Wednesday 26 November 2008

It works - for whom?

Every text or podcast on basic economics maintains that the market works because people are selfish. A fund manager will not take stupid risks and will lookout for customers’ interests because that’s what gets paid for, and if he fails his customers he’ll find himself without a job. The manufacturer will give you a fail deal, otherwise his competitors would. Those who are rude to customers will lose business because customers will tell.

Sounds logical. But so do all platitudes.

Yet how many platitudes apply to the daily lives and decisions of ordinary people? Think about the money manager. Who are his customer? You and me with our tiny investments? Or his fellow money managers who can pour millions into each other’s funds at the press of a button? And even if push comes to shove and our friend finds himself without a job, doesn’t he have a wonderful golden parachute to ensure a comfortable landing? In fact, wasn’t the golden parachute put in so that he may not worry about his personal future while taking risks? What is his personal downside? Is it in any way comparable to the (relative) losses of lay investors?

Think of a parallel. A general of a democracy’s army will probably never use his troops as cannon fodder. Why? Because of his values, of course, but also because such a thing will be criminal under a democracy. Can he assume that his opposite number will be just as careful? Not if the enemy is a dictatorship.

Look at politics. It’s supposed to be highly competitive; most probably, it is. The midnight orgies of political rivals is likely to be a figment of the disgusted public grasping for some logic (They must have formed a cartel, or they can’t screw me so badly). Yet, by all accounts, quality doesn’t improve, in either governance or legislation. Most agree that it declines all the time. Can an invisible master mind of the marketplace for votes have decided the optimal quality level, as the invisible hand guides all good capitalists to create a good earth?

Or are the troubles and tribulations nothing but kinks that will get ironed out in the long run, after we little worms are dead and gone? Why do we swallow the economics 101 day in and day out? Because we are helpless? Because we are afraid? Because if we don’t we’ll have to grow beards, take up Kalashnikovs and head for the jungles? Or because we never had it so good? Had it not been for our invisible gods we’d all be pulling rocks under slave-drivers’ whips?

Monday 24 November 2008

Orphaned terror

“The terrorist has no state, politics or religion.” Every show on terrorism has someone or the other mouthing this platitude. Now, if this is true, then why do we have the panel of experts representing political, religious and state groups? Shouldn’t terrorism be left totally to psychiatrists and policemen?

Wednesday 19 November 2008

Silly numbers

I refrain from writing about personal experiences, especially bitter ones, for fear of sounding like a cry baby. But this one is an example of such downright stupidity and high-handedness, that I cannot but put it on record.

I had asked several American universities if they'd accept my 3-year BS degree as minimum qualification for their MBA programmes. Some replied they won't, because, according to them it wasn't equivalent to an American 4-year degree. Some said they would. And some wanted my numbers evaluated by a 3rd party.

There was no question of applying with the first group; and I generally steered clear of the third. But one course I badly want to attend wanted the 3rd party evaluation, so I had to approach one of the agencies. So far, so bad.

I sent them copies of my transcript, attested by my university. On receiving them, they sent me mail confirming they had the documents, and saying my marks will be evaluated in a week or so, but I can hurry the process by making an extra payment. Since the last data for the application in question was in February 09, I didn't may any extra payment.

On the promised data, I went online to see my results. To my shock, it said my numbers couldn't be evaluated because I hadn't sent them a copy of my diploma or a provisional certificate. Now, my university's transcript clearly states that it doubles as a provisional certificate. Besides, the final certificate, which I got four whole years after passing, doesn't even carry my percentage. I couldn't see why they needed it. Even if there was a reason, why did they wait so long to tell me that my application was incomplete. Clearly, they hadn't opened the envelope till the day on which they were to deliver the evaluation.

Anyway, I called them up, after a futile search for an email ID. And was put on hold. A recorded message informed me that the average on-hold time was 12 minutes! My any standards, this is pathetic. Worse, the time kept changing every half a minute. Once it the 7 minutes 36 seconds, then 10 & 42, and then 13 & 3... This was technology without commonsense. Instant averaging for the sake of it, never mind if it mislead and irritated callers.

Finally, someone turned up. “Why do you want a copy of this diploma?” “Because that's the policy, and it applies to everyone, not just you.” “Of course, but why do you have such a policy, more so when the transcript clearly says it's a provisional certificate?” “To make sure you really took the diploma you say you have.” “And why should an university attest its 15-year-old transcript if I hadn't? Never mind, do you have an email ID to which I can mail a scanned copy?” “No. You have to fax it.”

So I faxed a copy the next day. And went through another 12-minute wait, whence I was informed that the executive (clerk is far more apt) had no clue if my fax had reached.

But today was the worst, because I got my marks. Apparently, my BS is equivalent to a GPA of 2.85. I knew I hadn't done well, managing just 59% in those bad old days, but I was pretty sure I was a better student than this. So how did I fall so hard?

I looked up their evaluation method. This depends on two things: (a) the credits assigned to a paper and (B) the grade equivalent of your score in it. I need that quarrel with the latter, but the former left me flabbergasted.

In my university, University of Calcuatta, at my time, 1993, a student's BS percentage and class (1st or 2nd) depended solely on his eight Honours subject (3 Theory & 1 Practical in Part 1; 2 Theory & 1 Practical in Part 2).

He merely had to get through his two Pass papers in Part 1, after which both were discontinued. The English papers didn't count at all.

So, one can reasonably expect maximum and equal weight to all Honours papers, less weight to the Pass papers, and none for English.

Instead, this evaluation agency assigned the same weight to all papers, Honours and Pass and English – except the two Part 2 (Honours) practical papers!

Every market struggles with exchange rates. I wonder how many accept whimsical balderdash, topped with horrible service, as the solution?

PS: When I tried to complain online, I found their email takes only 255 charecters. I asked for an ID, and was told to fax.

PS: It's 3rd December today, a week since I faxed them my points. I haven't even got an acknowledgement. 

Wednesday 12 November 2008

More from buyology

“In short, based on viewers' brains' responses to the three programs we tested that day at Los Angeles, The Swan was the least engaging, How Clean Is Your House? The most engaging, and Quizmania lay somewhere between the two. Therefore, we concluded (with a 99 percent degree of statistical certainty) that Quizmania – if and when it is ever aited – would be more successful than The Swan, but less successful than How Clean Is Your House?”

If there were a smiley for a dropping jaw, I'd put it here.

Our boy genius, Lindstrom, and his brain scanning friend were showing some people reality shows and measuring how their brains lit up to these. And then linking existing shows' TRPs, or whatever they use to rate shows out there, predicting success for future shows. The more a new show fries your brain, the more likely it'll be a hit.

Very nice, but is the luminosity of the frontal lobe the only thing that matters to the success of a reality show? How about culture? The economy? War? Show timing? Publicity?

Oh, but we do all know that our boy wonder means that 'all things being equal', it's the heat in the head that matters, don't we? Do we? Or are we doing a hallelujah to this sure-shot method of predicting everything to do with anything?

It's one thing to design an experiment that allows for every possible influence, and then measures the effect – if any – of the factor under investigation*; it's quite another to blissfully ignore the universe and measure only one specific change coincident with a given factor (Did they measure, say, the twitching of the subjects' ears?).

It is yet another thing to extrapolate a straightforward observation (brain engagement => glowing frontal lobe) into something heavily pregnant with possibility (not only glowing frontal lobe => hit show; but also rating = k times glow).

I'm afraid there are such suspicious logical jumps throughout the book. Worse, he doesn't give references to the original research. So, one giant leap for Lindstrom, many steps back for marketing research. I tremble for the day when my headlines will be glow tested on any dimwit with time to kill.

*What is beyond measure can be immeasurably important. But we shouldn't engage in 'semantics'.

Monday 10 November 2008

Chance and compensation

In an article titled Proximity is key to raking it in in today’s Times of India, columnist Santosh Desai argues that you get paid according to your closeness to money. He says, “We get paid not for what we do, but for where we are. Salaries are all about location; the closer one is to money, the more of it one makes. Like the arms dealer who makes a few hundred million dollars for putting the right people in touch with each other, the key is proximity to money. Schoolteachers and college professors sit very far from money, so no matter how much their personal ability or how much value they add to our lives, they earn what they do. The market is impatient with distance; it discounts one's worth, the further one gets from it.”

The same point is expanded in John Kay in Culture and Prosperity: Why Some Nations Are Rich but Most Remain Poor. At any rate, that’s what I made of that book.

But somewhere else I remember reading another, probably complimentary explanation. Income is also reward for taking risks. The superstar is paid millions to attract thousands to stardom; only a few make it; and the average income of actors is quite low, because for each superstar there are literally hundreds of out-of-work actors, surviving on handouts or part-time jobs, and scores of minor ones who live no better than a middleclass life.

Similarly, executives, especially in finance, can have prolonged lean periods where they earn little or nothing. And a CEO who sits through bad times will have his career and reputation terminally ruined. The ruin of one’s good name can hurt one more than the loss of several fortunes.

Fat paycheques are compensation for these risks. It’s not just nearness to wealth; it’s also closeness to ruin.

Thursday 6 November 2008

Caveat believer

Before you buy Lindstorm’s buyology – or at least after you have read it – do click here: There's a Sucker Born in Every Medial Prefrontal Cortex (

According to Lindstorm’s online resume, he opened his first agency at 12 and has been advising people since. He has been a certified genius for the last two decades. It does mention an Academy of Advertising, which he attended in between heading companies. One wonders what this is. Though, of course, one shouldn’t because all the research he sites are done by doctorates of this and that on machines that cost at least a couple of million. 

And therein lies the catch. Tremendous intelligence and even more gusto extrapolating whatever data that looks nice, taking enormous and audacious leaps of logic whenever necessary. 

This may be good enough in the boardroom, but is it good enough in the classroom? Will a social scientist build hypotheses on data like that used to take business decisions on a regular basis? If not, why not? An academician’s work will be read by a select circle and effect fewer still, if any, materially. Yet, it’ll probably appear with far more ‘timid’ than even the most junior executive’s proposal. Is that because, unknown to us, society does indeed value the ‘truth’ than the dollar, because the truth can sometimes become very big, very powerful?