Tag: arranged scissors

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.

Women are like edge triggered flipflops

Every once in a while, we talk about (in some wonder and amazement) how we came to meet each other, and eventually got married. Most of it is usually the same story, (chinese-whispers induced much-mauled) versions of which are known to quite a few people. But each time we talk about it, there’s something new that comes forth, which makes the discussion enlightening.

So the part about how we first got talking is well-established. Priyanka was excited to find Manu, a distant relative of hers, on Orkut. From his Orkut page, she landed at his website, where back then there was a list of “blogs I follow” (in the standard of mid-2000s websites).

And from there she ended up at my blog (the predecessor of this blog), where she chanced upon this one-line post:

noticed a funny thing at the loo in office today. a number of people tie their janavaaras (sacred thread) around their ears while peeing or crapping!!

She got interested and started reading, and presently landed at this post. Then she started her own blog, scrapped me on Orkut and then disappeared after I’d scrapped her back. And so it went.

A year and half later I saw her at Landmark Quiz, and she messaged me a few days later (when I didn’t know it was the same cute chick I’d seen at the quiz) asking if I remembered her and giving me a puzzle, and then we got added to each other on GTalk, and got talking.

Cut the story two years forward, and we met for the first time in Gandhi Bazaar in 2009. A day later, I wrote this blogpost on “Losing Heart“.

Yesterday I met a friend, an extremely awesome woman. Once I was back home, I sent a mail to my relationship advisor, detailing my meeting with this friend. And I described her (the awesome friend) as being “super CMP”. I wrote in the mail “I find her really awesome. In each and every component she clears the CMP cutoff by a long way”. That’s how I’ve become. I’ve lost it. I’ve lost my heart. And I need to find it back. And I don’t know if I should continue in the arranged scissors market.

And a couple of days later I apparently told her I liked her (I don’t remember this, and our GTalk conversations had gone “off the record” then, so there is no evidence).

And today’s conversation revealed that Priyanka completely misunderstood my “losing heart” post and assumed that I didn’t like her. In her hurry of reading my post (perhaps), she had assumed that I had “lost heart” after meeting her, and had taken it to mean that she was unattractive in whatever way.

Then, when I told her a couple of days later that I liked her, it was a massive boost to her confidence, which had been (rather unintentionally) “pushed down” by way of my blog post.

She had been skeptical of meeting me in the first place, afraid that I’d turn out like “another of those online creeps who hits on you the first time he meets you”, and said that if I’d directly told her I liked her after meeting her, she would’ve got similarly creeped out and never married me. But coming after the blog post that had pushed her confidence down, my telling her that I liked her was enough of a confidence boost to her that she stopped seeing me as “yet another online creep”. There’s more to the story, but we ended up getting married.

From my point of view, the moral of this story, or at least the part that I discovered during our conversation today, is that women are like edge-triggered rather than level-triggered flipflops (the wife is an electrical engineer so I can get away with making such comparisons in normal conversation).

The reason Priyanka liked me is that something I told her caused an instant and massive boost in her self-esteem. The level to which it was raised to wasn’t as important as the extent by which it was raised. And she said that it’s a standard case with all women – it’s the delta to their self-esteem that turns them on rather than the level.

She went on to say that this is a rather standard trick in “the game” – to push down the potential partner’s self-esteem or confidence so that you can raise it by a large extent in the next move and win them over. I admit to having no clue of this back in 2009 (or even now). But like in a typical comedy movie, I had unwittingly stumbled into a great strategy!

Tinder and Arranged Scissors

For those of you who have been following my blog for a while know, I was in the arranged marriage market for a brief period in 2009, before Priyanka magically materialised (from the comments section of this blog) and bailed me out. I may not have covered this in any of the Arranged Scissors posts that I wrote back then (ok I alluded to this but not really), but I had what I can now call a “Tinder moment” during the course of my time in the market.

So on this fine day in Bangalore, I was taken to this Marriage Exchange called Aseema. The name of the exchange is quite apt, since based on two data points (my own and one acquaintance’s), if you go there your search for a spouse is literally endless.

My uncle, who took me there and who was acting as my broker-dealer for that brief period, told me that they literally had binders full of women (note that this was three years before Romney), and that I could search leisurely if I accompanied him there on Saturday morning.

My uncle didn’t lie. This place did have several binders full of women (and men – I too ended up in one such binder after I signed up) and four binders that said “Smartha (my subcaste) Girls” were pulled out and handed over to me. My uncle probably expected me to spend a few hours ruminating through the binders and coming up with a shortlist.

It was nothing like it. Each profile in the binder followed a standard format. There was this 4 by 6 full-length photo. You knew where to look for educational qualifications. And professional summary. It was like LinkedIn meets Facebook profile picture. And that was it.

I remember having some criteria, which I don’t remember now. But once I had gone through the first few pages, it became mechanical. I knew exactly where to look in a particular profile page. And quickly come to a judgment if I should express interest.

Thinking back, I might have just been swiping (mostly left – I came up with a grand shortlist of one after the exercise) on Tinder. The amount of time I spent on each profile wasn’t much more than what the average user spends on Tinder. Except that rather than looking only at the photo, I was also looking at a few profile parameters (though of course whether I would want to sleep with her was one of the axes on which I evaluated the profiles). But it was just the same – leafing through a large number of profiles in a short amount of time and either swiping left or right instantly. Talking to a few other friends (some of it at the now legendary Benjarong conference) about this, my experience seemed representative (note that I’m still in anecdata territory).

Maybe there is a lesson in this for all those people who are designing apps for arranged marriage (including the venerable Shaadi.com and BharatMatrimony.com). That even though the stated intent is a long-term relationship, the initial process through which people shortlist is no different from what people follow on Tinder. Maybe there surely is a market for a Tinder-like arranged marriage application!

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!