Tag: arranged marriage

People are worried about marriage market liquidity

Every time we have a sort of financial crisis that has something to do with settlement, and collaterals, and weird instruments, people start questioning why more instruments are not traded on exchanges. They cite the example of equities, which world over are exchange traded, centrally settled, and whose markets function rather efficiently.

After the 2008 Financial Crisis, for example, there was a move to take Credit Default Swaps (CDS) to exchanges, rather than letting the market go over the counter (OTC). Every few years, ideas are floated about trading bonds on exchanges (rather than OTC, like they are now), and the blame falls on “greedy bankers who don’t want to let go of control”.

There is an excellent podcast by Bloomberg Odd Lots where Chris White, a former Goldman Sachs banker, talks about how the equity markets went electronic in the 1970s with NASDAQ, and how the “big bang” in the UK markets propelled equities into electronic trading everywhere.

A lot of these ideas have also been discussed in my book on market design. 

In any case, I think I have the perfect explanation of why bond trading on exchanges hasn’t really taken off. To understand this, let’s look at another market that I discussed extensively in my book – the market for relationships (that chapter has been extracted in Mint).

The market for relationships is in the news thanks to this Netflix documentary called Indian Matchmaking. I started watching it on a whim on Saturday night, and I got so addicted to it that yesterday I postponed my work to late night so that I could finish the show instead.

Marriage can be thought of as a sale of “50% of the rest of your life“, paid for by 50% of the rest of someone else’s life.

There are two ways you can go about it – either “over the counter” (finding a partner by yourself) or “exchange traded” (said exchange could be anything from newspaper classifieds to Tinder to Shaadi.com). Brokers are frequently used in the OTC market – either parents or friends (who set you up) or priests.

The general rule of markets is that the more bespoke (or “weird” or “unusual”) an instrument is, the better the likelihood of finding a match in the OTC markets than on exchanges. The reason is simple – for an exchange to exist, the commodity being traded needs to be a commodity.

Read any literature on agricultural markets, for example, and they all talk about “assaying” and “grading” the commodities. The basic idea is that all goods being traded on a marketplace are close enough substitutes of each other that they can be interchanged for each other.

Equity shares, by definition, are commodities. Equity and index derivatives are commodities as well, easy enough to define. Commodities are, by definition, commodities. Bond futures are commodities, since they can be standardised on a small number of axes. We’ll come to bonds in a bit.

Coming back to relationship markets, the “exchanges” work best if you have very few idiosyncrasies, and can be defined fairly well in terms of a small number of variables. It also helps you to find a partner quicker in case many others in the market have similar attributes as you, which means that the market for “your type of people” becomes “liquid” (this is a recurring theme in my book).

However, in case you are either not easily describable by commonly used variables, or in case there are few others like you in the market, exchanges are likely to work less well for you. Either of these conditions makes you “illiquid”, and it is not a great idea to list an illiquid asset on an exchange.

When you list an illiquid asset on an exchange, unless you are extremely lucky, it is likely to sit there for a long time without being traded (think about “bespoke exchanges” like eBay here, where commodification is not necessary). The longer the asset sits on an exchange, the greater the likelihood that people who come across the asset on the exchange think that “something is wrong with it”.

So if you’re listing it on an exchange, its value will decay exponentially, and unless you are able to trade soon after you have listed it, you are unlikely to get much value for it.

In that sense, if you are “illiquid” for whatever reason (can’t be easily described, or belong to a type that few others in the market belong to), exchanges are not for you. And if you think about each of the characters in Indian Matchmaking who come to Sima aunty, they are illiquid in one way or another.

  • Aparna has entered the market at 34, and few other women of her age are in the market. Hence illiquid.
  • Nadia belongs to a small ethnicity, Indian-Guyanese-American, which makes her illiquid.
  • Pradhyuman has quirky interests (jewelry and fashion), which his parents are trying to suppress as they pass him off a liquid “rich Maadu boy”. Quirky interests mean he’s not easily describable. Hence illiquid.
  • Vyasar, by Indian-American standards, doesn’t have a great job. So not too many others like him. Illiquid, even before you take his family situation into account.
  • Ankita is professionally ambitious. Few of those women in the Indian arranged marriage market. Illiquid.
  • Rupam is divorced with a child. Might be liquid by conventional American markets, but illiquid in an Indian context. And she is, rather inexplicably, going the Indian way despite being American.
  • Akshay is possibly the most liquid (characterless except for an overly-dominating mom), and maybe that’s why he’s shown getting engaged.

All of these people will be wasting themselves listing themselves on exchanges. And so they come to a matchmaker. Now, Sima Auntie is both a broker and a clearinghouse (refer to Chapter 3 of my book 😛). She helps find matches for people, but only matches within her own inventory (though she decided Ankita has no matches at all in her own inventory, so connected her with another broker-clearinghouse).

This makes it hard – first of all you have illiquid assets, and you are trying to fulfil them within limited inventory. This is why she is repeatedly showing saying that her candidates need to “compromise” (something that seems to have triggered a lot of viewers). By compromise, she is saying that these people are so illiquid that in case they need to get a deal in her little exchange, they need to be willing to accept an “illiquidity discount” in order to get a trade. 

Back to bonds, why is trading them on an exchange so difficult? Because each bond is so idiosyncratic. There is the issuer, the exact date of expiry and the coupon, and occasionally some weird derivatives tacked on. The likelihood that you might find someone quickly enough to take the other side of such a deal is minuscule, so if you were to list your bond on an exchange, its value would drop significantly (by being continuously listed) before you could find a counterparty.

Hence, people trade this uncertain discount to a certain discount, by trading their bonds with market makers (investment banks) who are willing to take the other side of the deal immediately.

Unfortunately, market making is not a viable strategy when it comes to relationship markets. So what do you do if you can either be not defined easily in a few parameters, or if there are few others like you in the arranged  marriage market? You basically go Over The Counter. Ditch the market and find someone for yourself, or ask people you know to set you up. Or hire a matrimonial advisor who will tell you what to do.

If this doesn’t convince you on why matchmakers are important, then may be you should read what my other half has to say. If she’s the better half or not, you figure.

How Mani Ratnam Ruined A Generation Of Indian Men

If you fall in love, you might be falling in love with a terrorist. In the arranged marriage market, you’ll find a hot girl who asks if you’re a virgin

I had recently written about how the ages are 13 to 16 are “peak movie appreciation age”, and about how I got influenced by several movies in that period in life. One of them was Mani Ratnam’s Dil Se (1998).

Of course, the most influential thing about this movie was the idea of dancing on top of a moving vehicle. I clearly remember our school picnic (on October 31st 1998), when responding to a challenge, a friend and I (later joined by another friend) clambered on top of the picnic bus and started dancing. I got a 2 litre bottle of Pepsi (presented by the friend who joined us later) for my efforts, which was duly shared between the rest of my class.

Dancing on top of a bus was fun, though it could get dangerous if the bus moved well-at-a -faster rate (I don’t think too many people copied that). The more dangerous thing about Dil Se was about the sort of ideas about arranged marriage that it presented.

Dil Se happened to be Preity Zinta’s debut movie (she was earlier mainly known for this Cadbury’s Perk ad) (it wasn’t technically her debut but I think it got released before the other movie she had shot).

Ten years back, when I was in the arranged marriage market, I wrote this series of blog posts called “Arranged Scissors“. One of them was a hypothetical letter I’d written to a prospective father-in-law (I don’t think I’ve got my actual father-in-law to read it). That included:

During the interview, I’m going to ask your daughter if she is a virgin. If you think she is the type that will be scandalized at such questions, you need not shortlist me.

I must admit that wasn’t an original. It was inspired by this movie released more than ten years before I wrote that.

Preity Zinta plays the role of this Mallu girl whom the protagonist (played by Shah Rukh Khan) meets in the arranged marriage market. They break out to a side room in the house for a chat. The first thing she asks him is if he is a virgin (that also happened to be Zinta’s first line on-screen, helping her set herself an image of a no-nonsense actress).

It fit into the story, so it was all fine. But for a generation of teenage boys watching Dil Se in 1998, it gave the perfectly wrong idea of what arranged marriage was like. It was almost like how Mani Ratnam was telling us that “if you fall in love, you might be falling in love with a terrorist. In the arranged marriage market, you’ll find a hot girl who asks if you’re a virgin”.

And some of us influential boys bought it. It didn’t help matters that just three years later, in Dil Chahta Hai, the Saif Ali Khan character finds that he can find himself a good match in the arranged marriage market (that occurred after my optimal age of movie appreciation, but Preity Zinta in Dil Se had influenced me enough that I bought the tripe anyway).

Many years later, many of us came into the arranged marriage market looking for Preity Zintas and Sonali Kulkarnis, only to find that it was an admission of failure, where you could at best look for a “common minimum program”, and which was overall a dehumanising experience (I’m glad I met my wife when I did, and she bailed me out of the market).

Now, we look back and curse the filmmakers. All because we happened to watch these movies at our most optimal movie appreciation age.

Love and arranged jobs

When I first entered the arranged marriage market in early 2009, I had done so with the expectation that I would use it as a sort of dating agency. Remember this was well before the likes of OKCupid or Tinder or TrulyMadly were around, and for whatever reason I had assumed that I could “find chicks” in the arranged marriage market, and then date them for a while before committing.

Now that my wife is in this business, I think my idea was a patently bad one. Each market attracts a particular kind of people, who usually crowd out all other kind of people. And sort of by definition, the arranged marriage market is filled with people looking for arranged marriage. Maybe they just want a Common Minimum Program. But surely, what they are looking for is a quick process where after two (or maximum three) meetings, you commit to someone for life.

So in this kind of a market you want to date, there is an infinitesimal chance of finding someone else who also wants to date. And so you are bound to be disappointed. In this case, you are better off operating in a dating market (such as Tinder, or whatever else did its job ten years ago).

Now that this lengthy preamble is out of the way, let us talk about love and arranged jobs. This has nothing to do with jobs, or work itself. It has everything to do with the process of finding a job. Some of you might find that I, who has been largely out of the job market for over eight years now, to be supremely unqualified to write about jobs, but this outsider view is what allows me to take an objective view of this (just like most other things I write about on this blog).

You get a love job through a sort of lengthy courtship process, like love marriage. You either get introduced to someone, or meet them on twitter, or bump into them at a networking event. Then you have a phone chat, followed by a coffee, and maybe a drink, and maybe a few meals. You talk about work related stuff in most of these, and over time you both realise it makes sense to work together. A formality of an interview process happens, and you start working together.

From my outside view (and having never gotten a job in this manner), I would imagine that this would lead to fulfilling work relationships and satisfying work (the only risk is that the person you have “courted” moves away or up). And when you are looking for a sort of high-trust relationship in a job, this kind of an “interview process” possibly makes sense.

In some ways, you can think about getting a “love job” as following the advise Dale Carnegie dishes out in How To Win Friends and Influence People  – make the counterparty like you as a person and you make the sale.

The more common approach in recruitment is “arranged jobs” (an extreme example of this is campus recruitment). This is no nonsense, no beating around the bush approach. In the first conversation, it is evident to both parties that a full time job is a desired outcome of the interaction. Conversations are brisk, and to the point. Soon enough, formal interviews get set up, and the formal process can be challenging.

And if things go well after that, there is a job offer in hand. And soon you are working together. Love, if at all, happens after marriage, as some “aunties” are prone to telling you.

The advantage of this process is that it is quick, and serves both parties well in that respect. The disadvantage is that the short courtship period means that not enough trust has been built between the parties at the time they start working together. This means “proving oneself” in the first few months of getting a job, which is always tricky and set a bad precedent for the rest of the employment.

In the first five years of my career, I moved between four jobs. All of them happened through the arranged process. The one I lasted the longest in (and enjoyed the most, by a long way, though on a relative basis) was the one where the arranged process itself took a long time. I did some sixteen interviews before getting the job, and in the process the team I was going to join had sold itself very well to me.

And that makes me think that if I end up getting back to formal employment some day, it will have to happen through the love process.

Arranged Scissors 16: Liquidity

Ok so the last time I wrote about Arranged Scissors was more than five and a half years back, when the person who is now my wife had just about started on her journey towards ending up as my wife. And today she made a very interesting observation on arranged marriage markets, which made me revisit the concept. She tweeted:

It is a rather profound concept, well summarised into one tweet. Yet, it doesn’t tell the full picture because of which I’m writing this blog (more permanence than tweet, can explain better and all that).

Reading the above tweet by the wife makes you believe that the arranged marriage market is becoming less liquid, because of which people are experiencing more trouble in finding a potential partner on that market. And there is a positive feedback loop in play here – the more illiquid the arranged marriage market becomes, the more the likelihood for people to exit the market, which results in making the market even more illiquid!

But this makes you believe that there was a time when the arranged marriage market was rather liquid, when people were happy finding spice there, and then it all went downhill from there. The fact, however, is that there are two countervailing forces that have been acting on the liquidity of the arranged marriage market.

On the one hand, more people are nowadays marrying “for love”, and are hence removing themselves from the arranged marriage market. This is an increasing trend and has resulted in the vicious circle I pointed to two paragraphs earlier. Countervailing this, however, is globalisation, and the fact that the world is becoming a more connected place, which is actually increasing the liquidity of the market.

Consider the situation a century back, when most marriages in India were “arranged”, and when it was the norm to pick a spouse through this market. While that in theory should have made the market liquid, the fact remained that people’s networks back in those days was extremely limited, and more importantly, local. Which meant that if you lived in a village, you could get married to someone from a village in a small radius, for example. Your search space was perhaps larger in a city, but even then, networks were hardly as dense as they are today. And so there was a limited pool you could pick from, which meant it was rather illiquid.

And over time, the market has actually become more liquid, with the world becoming a more connected place. Even a generation ago, for example, it was quite possible (and not uncommon) to get “arranged married” to someone living in a far-off city (as long as caste and other such factors matched). In that sense, the market actually got better for a while.

But it coincided with the time when social norms started getting liberalised, and more and more people found it okay to actually exit the arranged marriage market. And that was when the illiquidity-vicious-circle effect started coming into play.

In recent times, connectedness has hit a peak (though it can be argued that online social networking has helped extend people’s connections further), and the vicious circle continues unabated, and this is the reason that we are observing that the arranged marriage market is becoming less liquid.

Oh, and if you’re in the market, do get in touch with the wife. She might be able to help you!

Community and age of marriage

I’ll be 26 within two weeks time. In fact, if you go by the Hindu calendar (which sacrifices short-term accuracy for long-term precision) I’m already 26. One question people constantly ask me when I bump into them is about when I plan to get married. Most of my friends also belong to the same approximate age group. When we meet up, discussion frequently veers towards “market entry”. About the arranged marriage market.

One common thread of discussion is “you belong to XXX community. you should’ve already fathered two kids by this age” or “you belong to YYY community. it’s ok even if you don’t get married for another six years”. Which makes me wonder why people from different castes and communities get married at different ages.

The Hindu scriptures divide a man’s life into four stages. At the end of the first quarter, which is brahmacharya, the boy is supposed to get married, and become a gRhasta. This division of life into four quarters in the Hindu scriptures is a clear indication that our ancestors knew about the Quarter Life Crisis so long ago. And they has prescribed a simple antidote to it – marriage. Yes, I admit that different people would feel the QLC at slightly different ages, leading to a small variation in marriage age. However, there seems to be no reason as to why this should depend upon one’s caste.

For one to get married, one needs to earn enough in order to support a partner and still lead a fairly comfortable life. Typically, you won’t want a quality of life that is much inferior to what you were leading at your parents’ place, before you moved out. When you are still a bachelor, you might be willing to accept a lower quality of life in order to maybe further your career. However, by the time you get married, you want to be closer to the quality you were used to in childhood.

We need to remember that the caste system was initially intended to divide people based on their occupation. Thus, it is fair to assume that even fifty to seventy years back, when most people more or less “lived within their caste”, people from similar castes were likely to take up similar kind of careers. Some would choose to join the family business, others would go out to set up their own business, a few others would join the government, and some others would join the army, and so on.

You need to notice that each kind of occupation promises its own kind of cash flows, and so in each of these types of professions, you take a varying amount of time in order to reach the standard of living of your parents.

If you observe, in most parts of India, the people who get married the youngest are typically people who belong to Lala communities. Once you choose to become a Lala, you forego an income, and live on pocket money. And it’s your family which decides how much pocket money you get, and typically your father and uncles and so on won’t want you to live an inferior life to theirs. And so your standard of living is always equal to that of your parents’. And you get married quickly.

Then you have people who work for a salary. If you look back, back in the 50’s and 60’s, the only employer (there wasn’t much of a choice in this) was the government. And irrespective of what degrees you had, or what colleges you went to, you were subject to a pay scale based on number of years in the job. And your salary would typically start off obscenely low. And it would take ages for you to reach the standard of living of your parents.

So that explains it. I know I haven’t taken any data points in between, but I suppose it shouldn’t be too tough. Lalas always live at the same standard as their families, and are thus eligible to marry the earliest. People working for salaries had no choice. They had to wait till the sarkar paid them enough to reach the same standard of living as their parents. And they married really late.

It is all because of Nehruvian socialism, I tell you. In case India was more capitalist back then, more people would’ve gotten rich enough to marry sooner. And this caste-based distinction in age of marriage wouldn’t have existed.

So the next time someone brings up some caste or community related stuff when encouraging or discouraging you to get married, tell them that it is all Nehru’s fault. Talk to them about our great scriptures, and their recognition of the Quarter Life Crisis. Argue from the point of view of your own QLC so as to conveniently hasten or postpone marriage. I’m sure that the scriptures, properly invoked, won’t fail you.