Category Archives: arbit

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


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!


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!


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.

Law of conservation of talent

For starters. there is no such law. However, there exists a belief in most people’s minds that everyone is equally talented, and it is only that talent in different people is spread across different dimensions.

It starts when you are in school. If you are not good at maths, people tell you that you must be good at something else – arts perhaps. At that age it is perhaps not a bad thing – to be told when you are a child that you have no talent no way helps you in growing up. You are encouraged at that age to try different things, to find the thing that you’re good at.

And then you grow up. And you grow up with this entrenched belief of the “law of conservation of talent”. When you see someone good at something, you will assume that that is the only thing that they are good at. When you see that someone is bad at something you assume there is something else that they are good at. When you see someone good at more than the average number of things, you think they cannot be real, or that it is unfair, or perhaps that they are just faking it.

I once heard this story of a mother arguing with a schoolteacher that her son did not need remedial classes in maths. When told that the kid was indeed poor at maths, the mother responded “so what? He might be good at art. Why does he have to pass his maths exam for that?” (not sure I’ve paraphrased accurately but this is broadly the picture). While it might be a good idea to tell the kid that there is perhaps something else that he is good at, the mother strongly believing in the same thing is simply not done.


Back in business school, there was this set of people who claimed to have a deep passion for marketing. Now, these people belonged to two classes. The first were actually passionate about marketing – there was something about marketing that gave them a kick and they wanted to pursue a career that would allow them to generate such kicks. From my conversations with them I know the passion was real, and most of them are doing rather well now in their marketing careers.

And then there was the second type. This was the class of people who had found that they were no good at mathematics and accounting and economics, and thus figured that they had no hope of a career in anything related to any of these fields, and thus found refuge in marketing. Of course they wouldn’t admit that – they would also claim a deep passion in marketing. While that was okay – perhaps marketing gave them their best chance of pursuing a successful career, and thus I don’t grudge their choice – what got my goat was that these people would claim that because they were no good at the “hard sciences” (mathematics, accounting, etc.) they were “creative”. Who says that mathematics and accounting and economics are not creative subjects? And why does anyone who is not good at these subjects (it is impossible, for example, to excel at mathematics unless you are creative) automatically become “creative”? It is the law of conservation of talent, simple.


For people who are good at more than one thing, law of conservation of talent can bite you in more than one way. Actually there is more to do with this than just law of conservation of talent – people like to analyze other people by putting them in easily understood silos, or categories. And law of conservation of talent helps assign sets of talents to these silos.

Over the last two years, by hook or by crook, I’ve built my reputation to be a great quant. I consult with companies helping them with their quant and data stuff, I write a quant blog and I write a series in Mint on quant in elections. While it is all good and I’m glad that I’ve built a reputation as a quant, the downside is that people refuse to look beyond this and recognize my other skills.

For example, I think I’m rather good at economic reasoning, and I believe that my prowess in that combined with my prowess in working with numbers can deliver massive value to my potential clients. However, when people see me as a quant, it is hard for them to digest that I could also be good with economic reasoning, or behavioural sciences, for example. Thus, when I take on a mandate to do something beyond quant, people find it extremely hard to accept that I dole out non-quant advice too. I blame the law of conservation of talent for this – when people think you are good at quant, they exclude all other skills you might possibly have.

I’ll end this post with another anecdote from  business school. A few months in, things were going well and I had (even back then) built a reputation as someone who was good at quant and mathematics and accounting and economics (in business school, all these fell on the same side of the fence, so the law of conservation of talent allowed you to be good at all these at once). Quizzing was a related activity, so I was “allowed” to be good at that. If I remember right, what perhaps upset people’s calculations was when I represented my class in the inter sectional basketball tournament and didn’t perform badly – based on reactions after the game I think people were a bit thrown off that I could be good at basketball too (especially given that I’ve never looked remotely athletic, and have always been a slow mover). Law of conservation of talent again!

Number thirteen

The number of rats I’ve killed in my life has remained constant at twelve for way too long. One of my biggest sources of embarrassment in recent times has been in 2011 when a rat inhabited our home for a full fortnight without me catching it. I’d even chased it around the house one day but it had proved elusive. Considering that that was my first attempt at killing a rat in Pinky’s presence, after having bragged much to her about my previous twelve kills, it was a major disappointment. It was as if my manhood was in question.
I made up for that today by killing number thirteen. This one was rather timid and easy kill. I’d closed the door between the drawing room and back room of my in-laws’ house but the stupid rodent just kept pushing against the door trying to open it. At that moment my mother in law alerted me (I was on a phone call in another room) and in I came and whacked the rat a few times with a broom. It quickly keeled over and I put it in a polythene bag and threw it out.


Of course there was considerable groundwork I’d done before this. I’d procured from the mother-in-law a broom and a long stick. I’d closed all the doors and thus restricted the rat to one closed space. I’d tapped around the entire house with the stick trying to scare the rat. And then I moved away to talk on the phone. Groundwork thus laid I proceeded to whack the rodent.

Pinky may not have seen the kill herself but I was on the phone with her as I whacked the rat. Phone in one hand held to the ear. Broom in another whacking the rat dead. Quite I sight I made I imagine!

And while Pinky did not see this kill directly I did one better – Pinky’s mother was there through the entire process (she did her bit by supplying the whacking implements and sacrificing a sweet to lay bait for the rat and most importantly alerting me when the rodent made its stupid move). I feel so glad. I feel like my life has been resurrected. I can finally rest, having made up fit that spectacular failure of 2011.

The rat is dead. Long live the rat!

The RBI does a Ramanamurthy

This is the second time in a few weeks I’m referring to this scene from Ganeshana Maduve. Please watch it first.

To repeat the story:

Ramanamurthy the owner of the “vaTaara” (a kind of apartment that was popular in Bangalore till the 1980s, with lots of small houses in the same compound) wants to whitewash his house. The residents of the vaTaara  demand that if he whitewashes his house he should whitewash the entire vaTaara. After a long and protracted negotiation, Ramanamurthy agrees to their condition – he doesn’t whitewash his house!

It is a similar story with taxi operators in India. Uber (the Ramanamurthy) figured out a way to bypass RBI’s two factor authentication system and offer seamless payment options for their taxi services. Soon other taxi operators like TaxiForSure and Ola started crying foul saying they too wanted their houses painted, i.e. they too wanted to locate payment servers abroad to accept one factor authentication credit cards.

And now RBI, like the rent controller ubiquitous (in mention only) in movies of the late 80s has stepped in and stopped Ramanamurthy from painting his house, too – they’ve barred Uber from charging in US dollars for Indian rides. It would be interesting to see how the market will develop now.

My personal opinion is that RBI’s insistence on two factor authentication is half-assed. They should make every effort possible to increase the number of credit card (or account-to-account) transactions. On one hand it decreases flow of black money but more importantly it means that people will keep more cash within the banking system (rather than as hard cash) which will have a multiplier effect on money available for lending and all that.

It’s fine to have regulations in place such that credit card fraud is minimized but that doesn’t mean cutting credit card transactions altogether! Hopefully the RBI will see the light of day on this one soon.

Alcohol and Shit

I started drinking when I was 21, after I had graduated from IIT. To most, that might sound surprising, but it’s a fact. It wasn’t supposed to be that way – I had initially planned to make my alcohol debut in my last week at IIT, just before the final exams. However, I ended up falling sick and missed the occasion. It would be another two months and entry into another institute of national importance before I finally broke my duck.

There are several reasons that could possibly explain my delay in experimentation with alcohol (you read that right – despite ample opportunity I never even considered experimenting with alcohol at IIT). But thinking back at those days the most compelling one is shit. Yeah, you read that right. I delayed my experimentation with alcohol because I was afraid of what shit it would lead to. Literally.

In the middle of my first night at IIT, I ended up in hospital. Yes, you read that right. The first day had gone alright. My father had accompanied me and helped me set up my third of the room. I had opened a bank account, registered myself at the mess, and after my father left in the evening, went about exploring campus and venturing into other hostels to meet people I know (a cardinal mistake by an IIT “freshie” but somehow I escaped getting caught).

And then in the middle of the night it started. A few trips to the loo later I figured it was time to seek help (it’s not that I wasn’t prepared – my belongings included a sheet of Andial – reputed to put an instant stop to the toughest of shit. But I ended up puking it out that day). I woke up Paddy the Pradeep, who was the only person in my hostel I knew well. He called the institute hospital, which sent an ambulance, and I spent the rest of the night in the hospital, with some shots and on drips. The next morning I was fit enough to be attending the orientation ceremony.

As if this wasn’t enough, shit problems struck again a month down the line, this time during the first round of exams. To make matters worse, the hostel had water problems (always an issue in Chennai). And the institute hospital’s medications wouldn’t seem to help. It was a nightmare.

It was around then that my classmates had settled down in the institute and started experimenting in life. As they began their experimentation I began to notice, and be told stories of, some side effects. If you drank too much you would puke. If you drank too much, the next morning you would have a hangover. And it was only after you shat that the hangover would pass, i was told. It all sounded like so much of a nightmare to me, who was already scarred about any potential stomach problems. There was no way I was going to try something that would give me more shit.

It was after I moved to an institute with reasonably assured water supply that I started my experimentation. Experiments were mostly successful (except for occasional infringements like this and this and this ). Shit wasn’t so much of a problem at all, I realized. The experimentation, though delayed, had ultimately been successful.

It’s of late – perhaps in the last one year – that I’ve noticed a peculiar problem. Whenever I have a few rounds (few can be as few as one) of Vodka or Beer, it results in terrible shit the following day. You get the normal dump right in the morning. But the real bad shit comes out in two installments, usually one after breakfast and one after lunch. It’s really foul-smelling (normally you shouldn’t mind the smell of your own shit or fart, but this is exceptionally bad). It causes great pressure (which means you better stay not far from a toilet). And when it comes out it results in insane pleasure.

One interesting thing is that this happens only when i consume beer or vodka. It never happens with whisky (the kind of alcohol I most often imbibe) – not even with cheap IMFL whisky. With whisky I can drink copious amounts, get drunk, and carry on the next morning like I had fruit juice the previous night. But not with beer or vodka – does anyone have an explanation for this?

You might have guessed that the gritter for this post was certain events last night and this morning. That’s right. At a party last night I didn’t realize that they were serving whisky, too, and went for beer (UB Export Strong – also known as “Yaake Cool Drink”). Having started I had more rounds of it. And after breakfast this morning it’s started acting! If only I’d gone for the whisky!