Introverts and extroverts

I find the classification of people into introverts and extroverts to be rather simplistic. While it is bad enough that people are commonly classified into one of these, you also have metrics such as the Myers Briggs Type Indicator (MBTI) that formalise this classification, with top consulting firms actively using such classifications in their day-to-day work.

What makes introvert-extrovert thing complex is that it is not even a spectrum between introversion and extroversion – you can’t say, for example, that you’re “20% introvert and 80% extrovert”. So you can’t even convert the binary classification into a scale.

The thing is that introversion and extroversion is context sensitive. For example, I like to socialise by talking to people (I HATE “catching up” in cinema halls or loud bars, since they don’t allow conversation). In terms of work, though, I largely prefer to be left alone. Even within that, I sometimes like to talk to people when I’m ideating but wholly want to be left alone when I’m executing on something.

And with each person, there might be different contexts in which they might derive energy from people around them, and contexts where they might want to be left alone. And within each context, whether they want to be with or without people is probabilistic, without a good classifier telling when they want to be how.

So introversion or extroversion is a rather large and complex set of personality traits that people have tried to force-fit not only on one axis, but also into binary classifications. And with it being part of management theory as practiced by top strategy consulting firms, it’s simply sad.

Direct listing

So it seems like Swedish music streaming company Spotify is going to do a “direct listing” on the markets. Here is Felix Salmon on why that’s a good move for the company. And in this newsletter, Matt Levine (a former Equity Capital Markets banker) talks about why it’s not.

In a traditional IPO, a company raises money from the “public” in exchange for fresh shares. A few existing shareholders usually cash out at the time of the IPO (offering their shares in addition to the new ones that the company is issuing), but IPOs are primarily a capital raising exercise for the company.

Now, pricing an IPO is tricky business since the company hasn’t been traded yet, and so a company has to enlist investment bankers who, using their experience and investor relations, will “price” the IPO and take care of distributing the fresh stock to new investors. Bankers also typically “underwrite” the IPO, by guaranteeing to buy at the IPO price in case investor demand is low (this almost never happens – pricing is done keeping in mind what investors are willing to pay). I’ve written several posts on this blog on IPO pricing, and here’s the latest (with links to all previous posts on the topic).

In a “direct listing”, no new shares of the company are issued, the stock gets listed on an exchange. It is up to existing shareholders (including employees) to sell stock in order to create action on the exchange. In that sense, it is not a capital raising exercise, but more of an opportunity for shareholders to cash out.

The problem with direct listing is that it can take a while for the market to price the company. When there is an IPO, and shares are allotted to investors, a large number of these allottees want to trade the stock on the day it is listed, and that creates activity in the stock, and an opportunity for the market to express its opinion on the value of the company.

In case of a direct listing, since it’s only a bunch of insiders who have stock to sell, trading volumes in the first few days might be low, and it takes time for the real value to get discovered. There is also a chance that the stock might be highly volatile until this price is discovered (all an IPO does is to compress this time rather significantly).

One reason why Spotify is doing a direct listing is because it doesn’t need new capital – only an avenue to let existing shareholders cash out. The other reason is that the company recently raised capital, and there appears to be a consensus that the valuation at which it was raised – $13 billion – is fair.

Since the company raised capital only recently, the price at which this round of capital was raised will be anchored in the minds of investors, both existing and prospective. Existing shareholders will expect to cash out their shares at a price that leads to this valuation, and new investors will use this valuation as an anchor to place their initial bids. As a result, it is unlikely that the volatility in the stock in initial days of trading will be as high as analysts expect.

In one sense, by announcing it will go public soon after raising its last round of private investment, what Spotify has done is to decouple its capital raising process from the going public process, but keeping them close enough that the price anchor effects are not lost. If things go well (stock volatility is low in initial days), the company might just be setting a trend!

Not-working events – IIMB alumni edition

So yet another event that was supposedly for networking purposes turned out to be so badly designed that little networking was possible. The culprit in this case was the IIM Bangalore Alumni Association which organised the London edition of Anusmaran, the annual meet-up of IIMB Alumni which is held in different cities across the world.

Now, I must mention that I had been warned. Several friends from IIMB who have lived in London for a while told me that they had stopped going to this event since the events were generally badly organised. I myself hadn’t gone to one of these events since 2006 (when I’d just graduated, and found a lot of just-graduated classmates at the Mumbai edition).

So while I didn’t have particularly high expectations, I went with the hope that it “couldn’t be that bad”, and that I might get to meet some interesting people there. At the end of the event, I wasn’t sure if anyone interesting attended, because the format didn’t allow me to discover the other attendees.

Soon after I entered, and chatted briefly with the two professors there, and one guy from the batch before mine, one of the organisers requested everyone present to “form a huddle”. And then the talks started.

For some reason, the IIMB Alumni Association seems to have suddenly started to take itself too seriously in the last few years. The last few editions of the Bangalore edition of Anusmaran, for example, have featured panel discussions, and that has been a major reason for my not attending. The idea of an alumni event, after all, is to meet other alumni, and when most of you are forced to turn in one direction and listen to a small number of people, little networking can happen.

And that is exactly what happened at the London event today – the talks started, unannounced (there had been no prior communication that such talks would be there – I’d assumed it would be like the 2005 event in London that I’d helped organise where people just got together and talked). Some two or three alumni spoke, mostly to promote their businesses. And they were long talks, full of the kind of gyaan and globe that people with long careers in management can be expected to give.

So it went on, for an hour and half, with people speaking one after other and everyone else being expected to listen to the person speaking, rather than talk to one another. The class participation reminded me of the worst of the class participation from my business school days – people trying to sound self-important and noble rather than asking “real” questions.

When the organiser asked everyone to introduce themselves in a “few seconds each” (name, graduating batch, company), most people elected to give speeches. I exited soon after.

Based on the last data point (of people giving long speeches while introducing themselves), it is possible that even if I had the opportunity to network I may not have met too many interesting people. Yet, the format of the event, with lots of speeches by people mainly trying to promote themselves, was rather jarring.

This is not the first time I’ve attended a networking event where little networking is possible. I remember this “get together” organised by a distant relative a few years back where everyone was expected to listen to the music they’d arranged for rather than talking. There was this public policy conference some years ago which got together plenty of interesting people, but gave such short tea breaks that people could hardly meet each other (and organisers ushering people who overstayed their tea breaks into the sessions didn’t help matters).

Sometimes it might be necessary to have an anchor, to give people a reason apart from networking to attend the event. But when the anchor ends up being the entirety of the event, the event is unlikely to serve its purpose.

I’d written about Anusmaran once before. Thankfully the organisers of today’s event had got the pricing bit right – the event was at a pub, and you had to get your own drinks from the bar, and pay for them.

I’d also written about the importance of giving an opportunity for networking at random events.

 

People are worried about investment banker liquidity 

This was told to me by an investment banker I met a few days back, who obviously doesn’t want to be named. But like Matt Levine writes about people being worried about bond market liquidity, there is also a similar worry about the liquidity of the market for investment bankers as well. 

And once again it has to do with regulations introduced in the aftermath of the 2008 global financial crisis. It has to do with the European requirement that bankers’ bonuses are not all paid immediately, and that they be deferred and amortised over a few years. 

While good in spirit what the regulation has led to is that bankers don’t look to move banks any more. This is because each successful (and thus well paid) banker has a stock of deferred compensation that will be lost in case of a job change. 

This means that any bank looking to hire one such banker will have to compensate for all the deferred compensation in terms of a really fat joining bonus. And banks are seldom willing to pay such a high price. 

And so the rather vibrant and liquid market for investment bankers in Europe has suddenly gone quiet. Interbank moves are few and far in between – with the deferred compensation meaning that banks look to hire internally instead. 

And lesser bankers moving out has had an effect on the number of openings for banker jobs. Which has led to even fewer bankers looking to move. Basically it’s a vicious cycle of falling liquidity! 

Which is not good news for someone like me who’s just moved into London and looking for a banking job!

PS: speaking of liquidity I have a book on market design and liquidity coming out next month or next next month. It’s in the publication process right now. More on that soon! 

Flash Boys, Ramanand Sagar’s Ramayana and the bias in the narrative

I just finished reading Michael Lewis’s Flash Boys. It seems like a nice book on financial markets and high frequency trading (HFT), and how HFT makes money. And as is the case with Lewis, the story is very well told.

However, having worked in HFT in the past, and having written a book on market design (which will be out next month), there was one thing about the book that left a massive sour taste – that it makes a value judgment.

Fairly early on in the book, Lewis makes it clear that HFT doesn’t actually add value to the market, and in fact extracts value. And from then on, HFT and hedge funds who practice it are the “bad guys” of the book, and Brad Katsuyama and the rest of the IEX guys are the “good guys”.

If this were to be considered a journalistic account, it would be horrible due to the fact that there is not even an attempt to present the view of the opposite side – of the real flash boys (people working on HFT), and how HFT might actually be beneficial. It also fails to document whatever might be the shortcomings of IEX.

As the Ramanand Sagar retelling of the Ramayana has showed us, when you reduce a story to a story of “good against evil”, the story is robbed of all nuance, and what you get is a rather simplistic version. Any facts in the story that run contrary to this simplistic version tend to be glossed over (or reduced in importance). And what the reader gets is a wholly one sided view which may not actually be correct.

HFT is so fascinating (apart from the money it makes for its practitioners) that there exists scope to write a great value-neutral book about it (and someone who writes as well as Lewis is very well placed to write that). It is thus disappointing that Lewis has eschewed that and has instead written what effectively looks like PR for IEX.

In any case, reading the book gave me one valuable piece of input. In my book (that will be out next month), I’m starting each chapter with a quote. And the quote to the introduction of the book has been supplied by Flash Boys. It goes, ‘”Liquidity” was one of those words Wall Street people threw around when they wanted the conversation to end, and for brains to go dead, and for all questioning to cease’.

Perhaps, the quote suffices to tell you all that is wrong with the book (Flash Boys)!

House husbanding

On Friday I spent my first ever full day as a stay-at-home father. It was rather overwhelming. The daughter is now at an age where she’s learnt to both sit and crawl, and wants to try stand up holding whatever support she can find. And on that very day, she found a fascination for sockets, which are at floor level in our house.

So the morning was spent just making sure she wasn’t trying to reach out into a socket (and one of them is right next to the heater), or hurting herself in other ways. Putting her in the middle of her toys didn’t help – those toys, it seems, aren’t half as interesting as the kitchen floor or the sockets. And so I kept running.

Presently it was time for her breakfast. There’s this Heinz porridge we’ve found which she doesn’t seem to mind, and I tried feeding her that. Midway through her breakfast, she refused to open her mouth, and started crying. It was time for her to sleep, I figured, and put her on my chest. She was soon snoring.

That one time, it wasn’t much of a challenge to transfer her from my chest to her crib (it’s usually an issue, and she cries as soon as I move her away from me). And that little time she slept gave me an opportunity to shit, shower, shave and have my breakfast. Presently she woke up, presenting that cute smile of hers, and it was running all over again.

The second third of the day was the hardest. She was sleepy, and I was supposed to make formula milk for her! And making formula milk is a real bitch, in terms of cleaning the bottles, heating water to the right temperature, etc. I somehow managed it with the background noise of a screaming baby. And then she drank and slept. I was only halfway through making my lunch when she woke up crying (I ultimately ate some old rice with curd for my lunch).

There were many points of time during the day I almost gave up, except that there was no bailout – the wife was far away at work in meetings. I cried a couple of times when the daughter wouldn’t sleep. I sometimes screamed back when she screamed. I nearly went mad.

And then, in the final third, she became normal once again. She’d  rediscovered her toys, and sat in the middle of them, playing. She banged out some jazz tunes on the ancient keyboard we’ve set up on the floor for her. And she felt so happy when I carried her on my shoulders, and demanded that I do it, again, and again, and again!

Making her sit on my shoulders makes her so happy!

A post shared by Karthik S (@skthewimp) on

Finally the wife returned early from work to provide me a bailout, and then cooked dinner for me, and asked me to go out, in order to compensate me for the troubles during the day!

Suddenly, after that day, my respect for the wife shot up, for having taken care of the daughter mostly by herself for the first five months. My contention back then was that she was on “maternity leave” (though she was yet to start work, and though she was running Marriage Broker Auntie then), so it should be okay for her to take care of the baby. My contention had also been that since it was relatively easy for her to feed the baby (no need to prep bottles, heat water, mix formula, etc.), and comfort her, it was okay to take care of the baby alone.

One day of house-husbanding, however, has changed my perspective on this. Babies demand a LOT of attention, and the only way you can do this job well is if you completely give up on doing anything all all of your own in that time (including cooking or eating your meals). And it can be bloody exhausting – though it’s possible that with experience you learn to manage things!

So yes, massive respect now for the wife for having taken care of the baby all by herself for the first five months, when I’d be mostly out either working or meeting people or other such stuff! She is awesome!

The high cost of “relaxing” activities

So I have a problem. I can’t seem to enjoy movies any more. I’ve written about this before. My basic problem is that I end up double-guessing the plots of most movies that I watched (how many storylines are there anyways? According to Kurt Vonnegut, there are six story arcs).

So as I watch movies, I know exactly what is going to happen. And just continuing to watch the movie waiting for that to happen is simply a waste of time – it adds no information content to me.

The result is that I’m extremely selective about the kinds of movies I watch. Some genres, such as Westerns, work because even if the stories may be predictable, the execution and the manner of execution are not, and that makes for interesting watching.

Then, of course, there are directors who have built up a reputation of being “offbeat”, where you can expect that their movies don’t follow expected story arcs – their movies have enough information content to make them worth watching.

And most “classic” movies (take any of the IMDB Top 250, for example) have stories that are told in an extremely compelling fashion – sometimes you might know what happens, but the way things are built up implies that you don’t want to miss watching it happening.

Now, all this is fine, and something I’ve written about before. The point of this post is that while I feel this way about movies, my wife doesn’t feel the same way. She watches pretty much anything, even if the stories are utterly predictable.

For example, she’s watched at least a 100 Telugu movies (though, admittedly, during a particularly jobless stretch in her MBA when she was watching loads of movies, even she got bored of the predictability of Telugu movies and switched to Tamil instead!). She likes to watch endless reruns of 90s Kannada movies that now appear rather lame (to me). She especially loves chick flicks, which I think have excess redundancy built into them for a very specific reason.

I don’t have a problem with any of this! In fact, I’m damn happy that she has a single-player hobby that enables her to keep herself busy when she’s bored. The only little problem I have is that she believes it is romantic to watch movies together. She might sell video for Amazon for a living, but she surely is a fan of “netflix and chill” (more the literal meaning than the euphemistic one).

And that is a problem for me, since I find the vast majority of movies boring and predictable, and she thinks the kind of movies I like are “too serious” and “not suitable for watching together” – an assessment I don’t disagree with (though I did make her watch For a Few Dollars More with me a couple of months back).

I’d prefer to spend our time together not spent in talking doing other activities – reading, for example (reading offers significantly higher throughput than movies, and that, I think, is a result of formats of several lengths being prevalent – newspaper articles, longform articles, books, etc.). I’ve offered to watch movies with her on the condition that I read something at the same time – an offer that has been soundly rejected (and I understand her reasons for that).

And so we reach a deadlock, and it repeats every time when we have time and want to chill. She wants to watch movies together. I initially agree, and then back out when presented with a choice of movies to watch. Sometimes I put myself through it, thoroughly not enjoying the process. Other times, much to her disappointment, we end up not watching.

Clearly there are no winners in this game!