Genetically evil

In The Caged Phoenix sociologist Dipankar Gupta convincingly argues that our many ills don’t stem from our being exotically culturally different but from bad politics, bad economics, and lazy scholarship that goes for easy answers (caste, religion) which are completely wrong. Such inputs would have produced a mess anywhere.

Yet, he leaves his readers – this particular reader, at any rate - with the (unstated) conclusion that we couldn’t have done so badly unless we were peculiarly rotten to begin with! So, we are hopeless.

Why is China not Japan?

The biggest datum in global economics is that China has had 10% growth year on year for the last quarter century, that is, ever since they embraced the free market.

In which case its industry (or whatever industrial growth measures) should be nearly 11 times what it was 25 years ago. How many times richer should the workers be? What should they have? What standard of living should they have, on average, attained by now? Have they come very near those theoretical standards?

Is today's English labourer 10 times better off than his Victorian ancestor (who was probably at 1984 China standards)?  

Why the surveys were all wrong

Apparently the Congress win in the recent was not predicted by any pre-pool or exit survey. I find that rather difficult to digest. However, let's say that is indeed the case. How can it be possible? Two possibilities come to mind:
All the surveys were badly done. They didn't go for representative samples; instead they just interviewed people near their homes and hotels.

Many seats were decided by the narrowest of margins. This was reflected in the surveys, but was left of by the publications. The newspapers and news channels left out the uncertainty so that the innumerate millions are not confused.

Also, the Congress, because it contested more seats this time (thanks to Ekla Cholo), won more of those marginal seats. A person who calls many tosses is almost sure to win more (numbers, not percentage) than one who calls few.

And, hey, where's the landslide? Congress & Co are 11 short of getting a simple Vote of Confidence. We don't have a hung parliament, but Vajpayee's and Dr Singh's terms show that that doesn't necessarily mean fatal crisis. Let's get real for once.

PS: One thing I heard no commentator talk about was the inordinate length of this election, the consequent presence of central security throughout the country, leading to free and fair (one assumes and hopes) voting. We all agree that corruption is a great ill, yet discuss matters as if it is not even a factor!

Second, I am sure someone has tried to find the role of luck in elections in our country. Very simply, we may look at the correlation between vote shares and seats, after adjusting for state size (In a state with one or two seats, the correlation will probably be weak). Do political parties employ statisticians? Shouldn't they?

The logic of the evil moneylender

The village moneylender is the villain of countless movies. His two great crimes being high interest rate and ruthless demand for  collateral. Doubtlessly, he did and does both. However, there may be more to his sins than greed.

All businesses have low rates for bulk orders and high rates for small orders.

Second, all lenders, including the Nobel winning Gramin Bank, have different terms for borrowers with bad credit ratings. Undeniably, most Indian farmers are shaky debtors.

Third, the moneylender’s business, one assumes, had and has little or no legal protection. One cannot imagine the government, of any age, paying off farmers’ loans to him. So what choice did he have besides strongmen?

This is not to say that the moneylender was a misunderstood and unappreciated do-gooder. But to suggest that had his limitations been taught in schools, instead of evils – which probably had far more to do with justifying political rather than economic reforms – people would have a better idea of what needed to be done in rural credit.

For example, (good) organised rural banking may well be a viable business at high interest rates and high penalties for non-payment. Yet it may be impossible if people are brainwashed into believing that both are unnecessary evils. Also, if the US were wrong about sub-prime credit for homes, why are we right on waiving repayment on sub-prime credit on farms? The humanitarian reasons are readily apparent, yet one wonders if no ‘restructuring’ was possible.

Come, steal the vote!

We, the chattering class, are more obsessed with voting than babies are with their navels. Somehow, the act of voting will change everything. Today's Lead India ad in The Times of India reflects this: 
'...you have felt hopelessly outnumbered by another political phenomenon. 
The Great Indian Vote Bank. 
This time however, things have quietly changed. Here's how. 
Sure, every major political party nurtures its own committed vote bank based on case, religion, language and region. 
But since each of them has one, this also makes all of them equal once again. 
So what all parties badly need, and fear most, is that the vote that could go either way and tilt the balance. The swing vote. Which is yours. 
Because the vote banks may make the numbers but the swing votes decide the majority. In 2004 for instance, the winning margins in Mumbai were as low as 10,000 odd votes.'  

The election is decided by the political equivalent of a toss. Come, flip the coin!

Or, worse, vote as the deciding middle-class vote bank, with power totally disproportionate to population (thus denying the majority [the stupid poor in their sin-dripping vote banks] their way?). Do in the poll booth what those tiny parties do in parliament. That you do it without taking a bribe, and that your vote bank is defined by income rather than by creed, caste or language, make all the difference.  

Brilliant! Award-winning! 

By the way, in 2004, the seat was decided by a margin of around 10,000 votes in two of Bombay's six constituencies, North-Central and South. In South-Central, the margin was over 20,000; in North-West and North, they were nearly 50,000; and in North-East, it was nearly a lakh. 

PS: Strange, the chattering class gets so idealistic when it comes to voting and so 'realistic' when it comes to paying income tax!

Why viral hasn’t killed everything yet

Viral Marketing is upon us. Which means TV, radio and print should be dead. Because viral is free. HLL, P&G, Coke and LG should feel very unwell as well, because their market dominance depends a great deal on their deep media buying pockets.

Neither of the catastrophes have come to pass, yet, though they may be nearby.

Then again they may not. Why? Because the numbers don’t paint too rosy a picture.

A primary criterion for the success of viral – or for that matter, any form of marketing – would be its power to ‘infect’ a sufficient number of buyers in a reasonable time. Not forwarders alone, but buyers.

Let’s do a little thought experiment to understand where we’re heading. Lets say you need to sell 1,000 widgets. You have a conversion of 0.1%: You have to tell a thousand guys to sell a widget. Which means to sell a thousand, you need to ‘infect’ a million.

Ok, you start by sending out an email or SMS to 1,000 fellows. They’re your core, who’ll infect the 1st circle; who, in turn, will infect the 2nd circle, and so on.   

What’s the multiplier, that is, how much larger than is the n+1th round than the nth round? Let’s say the multiplier is some random number between 1 and 2.

So how many rounds do you need to ‘infect’ your million?

I repeated the experiment 80 times. The average (no of rounds) came out 17.02 (excluding the starting blast; st dev = 2.16). That’s a lot of rounds, a lot of time, very little control, and plenty of risk, isn’t it? (Here is the math: http://spreadsheets0.google.com/ccc?key=r-4-Cjzxmo4zO1iL2JRFcHA&hl=en)

Oh, we can try this with larger multipliers. Doubtlessly, someone’s already done that. But what matters is what we get in the real world, where everyone’s already unleashed their viruses, and everyone’s trying to get a life.

The elusive retail investor

“In India, only 5% of the investors in the stock market are retail investors; the rest are institutional investors.” Our stock market may be miniscule and immature by American standards, but the figure of 5% sounds extremely suspicious. Yet it is bandied universally.

Can it be that only 5% of the trades are made by retail investors, and 95% by the institutions.

An article on retail investors in USA in 1987 (Riding The Wild Bull
by Koepp, Fowler & Reingold, Time, Jul 27) says, “While individuals control nearly two-thirds of all stocks, or about $2 trillion worth, institutional investors turn over the remaining third at such a rapid pace that they account for 80% of all stock transactions.”

Why can’t something like that happen here? In fact, I’d suppose the chances are higher, given our data illiteracy (mistaking 5% of transactions for 5% of investors) and our penchant for playing with other peoples’ money.  Has anyone actually counted, assuming all transactions can be traced?

Why geniuses must retire at 40

For the same reason as heroines must retire at 25 or so. Their luck runs out.

You get signed up because you are someone’s daughter, or because you’re pretty, or because you’ve had a nose job.

9 chances out of 10, your first film flops. But if you succeed, you sign up five more. 9 chances out of 10, your second film – if there is one – makes money. But that doesn’t matter because you are already booked for five films, three of which may get made.

Now, what are the chances that none of the five will have a positive return on investment? Small.

Besides, your producers’ PR are working overtime. Indeed, even something as trifle as your appearance in someone’s birthday party is reported.

Anyway, you get the sequence: Hit Flop Flop Flop Average Flop Hit FFFFAAHHF. Somewhere you get a good run, when you make your nest egg, but mostly it’s bad.

When it starts going FFFFFF for too long, you have no option but to fly. The fundamentals have given away.

I suppose its the same with geniuses, except (a) they can stay afloat longer – score so-so – by simply mimicking others. And one big hit is often enough to see you through much of your career. All the same, you can’t tempt luck too much. You must retire at 40 or, more likely than not, you’ll be retired at 41.

At the border, the truth

Indian Hindus believe that while their coreligionists were expelled from the newly formed Pakistan, along with the Sikhs, Muslims did not meet the same fate in India. History shows that if five million came to India, six million went from here. Westerners keep writing that Partition created Pakistan for Muslims and India for Hindus, when facts show that India has the world’s second largest Muslim population. All this muddles perceptions and boils blood.

Now, from what little I have read, Partition seemed to have cleared India of most of its Muslim middleclass. Similarly, middleclass Hindus and Sikhs came to India from Pakistan. Many already had some family here.

In the latter case, though, the middleclass were accompanied by many poor as well. They had next to nothing; they came with nothing.

But wasn’t there a corresponding migration of poor Muslims too, or were most of them too far from the new Pakistani borders, in the erstwhile United Provinces and Bihar, to make the journey? How did the population of provinces near the new borders chance, on the Indian side? Didn’t Muslims, irrespective of economic status, leave there?

Is there any book with data on the migration, surely the greatest in human history? Stories and histories tell part of the story, but there must be more to it.

Walmart and Gazowhat

Free market preachers never tire of giving examples of Soviet retail giants and government distribution agencies which constricted choice, eliminated competition, destroyed efficiency, destroyed the Soviet system and won USA the Cold War.

Perhaps, but I don’t remember reading any populariser laying the same blame of recent crashes at the door of giant MNCs like Walmart, P&G and GM.

These are not government bodies, obviously, but they are surely gigantic. Why should they not invite all the ills of planning and obesity to visit the economies they operate in?

For what competition can realistically exist in a land where Walmart decides, say, that all men should wear the same shirt, stitched in the same cut and and at the same cost in Bangladesh and Guatemala.

One can argue that Walmart, in spite of its size, is not a monopoly. It must compete with This-mart and That-mart. But do we really believe that a system where mammoth sellers club each other in bloody price wars can offer real choice to buyers? If P&G has brand A does Lever have any choice but to offer its cousin, A1 – never mind the billions spent in ads to differentiate them?

Now, lack of (real) choice (i.e., discernibly different benefits) should mean that buyers have no clear preferences and loyalty, and, consequently, no reason to pay any premium to anyone.

In other words, irregular and, at best, wafer thin profits throughout any given industry. If profits exist, they’d probably be in the coffers of niche brands, which have minimal roles in the the giant Western economies.

Imagine linked treadmills all around, the entire mass (mess) going nowhere. 

Doubtlessly such a view is simplistic and illiterate. Is it wrong too?