I always thought it is a good thing to do something niche – like having a set of skills/capabilities which few other people have. However, the problem with that, I have come to believe, is that it can be too niche. In which case, you tend to suffer from lack of liquidity in the market.

Lack of liquidity can mean one of two things – it can be good in a way that it ensures wide spreads, so you get to charge much more than the “fair mid price”. On the other hand (maybe in very extreme cases) it can also mean that there is no deal, and you don’t even make the fair price, leave alone a spread.

I think creating liquidity in the market that you want to place your product in is an art.

Independence and contribution at work

This is based on a discussion I had at work a few days ago. We were talking about people being able to do things out of their own initiative, come up with their own new ideas, inventing their own problems to work on (which would be useful for the firm on the whole) and stuff.

Now if you consider people’s abilities as a multi-dimensional vector (the number of dimensions will be large, since one’s abilities, capabilities, etc. can be along several dimensions), what we realized is that if someone just takes orders from other people and not work on their own ideas and intuition, then their contribution to their role is just the component of their vector along the vector of the person whose orders they are following.

And considering that the probability of their vector and the vector of the person who they’re taking orders from lying in exactly the same direction is close to zero, what this means is that by simply following someone else’s orders they are contributing an amount that is less than what they are capable of contributing (since the component of their ability orthogonal to the vector of the person whose orders they are taking isn’t on display at all).

Hence, it is important to have people in the team who are capable of independent thinking and intuition since that is the only way in which their full possible contribution can be harnessed. On a related note, in order to bring the best out of its employees, and to allow them to contribute to their full capacity, firms should allow the employee to take initiative and come up with their own ideas rather than simply taking orders, since in the latter case only the component of the abilities along the orders is contributed.