linkedin – Pertinent Observations

Status and money

Over the last week or so, I’ve been discussing this post by Robin Hanson with just about anyone. The first paragraph is the one that caught my attention.

Having a romantic partner is useful in many ways. You won’t be as lonely, you can ask them for advice, you can do activities together, and you can share transport and even a household with them. But if you look carefully, you will notice that many people don’t choose such partners mainly for their promise in such roles. They instead seek high status partners, who make them look good by association. Partners who are hot, funny, rich, powerful, etc.

Nevertheless, I urge you to read the whole thing. Hanson goes on to talk about status in several other fields, such as politics or in organisations.

Broadly paraphrasing (you should still read the whole thing), he says that people want to be associated with people with high status, or people who add status to them. So politicians who can project higher status will get elected. Organisations will appoint people who can further increase the status of the organisation.

I was thinking about this today from the point of view of last night’s post, where I had compared my life in my (current) full time job to that of a consultant, which I had been for nine years prior.

Sometimes it is common for us to comment, or gossip, that someone got hired purely on the strength of their reputation, and that their abilities are not extraordinary. Sometimes, reputations can be self-fulfilling – if you can somehow get the reputation of being good at something, more people will start with the Bayesian prior that you’re good at that, and as long as you don’t suck at that thing, the prior will continue to hold. And so more people will think you’re good at it, and so on.

So when I think of my own career, basically I realise the way to go is to get into a position that my sheer presence adds status to the organisation I’m associated with. That way, they will be more forgiving of the work that I do (or don’t do). At the same time, from my own perspective, the organisation also needs to (at least marginally) add to my status – at some level I may not want to join a club that wants me as a member.

I remember back in the day when I was consulting – one of my clients, during the negotiations prior to the engagement, had wanted me to put on LinkedIn that I was working for them. Now when I think of it from the point of view of Hanson’s post, this was the client leveraging my then reputation in data to further their own status.

This is what I need to bring to my employers as well (I have no clue if I do already with my current ones – though I’m not so popular within my (data science) domain in india). The target, if I were to think of it, is to get into that self-fulfilling space when it comes to status – that people want me just because I’m me and bring along a certain (positive) status.

Now that I’ve identified the target, I need to figure out how to get there. I know in his famous podcast, Naval said that we should optimise for wealth (a positive sum game) rather than for status (a zero sum game). But Hanson’s post, and my analysis of it, suggests that status can also lead to wealth. I need to figure out the tradeoff now!

Social Media Addiction

Two months back I completely went off social media. I deleted the instagram app from my phone and logged out of Instagram, Twitter, LinkedIn and Facebook on my computer. I needed a detox. And I found myself far more focussed and happier after I did that. And I started writing more here.

My first month off social media was strict. No social media under any circumstance. This was necessary to get rid of the addiction. Then, since I came back from the Maldives trip, I’ve been logging into various social media accounts on and off (about once a day on average) just to see if there are any messages and to browse a bit.

I only do it from my computer, and at a time when I’m not fully working. And as soon as the session is over I make sure I log out immediately. So the instinctive adrenaline-seeking opening of social media tabs is met by a login screen, which is friction, and I close the tab. So far so good.

In my infrequent returns to social media I’ve found that the most “harmless” are LinkedIn and Facebook (it might help that I don’t follow anyone on the latter, and if I want to check out what’s happening in someone’s life I need to explicitly go to their profile rather than them appearing on my timeline). LinkedIn is inane. Two or three posts will tell you it’s a waste of time, and I quickly log out. Facebook is again nothing spectacular.

Twitter is occasionally interesting, and I end up scrolling for a fair bit. For the most part I’m looking for interesting articles rather than look at twitter arguments and fights. I’m convinced that twitter statements and arguments don’t add much value – they’re most likely ill thought out. Instead a link to a longer form piece leads me to better fleshed out arguments, whether I like it or not.

Mostly after a little bit of twitter scrolling, I find enough pieces of outrage, or news/political stuff that I get tired and log out. It’s only when I really need an adrenaline rush and don’t mind people cribbing that I stay on twitter for a bit of a long time (over five minutes).

Instagram, on the other hand, is like smoking cigarettes. When I smoked my first cigarette in 2004 I felt weak in the knees and a sort of high. It was in my final year of college, so I’d had enough friends tell me that cigarette smoking is addictive. And my first cigarette told my why exactly it was addictive.

So I made a policy decision at that moment that I’d limit myself to a total of one cigarette a year. I’ve probably averaged half a cigarette a year since then. My last one was in 2016.

Instagram is really addictive. It’s full of pictures, and if you avoid the really whiny accounts there is little negativity or politics. People make an effort to look nice, and take nice pictures, for instagram. So there is a lot of beauty in there. And if I choose to, especially when I’m logging in after a long time, I can keep at it for hours.

Instead I need to be conscious that it’s addictive (like my one cigarette a year rule), and pull myself away and force myself to log out. This also means that while I open twitter about once a day, Instagram is less than once a week.

I wonder what this means about the sustainability of social networks!

Commenting on social media

While I’m more off than on in terms of my consumption of social media nowadays, I find myself commenting less and less nowadays.

I’ve stopped commenting on blogs because I primarily consume them using an RSS reader (Feedly) on my iPad, and need to click through and use my iPad keyboard to leave comments, a hard exercise. And comments on this blog make me believe that it’s okay to not comment on blogs any more.

On Facebook, I leave the odd comment but find that most comments add zero value. “Oh, looking so nice” and “nice couple” and things like that which might flatter some people, but which make absolutely no sense once you start seeing through the flattery.

So the problem on Facebook is “congestion”, where a large number of non-value-adding comments may crowd out the odd comment that actually adds value, so you as a value-adding-commentor decide to not comment at all.

The problem on LinkedIn is that people use it mostly as a medium to show off (that might be true of all social media, but LinkedIn is even more so), and when you leave a comment there, you’re likely to attract a large number of show-offers who you are least interested in talking to. Again, there’s the Facebook problem here in terms of congestion. There is also the problem that if you leave a comment on LinkedIn, people might think you’re showing off.

Twitter, in that sense, is good in that you can comment and selectively engage with people who reply to your comment (on Facebook, when all replies are in one place, such selective engagement is hard, and you can offend people by ignoring them). You can occasionally attract trolls, but with a judicious combination of ignoring, muting and blocking, those can be handled.

However, in my effort to avoid outrage (I like to consume news but don’t care about random people’s comments on it), I’ve significantly pruned my following list. Very few “friends”. A few “twitter celebrities”. Topic-specific studs. The problem there is that you can leave comments, but when you see that nobody is replying to them, you lose interest!

So it’s Jai all over the place.

No comments.

InMails and the LinkedIn backfire

A few months back I cleaned up my connections list on LinkedIn. Basically I removed people who I don’t “know”. I defined “know” as knowing someone well enough to connect them to someone else on my network (the trigger for a cleanup was when someone asked me to connect them to someone else on my network who I hardly knew).

The interesting thing about the cleanup was that a lot of the spurious connections I had on LinkedIn were headhunters. Thinking back at how they got in touch with me, in most cases it was with respect to a specific opportunity for which they were finding candidates. Once the specific opportunity had been discussed there was no value of us being connected on LinkedIn, and were effectively deadweight on each other’s networks.

Over the last couple of days, ever since I wrote this piece for Mint on valuation of startup ratchets, I’ve got several connection requests, all from people I don’t know. Normally I wouldn’t accept these invitations, but what is different is that most requests have come with non-standard messages attached. Most have mentioned that they liked my Mint piece and so want to either connect or discuss it.

When you want to simply exchange messages with someone, there is no need to really add them as a “friend”. Except that LinkedIn’s pricing policy makes this kind of behaviour rational.

LinkedIn offers a small number of “InMails” which you can send to people who you aren’t directly connected to. Beyond this number, each InMail costs you money. So if you want to have a discussion with someone you’re not connected with, there’s an element on friction.

There’s a loophole, however. You can send messages for free as long as they go along with a connection request. And if that request is accepted, then you can have a “free” conversation with that person.

So given the current price structure, if you want to have a conversation with someone, you simply send your initial message as part of a friend request. If the person wants to continue the conversation, the request will get accepted. If not you haven’t lost anything!

Then again, there are mitigating features – an InMail won’t get charged unless there is a reply, and LinkedIn’s UI is so bad that it takes effort to read messages attached to connection requests. So this method is not foolproof.

Still, it appears that LinkedIn’s pricing practice (of charging for InMails) is destroying the quality of the network by including spurious links. I guess they’ve done a cost-benefit analysis and believe that the cost of spurious connections is far lower than the revenue they make from InMails!

Revisiting IPOs

I’ve written several times (here, here and here) that the IPO pop is unfair to existing shareholders since they end up selling the stock cheaper than necessary. Responses I’ve received to this (not all on the blog comments) have mostly been illogical and innumerate, talking about how the pop “increases the value of the entrepreneurs’ holdings”, and that the existing shareholder “should be happy that the value has gone up” rather than wondering why he sold his shares at the low value.

Thinking about this in the context of the impending Cafe Coffee Day IPO, I realised that a pop is necessary (though not maybe to the extent of the MakeMyTrip and LinkedIn pops), because investors need some incentive to invest in the IPO rather than buying the stock in the secondary market after listing.

Secondary markets have superior price discovery compared to primary markets since the former have several (close to infinite) attempts at price discovery, while the latter have only one attempt. Also, prices in the secondary market change “slowly” (compared to the price difference between primary and secondary market), so even if someone has invested at a price they later have dissonance with, they can reverse the investment without incurring a high cost.

For this reason, if you want to invest in a company and want to know that you are paying a “fair price”, investing in secondary markets is superior to investing in primary markets. In other words, you need a higher incentive in order to buy in primary markets. And this incentive is provided to you in the form of the IPO pop.

In other words, the IPO pop is an incentive paid to the IPO buyer in exchange for investing at a time when the price discovery is in a sense incomplete and cannot be particularly trusted. Rather than pricing the IPO at what bankers and bookbuilders think is the “fair price”, they will price it at a discount, which offers IPO investors insurance against the bankers having made a mistake in their pricing of the IPO.

And how much to underprice it (relative to any “fair price” that the bankers have discovered) is a function of how sure the bankers are about the fair price they have arrived at. The greater their confidence in such a price, the smaller the pop they need to offer (again, this is in theory since investors need not know what fair price bankers have arrived at).

The examples I took while arguing that the IPO pop is unfair to existing shareholders were MakeMyTrip and LinkedIn, both pioneers in some sense. LinkedIn was the first major social network to go public, much before Facebook or Twitter, and thus there was uncertainty about its valuation, and it gave a big pop.

MakeMyTrip was a travel booking site from India listing on NASDAQ, and despite other travel sites already being public, the fact that it was from an “emerging market” possibly added to its uncertainty, and the resulting high pop.

So I admit it. I was wrong on this topic of IPO pops. They do make sense, but from a risk perspective. Nothing about “wealth of existing shareholders increases after the pop”.

Pricing likes and the facebook algorithm

There is a good friend of mine who is a compulsive “LinkedIn liker”. Anything anyone in his network writes (either a LinkedIn blog or a status update or a job announcement), he is extremely likely to “like” them. While that helps the authors of such updates in getting their messages across to this guy’s networks also, the thing is that such likes add little value. If an update has come on my timeline because this guy has liked it, I’ll take it with salt since I know that this guy’s likes are “cheap”.

I don’t want to single out this guy, but there are several others on my Facebook friend list who are also compulsive likers. They like just about everything that they see, but the Facebook algorithm (by which not all of your updates are shared with all of your friends) means that their incidence is less than that of the LinkedIn liker. Then I have this one follower on Twitter who unfailingly likes each tweet of mine with a link. He engages in conversation very very sporadically, but like he does all the time!

So this got me thinking on the value of people’s likes, and what would happen if likes were to be rationed. I know it’s going to be hard to implement, but if you wee told that you had a quota of 10 likes that you could dole out in a day, how would you then ration your likes? Would such a cap make likes more valuable?

The reason this matters is that the number of likes has now become a metric that social media marketers track, and if some people’s likes are less valuable than others’, it is essentially a useless metric (and I know the problem is with the metric, not with likes). Even otherwise, from an information perspective, knowing the value of each person’s likes is useful for you in making up your mind on something!

So if say facebook decides that you get 10 free likes a day and have to pay for any more, how does that change your liking behaviour? For your 11th like, will you pay or go unlike something you’ve already liked? As a thought experiment, it is fascinating!

And while we are discussing Facebook, I must mention that I absolutely loathe its algorithm. I don’t know how it works, but it seems to me that the better updates that I put there just never get carried to my network, but some random updates that I sometimes put get propagated like crazy. I’ve been trying to reduce the number of updates there so that each update has a greater probability of getting propagated, but it just doesn’t seem to help!

And I was thinking about Facebook’s algorithm, and Twitter’s non-algorithm where every tweet you put gets carried to all your followers. Since Twitter doesn’t filter, all your followers have an opportunity to see all that you say. But the problem there is that since your followers see tweets of everyone on their timelines, your tweet is likely to get lost in the competition for attention.

So basically Twitter is like a free market where you have everyone’s tweets that get shown and compete for a follower’s attention. Facebook is like a more regulated market where there is no clutter, so every update gets undivided attention, but there is a Big Brother which decides who should see what!

I wonder if Facebook has considered making its algorithm public, and if it does, if it will have any impact on how people share. The value it will have for me is that at least I will know whether an update will get carried or not, and time and space my updates properly. But considering that one of Facebook’s revenue sources is to be paid by users to propagate their updates further, revelation of the algorithm will result in lower revenues for Facebook, so they’ll never do that.

I might just get all disgusted with the algorithm and quit Facebook some day.

More on IPOs

In the past I’ve written on this blog that IPOs that open with a pop are actually unfair to the existing shareholders of the company, and are not as “successful” as reported by the media. To this, people from the industry have pointed out that the “pop” (increase in share price on the day of listing) actually increases the value of the shares held by the existing shareholders and hence this is a good deal.

I’ve always been unsure about this kind of analysis, and have held it suspiciously as one of those views held by people who accept “received wisdom” without much questioning and so much of such wisdom gets received that it becomes a thing. While investment bankers are usually incentivised on a percentage of the money raised by the IPO, considering that they are a platform for trading, they choose to forego some of that income by transferring money to the other side of the market – the “buy side” who are their more consistent customers.

In the aftermath of the LinkedIn IPO which I had written about in a similar context a few years back, Facebook went public and it seems like they had put immense pressure on their bankers (Morgan Stanley if I’m not wrong) to “not leave money on the table”. And the IPO had opened rather flat. Not great for investors but excellent for Mark Zuckerberg and other old shareholders in Facebook.

Anyway, the reason I revisit this topic is this IPO by this Chinese company called Beijing Baofeng. Check out its share price movement:

Another view pic.twitter.com/aCl0ISnC1N

— Matt Levine (@matt_levine) April 30, 2015

The reason you see the neat step graph is that on each trading day following its IPO the share has hit the upper circuit breaker (at which point trading in the security is closed for the day). The inimitable Matt Levine has mentioned in his daily newsletter (which I subscribe to, and you should, too) that the stock has gained 1600% after the IPO, which makes LinkedIn’s doubling of share price on IPO day look like child’s play!

A takeaway from this is that investment banking remains strong as an industry, and bankers continue to shaft their hapless clients (or, if we should give them more credit, are so inept that they consistently underprice IPOs). It would be a great industry to get into except that they’re not hiring (a straw poll I conducted in the IIMB class I taught showed that hardly anyone had got a banking job)!

I continue to wonder how the IPO industry can be disrupted!

Useless LinkedIn

I’m not a big fan of LinkedIn. I mean, I use it, and fairly regularly at that (check it at least once a day), and I think conceptually it’s quite useful. However, in practice, I think there are a number of sticking points about the service, which makes it quite useless.

For starters its apps (iPad and Android) are quite lousy, and offer nowhere close to the kind of experience that the web interface offers. Things are extremely unintuitive (down to the tabbing order – you compose message, hit tab and enter, and you don’t send the message. It takes you to the profile of the person you’re messaging instead) on the website. Sometimes the apps show notifications even after you’ve checked them on the web, and so on.

In other words it’s an extremely poorly engineered product, but which is surviving (and thriving) thanks to network effects!

I might have commented on this in the past but there is this thing on endorsements. This was something that coincided with the time when LinkedIn went public (if I’m not wrong), and you could endorse people for their “skills” on LinkedIn. For a while I played along with the game. But then I completely lost it when a distant uncle who I’m sure has never traded derivatives endorsed me for “derivatives”. I quickly deleted my skills.

Then there are the LinkedIn recommendations, which has inherent selection bias and hence adds no value. And then you have the “say goncrats” feature, where LinkedIn prompts you to “say congrats” on people changing jobs or hitting job anniversaries. I’ve found this mildly useful (dropping a note when someone switches jobs is a good way to stay in touch), but there are the bugs in terms ofjob downgrades and people getting fired.

And of late, there has been serious spam in terms of people’s status updates. I don’t know when it became popular to post silly puzzles on professional networking sites, yet I find several of them popping up on my timeline every day, and the number of people who have shared each is not funny. Then you have these cartoons (Dilbert and the copycats), and “guru quotes” that appear in the form of images that further spam your timelines! The only way I can think of these being useful is that they act as a negative indicator when you’re checking out the profile of someone you are looking to hire or do business with!

To summarise, LinkedIn seems to be an extremely badly engineered product on several counts, but thanks to network effects (so many people are already on it that entry barriers for competitors are really high) the site still manages to do well! I wonder what it will take to disrupt it. Facebook for business is not the answer for sure – the potential havoc caused by a breach in chinese walls there will scare people enough to not sign up.

What do you think? Here is their stock price movement for reference:

LinkedIn, WhatsApp and Freaky Contact Lists

So one of the things I do when I’m bored is to open the “new conversation” (plus sign) thing on my WhatsApp and check which of my contacts are there in my WhatsApp social network. I do this periodically, without any particular reason. On the upside, I see people who I haven’t spoken to for a long time, and this results in a conversation. On the downside, this is freaky.

The problem with WhatsApp is that it automatically assumes that everyone in your phone book is someone you want to keep in touch with. And more likely than not, people make their WhatsApp profile pictures visible to all. And sometimes these profile pictures have to do with something personal, rather than a simple mugshot. Some people have pictures of their homes, of their kids, and of better halves. And suddenly, everyone who has their number on their phone book gets a peek into the part of their lives they’ve chosen to make public by way of their WhatsApp profile pictures!

Some examples of people on my phone book into whose lives I’ve thus got a peek includes a guy who repairs suitcases, a guy who once repaired my refrigerator, a real estate broker whose services I’d engaged five years back to rent out my house, and so forth. And then there are business clients – purely professional contacts, but who have chosen to expose through their WhatsApp profile pictures aspects of their personal lives! Thus, through the picture function (of course you can choose to not make your picture public), you end up knowing much more about random contacts in your phone book than you need to!

The next level of freakiness comes from people who have moved on from the numbers that they shared with you. So you see in the photo associated with an old friend someone who looks very very different and who is definitely not that friend! And thanks to their having put pictures on WhatsApp, you now get an insight into their personal lives (again I tell you that people put intensely personal pictures as their WhatsApp profile pictures). I haven’t tried messaging one of these assuming they are still the person who is my friend and used to once own their number!

Then there are friends who live abroad who gave you the numbers of close relatives when they were in town so that you could get in touch with them. These numbers have now duly passed back on to the said relatives (usually a parent or a sibling) of your overseas friends, and thanks to the pictures that they put on WhatsApp, you now get an insight into their lives! Then you start wondering why you still have these contacts in your phonebook, but then it’s so unintuitive to delete contacts that you just let it be.

The thing with Android is that it collects your contacts from all social media and puts them into your phone book – especially Facebook and LinkedIn. On Facebook people are unlikely to give out their phone numbers, and everyone on my facebook friends list is my friend anyway (today I began a purge to weed out unknown people from my friends list) it’s not freaky to see them on your whatsapp. But then thanks to the Android integration, you have your LinkedIn contacts popping up in your address books, and consequently whatsapp!

Again, LInkedIn has a lot of people who are known to you, though you have no reason to get to know their personal lives via the photos they put on WhatsApp. But on LinkedIn you also tend to accept connection requests from people you don’t really know but think might benefit from associating with them at a later date. And thanks to integration with WhatsApp, and profile pics, you now get an insight into the lives of your headhunters! It’s all bizarre.

So yes, you can conclude that I might be jobless enough to go through my full WhatsApp contacts list periodically. Guilty as charged. The problem, though, is that people don’t realise that their WhatsApp profile pictures are seen by just about anyone who has their number, irrespective of the kind of relationship. And thus people continue to put deeply personal pictures as their WhatsApp profile pictures, and thus bit by bit give themselves away to the world!

The solution is simple – put a mugshot or a “neutral” photo as your WhatsApp profile picture. You don’t know how many people can see that!