Raghuram Rajan replies to my Pragati article

At least I like to believe that! A couple of weeks back I’d published this article in Pragati (published by the Takshashila Institution, where I work part time as Resident Quant) slamming recent decisions by the Reserve Bank of India to make two factor authentication compulsory and to limit the number of free ATM withdrawals from non-home banks.

My criticism for both these decisions was that they were designed to take money out of the banking system, which would result in a reduction of money supply, and subsequent increase in borrowing costs, thus slowing down India’s economic recovery. I had some other criticisms, too, such as it being none of the RBI’s business to mandate what was essentially a pricing decision between the RBI and the customer, and the perverse incentives the rule created for banks seeking to set up new ATMs.

Could it be that the above regulations are a move by the RBI to curtail money supply without necessarily doing the politically tricky task of raising interest rates?

If it is (and it is a very remote possibility), we should commend the RBI for what will then amount to be a sneaky decision. If not, it must be mentioned that though noble in thought, the two decisions are completely bereft of economic and financial reasoning.

I had written.

So an article published an hour back in Mint quotes Rajan on these two policies, where he defends them. On the two factor authentication issue, he is surprisingly defensive, offering nothing more than a statement that banks and companies need to follow the rules and not try to circumvent them in the name of innovation. Rajan then added that he is looking into permitting transactions up to  a certain limit that don’t need two factor authentication – something I had pointed out in my Pragati piece.

On the ATM issue, I (and other news organisations who I got my news from) seem to have got my information wrong. Apparently currently regulation exists that five ATM transactions per month from non-home banks are supposed to be free, and that is being cut down to three. Rajan clarifies (as reported in Mint today) that the new regulation only allows banks to charge customers beyond the first three transactions in a month, and they are not obliged to do so. He talked about the perverse incentives that the earlier regime (where banks were obliged to permit a number of free ATM transactions from non home banks) created.

My apologies for not reading the regulations correctly (of course a part of the blame has to go to the newspapers that reported it thus! :) ). I admit I should have checked from multiple sources on that one.

Coming to the point of the post, why do I think that Rajan is responding to my Pragati piece? You might argue that it might simply be a case of correlation-causation – that it might be coincidental that Rajan has spoken about two issues that I had highlighted in that post. However, there are two reasons as to why I believe that Rajan was responding to my post.

The first has to do with the combination of subjects. While the two regulations (ATM withdrawals and two factor authentication ) were widely reported in the media, I haven’t seen any piece apart from mine which addresses these two issues together (I must admit my perusal of Indian media has dropped nowadays given my Twitter and Facebook sabbatical). Given that Rajan has chosen to address these two issues today, it is likely that he is responding to my piece.

The second reason has to do with the timing. The Takshashila Institution sends out a weekly “dispatch” which is a summary of commentary written by its fellows and employees and associates. This is an emailer which contains links to these articles along with short snippets, and a number of fairly influential people (within the government and outside) are on the list of recipients. The latest edition of the Takshashila dispatch went out this morning, and it has a link to my Pragati piece. Now, while Rajan is not on the mailing list (to the best of my knowledge), it is likely that an influencer on the list with access to him brought it up today (it could even be the Mint journalist who has reported the story – that would still count as Rajan, albeit indirectly, responding to my piece). This reaffirms my belief that he was responding to my piece in his comments today!

You might think I’m deluded. So be it!

Carrots have become expensive

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Carrots have become expensive in Bangalore, relative to cucumbers at least.

I’m at mainland China in Jayanagar to have their excellent pepper lemon chicken soup – which is brilliant when you’re nursing a cold – like I am  now.

Like any good Chinese restaurant they’ve given kimchi as complimentary starter and I’ve been eating that as I wait for me soup.

As you can see in the far right corner of the photo though the kimchi (not sure if the pickled carrot and cucumber they give as complimentary starter can be classified this or if the term is reserved for the pickled cabbage – anyhow) only has cucumber.

It’s my mistake that I took this photo now and not even it just arrived but what was supposed to be a bowl of carrot and cucumber was actually a bowl on picked cucumber only with one token piece of pickled carrot!

Clear indicator that carrots are expensive now – relative to cucumbers at least!!

PS: I shopped for vegetables on Wednesday. Bought carrots for sixty rupees a kilo while cucumbers cost twenty a kilo. So no ticket science to this post. Just a pertinent observation

Favours and slavedriving

The question is if you are allowed to slavedrive someone who is doing you a favour. Let’s say you want me to do something for you. I agree to do it, but slack in doing so – either I don’t want to do it and grudgingly agreed, or I genuinely want to help you and am caught up in other stuff, or if I forgot.

The question is if you are allowed to slavedrive me in terms of getting me to do what I promised, and if so, to what extent you are allowed to do that.

If you don’t do enough, then possibly it’s not enough of a prod for me to get things done in a way that works for you. If you prod too much, it can mess up our relationship, and I might refuse to do you any more favours for a long time!

Where and how do you draw the fine line here? Let’s assume we are acquaintances and don’t know each other’s working styles so there is some information asymmetry. How do we solve this problem?

If you have figured out, please leave a comment below. Any help on this one would be much appreciated!

Red bus

No, not that red bus. I’m talking about the red BMTC buses in Bangalore. They used to be red till 1998 or 1999, and then the government of the day decided that the buses were due an image change (red being danger and all that). This coincided with the spinning off of the BMTC from the erstwhile BTS (which was part of the Karnataka State Road Transport Corporation). The buses were all painted blue.

Over the years, new kinds of services have been launched. There was the Pushpak – coloured beige. Then there was the slightly premium Suvarna, coloured a very light purple. And then there were the pass-only green buses, women only pink buses (yes, really) and the red Volvos. For some reason, red buses have started making a comeback to mainline BMTC routes, though I don’t quite know the reason for the reintroduction of the colour, or if they are any different from the blue and white buses.

So for the first time in fifteen years or so, I rode a “normal” red BMTC bus today (in the intervening period I either rode “normal” blue and white buses or premium Volvo red buses). Some pertinent observations from this rather momentous (!!) journey.

I was close to Shivajinagar, and had to come home to Jayanagar. Considering that it’s a pain haggling with auto rickshaw drivers in that area, I decided to take a bus (especially since I was coming from a place really close to the bus stand). I quickly walked up to the Shivajinagar TTMC (“travel and transit management centre” or something). The footpath on the St Marks Road extension on which I walked was quite poor – I hope the TenderSure project that is rebuilding roads and footpaths in the middle of the city reaches there soon.

Even navigation within the TTMC is quite bad – it’s badly designed in the sense that there’s no space to walk where you have no chance of being hit by one of the hundreds of buses there. A helpful official told me where I would get the bus to Jayanagar, but to get there (walking fast) was quite a challenge. Finally I got there and found a red 27E (going to JP Nagar) and hopped on.

The BMTC is definitely not cheap – the journey set me back by 19 rupees (to put that in context, I had traveled there in the morning by auto rickshaw and paid Rs 86). It’s definitely been a long time since I’ve traveled by bus as I handed the conductor a ten rupee note and looked expectedly for change. I had to shell out another ten bucks.

I didn’t get a seat but found a comfortable place for myself to stand (right at the back of the bus). The concept of having the door in the middle of the bus rather than at the fag end is a good one – it allows you to go deep into the bus and find good places to stand. Also, you are looking ahead while standing and can look out for any shuffling in the seats which might potentially get empty!

What I noticed during my journey (which took 25 minutes which is not bad at all for that time of the day) is that each of these longish distance buses actually serve several small markets – if we can figure out a metric for how many times the passengers in the bus “churn”  (it’s not too hard, just feeling lazy right now) it might help us plan routes better in terms of multiple short routes rather than a few long routes (that can help cut down uncertainty in timings, etc.).

So the bus for example completely emptied itself out at the Shantinagar TTMC (which is a very good TTMC IMHO, since no buses terminate there), and then got refilled a couple of stops later in Wilson Garden. Earlier, there had been massive churn near Richmond Circle. And so on.

This is perhaps related to the cost but there seemed to be a very different demographic that populated the bus (based on looks – I’m being judgmental and all that, I know) compared to the type 15 years back. In terms of social strata the bus seemed much less diverse today than 15 years back, and it worked both ways. It seemed like most bus travellers today could be broadly defined as being lower middle class – I hardly saw any labourer types (might be a function of the route also) or too many upper middle class types in the bus. It is interesting how these things change!

CRIBS

I hereby propose that the venerable institution that was created earlier this year after a meeting in Fortaleza, based on an extension of a concept that the venerable Jim O’Neill proposed some ten years back, be renamed CRIBS.

There are several reasons for this. Primarily, the new name reflects the relative power of the countries that form the now organisation – there is no doubting, for example, that China is the most powerful nation in this grouping – indeed it can be argued that China is the most powerful nation in the world (with all the US treasuries they hold and all that).

The next more powerful nation in the group is of course Russia. Look at how they’ve quietly invaded Ukraine with impunity, knowing fully well that the Western powers can do little beyond cheap talk to contain them. Look at them forming the Eurasian Union, getting the support of Kazakhstan and Belarus – fairly inconsequential, of course, but with strong signalling value. Also let us not forget that inconsequential the UN and the UN Security Council may be – both China and Russia are permanent members of the council. Taking this forward it is not hard to see that these two are more powerful than India which is more powerful than Brazil (under recession now) which is more powerful than South Africa (which was never a part of the original grouping that O’Neill proposed).

The other reason for renaming the group is that the new name is more apt in terms of communicating the absolute pointlessness of a group of nations that has little in common but for the fact that they are large, significant in their respective local geographies, supposedly growing (though Brazil is not now) and were put in one paper by a famous economist working in a famous investment bank.

The third reason is that “BRICS” reminds people of bricks, which is constructive (pun intended). There is nothing constructive about this grouping, notwithstanding the bank that they are going to set up. Thus, the current name of the grouping is misleading and unfair to the general public.

I’m sure many more reasons can be invented, but these three are good enough reasons to rename the grouping. I hereby request our Dear Prime Minister Shri Narendra ModiJI to refuse to contribute India’s share to the bank unless it is renamed -after all none of the other countries are any good at English, so India should be able to bulldoze its way on this one!

The Risk of Overspecialization

A couple of months back i got an upgrade to my LinkedIn account that allows me to write essays there, which I occasionally use to spout management level gyaan. While it leads to fragmentation of my writing (there are already three blogs, including this one, and Mint), it helps create conversations on LinkedIn and in personal brand building.

So today I wrote a post on LinkedIn on the risk of overspecialization. The basic concept is that when you work at a large company you run the risk of specializing in something so narrow (which makes sense in the large company) that you are unable to transfer this skill to another job, and that leads to reduced job hunting opportunities.

Go ahead and read the whole post.

A month of detox

I cheated a little bit this morning. Since it’s been a month now since I got off Twitter and Facebook, I logged in to both for about a minute each, to check if I have any messages. The ones on Facebook weren’t of much use – just some general messages. There was one DM on twitter which had value, and I sent the guy an email explaining I don’t use twitter any more. I presently logged out.

The one month off Twitter and Facebook has so far gone off fantastically. For starters it’s given me plenty of time to read, meet people, talk to people and other useful stuff. And apart from some interesting links that people post on Twitter, I haven’t really missed either of them.

There have been times when there have been thoughts that would have earlier led to a tweet. However, given that the option exists no more, I end up doing one of two things – if there is substance to the tweet and I can elaborate on it, then I do so and it results in a blog post (you must have noticed that the frequency of blogging has gone up significantly in the last one month).

If it’s not really blog worthy but just something that I want to share with someone, I think of whose attention I would have liked to have caught by putting that tweet. In most cases I have found that there is a small set of people whose attention I would have liked to catch with a tweet – every time I tweeted, I would think of how a particular set of people would respond. So what I do when I have something to say and a particular set of people to say it to is to just message it to them.

While this gives a much better chance of them responding to the message than if they just saw it on their timeline (or missed seeing it), it also has the added benefit of starting conversations. Which is not a bad thing at all. In the last one month I’ve seen that my usage of WhatsApp and Google Talk has gone up significantly.

The only thing I miss about twitter is the interesting links that people post. I’ve tried a few things to remedy that. Firstly I tried to see if I could write a script that crawls my timeline, gets popular links (based on a set of defined metrics), and then bookmarks the top five each day. I went some way with the code (pasted below the fold here) but couldn’t figure how to post the linked articles to Pocket (my article bookmarker of choice). So I ended up tweeting those chosen links (!!) with a #looksinteresting hashtag, so that ifttt does the job of adding to Pocket.

It went for a bit till multiple people told me the tweets were spammy. And then I realized I needed to tweak the algorithm, and it needed significant improvement. And then I realized the solution was at hand – Flipboard.

If you have an android phone or an iPad and not used FlipBoard you’re really missing something. it’s a great app that curates articles based on your indicated areas of interest and history, and one of the sources it can get links from is your own Twitter and Facebook accounts. It is generally good in terms of its algo and good links usually bubble up there.

When I went off Twitter and Facebook on the 6th of August (in a fit of rage, outraged by all the outrage and negativity on the two media) I wanted complete isolation. And thus I deleted Twitter and Facebook from my FlipBoard also. Now I realized that adding back twitter on FlipBoard will allow me to access the nice links shared there without really getting addicted back to twitter, or partaking all the outrage.

For the last two weeks it’s worked like a charm. That twitter is present only on FlipBoard, which I use not more than twice a day (once in the morning, once at night), means that I’ve had the best of both worlds. And not being on twitter has meant that i’ve been able to get a fair bit of work done, finished three books (my first attempt at reading fiction in ten years fizzled out midway, though – Joseph Conrad’s Heart of Darkness failed to sustain my interest beyond about 40% (I have it on kindle) ), written dozens of blog posts across the three blogs and had more meaningful conversations with people.

I hereby extend my sabbatical from Twitter and Facebook for another month.

Below the fold is the code I wrote. It’s in R. I hope you can make some sense of it.

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Marketing

I’m in a conversation with a friend on marketing my consulting services and he gave me a most genius piece of advice

You can say you do supervised learning instead of saying regressions.

Last month I was at this big data conference. Everyone I met said they were into big data or analytics or some such. The follow up question would always be “and what exactly do you do?” Followed by a laugh about how these are much abused terms.

Election Metrics goes international

For those of you who are not particularly aware of it, for the last year and a half I’ve been writing this column called Election Metrics for Mint. It’s basically a quantitative take on elections, and in my estimate I should’ve written over 50 pieces for them so far.

The last two pieces, however, have been different in the sense that I have now moved beyond covering Indian elections to look at elections abroad. In my last but one post, published last month,  i took a look at potential cheating in Afghan elections. (Now I remember linking to that piece from here).

Now, in the latest piece that was published today I look at the forthcoming Scottish referendum, and a recent poll by YouGov in which 47% of respondents said they wanted to vote in favour of independence. I use some binomial jugglery that shows that this translates to a 2.5% chance of a Yes vote, which while insignificant, is an order of magnitude higher than the 0.0004% chance of “Yes” that can be implied from an earlier poll.

I then use the “possible, plausible and probable” framework made famous by Bill Gurley and Aswath Damodaran in their “exchange” in July to show why this poll is significant (it shows that a “Yes” vote is “plausible”, while earlier it was possible but definitely not plausible).