (2004) (they don’t give out ranks, only percentiles (to two digits of precision), so this is a stochastic measure). I was also perhaps the only (or one of the very few) person to get into IIMs that year despite getting 20 questions wrong.

It had just happened that I had attempted far more questions than most other people. And so even though my accuracy was rather poor, my speed more than made up for it, and I ended up doing rather well.

I remember this time during my CAT prep, where the guy who was leading my CAT factory once suggested that I was making too many errors so I should possibly slow down and make fewer mistakes. I did that in a few mock exams. I ended up attempting far fewer questions. My accuracy (measured as % of answers I got wrong) didn’t change by much. So it was an easy decision to forget above accuracy and focus on speed and that served me well.

However, what serves you well in an entrance exam need not necessarily serve you well in life. An exam is, by definition, an artificial space. It is usually bounded by certain norms (of the format). And so, you can make blanket decisions such as “let me just go for speed”, and you can get away with it. In a way, an exam is a predictable space. It is a caricature of the world. So your learnings from there don’t extend to life.

In real life, you can’t “get away with 20 wrong answers”. If you have done something wrong, you are (most likely) expected to correct it. Which means, in real life, if you are inaccurate in your work, you will end up making further iterations.

Observing myself, and people around me (literally and figuratively at work), I sometimes wonder if there is a sort of efficient frontier in terms of speed and accuracy. For a given level of speed and accuracy, can we determine an “ideal gradient” – on which way a person needs to move in order to make the maximum impact?

Once in a while, I take book recommendations from academics, and end up reading (rather, trying to read) academic books. Recently, someone had recommended a book that combined information theory and machine learning, and I started reading it. Needless to say, within half a chapter, I was lost, and I had abandoned the book. Yet, the little I read performed the useful purpose of reminding me of Shannon’s channel coding theorem.

Paraphrasing, what it states is that irrespective of how noisy a channel is, using the right kind of encoding and redundancy, we will be able to predictably send across information at a certain maximum speed. The noisier the channel, the more the redundancy we will need, and the lower the speed of transmission.

In my opinion (and in the opinions of several others, I’m sure), this is a rather profound observation, and has significant impact on various aspects of life. In fact, I’m prone to abusing it in inexact manners (no wonder I never tried to become an academic).

So while thinking of the tradeoff between speed and accuracy, I started thinking of the channel coding theorem. You can think of a person’s work (or “working mind”) as a communication channel. The speed is the raw speed of transmission. The accuracy (rather, the lack of it) is a measure of noise in the channel.

So the less accurate someone is, the more the redundancy they require in communication (or in work). For example, if you are especially prone to mistakes (like I am sometimes), you might need to redo your work (or at least a part of it) several times. If you are the more accurate types, you need to redo less often.

And different people have different speed-accuracy trade-offs.

I don’t have a perfect way to quantify this, but maybe we can think of “true speed of work” by dividing the actual speed in which someone does a piece of work by the number of iterations they need to get it right.  OK it is not so straightforward (there might be other ways to build redundancy – like getting two independent people to do the same thing and then tally the numbers), but I suppose you get the drift.

The interesting thing here is that the speed and accuracy is not only depend on the person but the nature of work itself. For me, a piece of work that on average takes 1 hour has a different speed-accuracy tradeoff compared to a piece of work that on average takes a day (usually, the more complicated and involved a piece of analysis, the more the error rate for me).

In any case, the point to be noted is that the speed-accuracy tradeoff is different for different people, and in different contexts. For some people, in some contexts, there is no point at all in expecting highly accurate work – you know they will make mistakes anyways, so you might as well get the work done quickly (to allow for more time to iterate).

And in a way, figuring out speed-accuracy tradeoffs of the people who work for you is an important step in getting the best out of them.

## The Aditya Birla Scholarship

I spent this evening attending this year’s Aditya Birla Scholarship awards function. Prior to that, there was a networking event for earlier winners of the scholarship, where among other things we interacted with Kumaramangalam Birla. Overall it was a fun evening, with lots of networking and some nostalgia, especially when they called out the names of this year’s award winners. My mind went back to that day in 2004, as I sat confident but tense, and almost jumped when I heard my named called out only to realize it was another Kart(h)ik!

You can read more about my experiences during that award ceremony here (my second ever blog post), but in this post I plan to talk about what the scholarship means to me. During the networking event today, one of the winners of the scholarship (from the first ever batch) talked about what the scholarship meant to him. As he spoke, I started mentally composing the speech I would have delivered had I been in his place. This blog post is an attempt to document that speech which I didn’t deliver.

People talk about the impact the scholarship has on your CV, and the bond that you form with the Birla group when you receive the scholarship. But for me, looking back from where I am now, the scholarship has primarily meant two things.

Back in the day, the scholarship covered most of my IIM tuition fee. When I’d joined IIM, my parents had told me that they wouldn’t fund my education, and I had taken a bank loan. However, the scholarship covered Rs. 2.5 lakh out of the Rs. 3 lakh I needed for my tuition fee, and the loan that I had taken for the remaining amount was cleared within a couple of months after I worked.

My first job turned out to be a horror story. It was six years before my ADHD would be discovered, but I was in this job where I was to put in long hours under extremely high pressure, and deliver results at 100% accuracy. I wilted, but refused to give up and pushed myself harder, and I’m not sure if I actually burnt out or only came close to it. But it is a fact that one rainy Mumbai morning, I literally ran away from my job, purchasing a one-way ticket to Bangalore and refusing to take calls from my colleagues until my parents told me that my behaviour wasn’t appropriate.

While my parents were broadly supportive, the absence of liabilities made the decision to quit easier. Of course I still had the task of finding myself another job, but I knew I would pull through fine even if I didn’t find another job for another six months (of course, I had saved some money from my internship at an investment bank, but the lack of liabilities really helped). The Aditya Birla Group, by funding my business school education, played an important role in my being free or financial obligations, and being able to chart out my own path in terms of my career.

My six-year career has seen several lows, aided in no small amount by my ADHD and depression, both of which weren’t diagnosed till the beginning of this year. I got into this vicious cycle of low confidence and low performance, and frequently got myself to believe that I was good for nothing, that I had become useless, and that I should just take some stupid steady job so that I could at least pay the bills.

During some of these low moments, my mind would go back to that day in September 2004 when I (at the end of the day) felt at the top of the world, having been awarded the Birla scholarship. I would then reason, that if I was capable of convincing a panel consisting of N. Ram, N K Singh and Wajahat Habibullah to recommend me for the Aditya Birla scholarship, there was nothing that was really beyond me. Memories of my interview and the events of the day I got the scholarship would make me believe in myself, and get me going again. Of course on several occasions, this “going again” didn’t last too long, but on other occasions it sustained. I credit the Aditya Birla scholarship for having given me the confidence to pull myself back up during the times when I’ve been low.

These are not the only benefits of the scholarship, of course. The scholarship has helped build a relationship with the Aditya Birla group. In the short run, when I won the scholarship, it helped me consolidate my reputation on campus. And last but not the least, it was a major catalyst in reviving a friendship which had gone awry thanks to some of my earlier indiscretions. Most important, though, was the financial security that scholarship offered, which made potentially tough decisions easier, and the confidence it offered me which has carried me through tough times.

## Detail

Detail is the devil. That’s my big problem in life. I’m fundamentally clumsy and prone to errors, and don’t have much of an eye for details. I tend to make a lot of silly mistakes. So whenever I’ve to do some task that requires precision, it requires me to put in way too much energy, so that I don’t commit any mistakes. This is why I have a problem with “routine” tasks. Routine tasks being routine, you are expected to complete them with one hundred per cent accuracy. Ninety five percent won’t do. That transformation from ninety five percent to hundred, though, takes up a lot of energy, and I tend to get stressed out.

Essentially, for a routine task to be done with one hundred percent accuracy, the mental energy I spend is far more than what the average person does. This means that if I do even a small bunch of routine tasks, all my mental energy is exhausted and I have nothing in store for anything else I’ve to do. This is the reason I’ve had an indifferent corporate career so far. Essentially, I face a competitive disadvantage in performing routine tasks.

This is something most people don’t appreciate. Most people assume that it doesn’t take much effort to perform routine tasks, and if you don’t do them well, you’re a good for nothing. And I must admit I’ve also not played to my strengths so far, routinely getting into situations where I’ve to show “detail” and “one hundred percent accuracy”, and not saving my energy for things I’m actually good at. Detail has been the devil.

PS: The motivation for this post was some small form I’d to fill (by hand). The space was limited and I knew I’d to write carefully without any mistakes, and that drove me completely  nuts!

## 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.

## Happy Birthday

This blog celebrates its first birthday today. It was on the 22nd of July 2008 that I wrote my first ever post on this site (prior to that I’d  been blogging on livejournal). Exactly a year back, I wrote:

The concept of NED has existed as long as mankind. Maybe even longer. If you have read Christian Theology you would have read that God took six days to create the world, and then took rest on the seventh day (Sunday). The truth is that God wanted to create even more and wonderful creatures, and give them even more wonderful features. He just happened to put NED. Since at the time that the Bible was written no one had quantified the concept of NED, the writers decided to take the easy way out by saying that God took rest on Sunday.

NED, for the uninitiated, stands for No Enthu Da. I don’t know how to explain it. In fact, no accurate explanation exists for this in English, for if it did, I wouldn’t have bothered inventing this phrase. By sacrificing some bit of accuracy I can say that NED is a state of mind where you don’t feel like doing anything. You just want to do nothing, and you don’t even have the enthusiasm to do nothing. Yes, if that confused you, you need to remember that there is no perfect explanation for NED in English.

I really don’t know how to celebrate the blog’s first birthday. I seem to be tending towards the trivial solution that Sanjeev suggested to me on facebook yesterday – to just put NED. If you have any bright ideas as to how to celebrate this, please let me know.

One blog fan has suggested that I get the blog a “new set of clothes”. That sounds like a good idea. If you can suggest any good 3-column wordpress theme (widget enabled, with sidebars on both sides), I’d be grateful.