Disconnected Life

The last forty eight hours were spent without internet connection, perhaps the first time I’ve spent an extended period of time at home without being connected. At first, it was incredibly peaceful, as without distractions it gave me enough time to finish off in 2 days all the 3 books (none of them very heavy, mind you, and all were “funda books”) that I’d brought home from the British Library. What was incredible was the amount of time I had in general, for everything. With the internet on, there are way too many distractions. Tweetdeck buzzes every minute. You are keen to “unbold” every mail as soon as it arrives in your inbox. Out of sheer habit, you periodically check out facebook and cricinfo. Lots of time gets wasted, no doubt.

I’d be lying, however, if I were to seay that I didn’t miss the net at all. Foremost was the need to check email, which I did though my phone periodically. I didn’t bother, however, unbolding all the stuff that was there. I only checked the mails that I thought were important, and the rest were “cleared” after I got back my connection this morning (the outage was because I’d applied for a new data plan, and the worthies at BSNL (bless them) decided I should go through some pain for having put them though the pain of changing the plan).

Then, there was some research I was trying to do yesterday, and I was looking for some data, which I wasn’t able to get since there was no internet. I went out of touch with my usual gtalk/twitter friends, but since it was only for a day I don’t really mind that. Most importantly, I missed regular updates of Ranji trophy scores, since those weren’t available anywhere else. It was too much of a hassle to be only via the phone (I don’t have 3G) for extended periods of time. There was also a lot of writing I did in the period, and all those blog posts are now sitting on my hard disk. I’ll upload them one by one with sufficient gaps so that I don’t flood you.

The worst part of no internet was the loss of the “option value” to stay connected. The best part was that it gave me a lot of time to do whatever I else really wanted to do without all the distractions the internet brings. I hope to go on an “internet break” for some time every day, switching off my modem for a few hours. Hopefully that’ll help me make better use of my time. For now, I’m glad to have the 4Mbps connection!

The Global Financial Crisis Revisited

When we talk about the global financial crisis, one question that pops up in lots of people’s heads is about where the money went. Since every trade involves two parties, it is argued that every loser has a corresponding winner, and that most commentary about the global financial crisis (of 2008) doesn’t talk about these winners. Everyone knows about the havoc that the crisis caused when prices went down (rather suddenly). The havoc that the crisis caused when prices initially went up (rather slowly) is less well documented.

The reason winners don’t get too much footage is that firstly, they are widely distributed, and secondly they spent away all their money. Think about a stock or a CDO or a bond being a like a parcel that you play by passing the parcel. The only thing is that every time you receive the parcel, you make a payment, and then pass on the parcel after receiving a higher payment. Finally, when the whistle blows, one person has the parcel in his hand, and it explodes in his face, ruining him. We know enough about people like this. A large number of banks lost a lot of money holding parcels when the whistle blew. Some went bust, while others had to be bailed out by governments. We know enough of this story so I don’t need to repeat here.

What is interesting is about the winners. Every person who held the parcel for a small amount of time was a winner, albeit a small winner. There were several such winners, each of whom “won” a small amount of money, and spent it (remember that the asset bubble in the early noughties was responsible for increasing consumption among common people). This spending increased demand for various goods and services produced in several countries. This increasing demand led to greater investment in the production facilities of these goods and services. Apart from that, they also increased expectations of growth in demand of these goods.

The damage the crisis did on the way up was to skew expectations of growth in different sectors, thus skewing investment (both in terms of financial and human capital). The spending caused by “small wins” for consumers put in place unreasonable expectations, and by the time it was known that this increased demand came as a result of an asset bubble, a lot of capital had been committed. And this would create imbalances in the “real economy”.

Yes, the asset bubble of the last decade did produce winners. The winners begat more winners (people whose goods and services were bought). However the skewed expectations that the wins created were to cause damage in the longer term. Unfortunately, I don’t see this story being told adequately, when the financial crisis is being talked about. After all, the losers are more spectacular.

Yet another startup idea

This time it’s an i-phone/android app. The motivation for this is the heavy advertising in the last few days for Mapmyindia GPS, on hoardings all over Bangalore. Again, I don’t know if this has been implemented before.

So this will be built on top of Mapmyindia or any other similar GPS. When you hunt for the shortest route between point A and point B, you can give two possible choices – shortest by distance and shortest by time. The former is the default choice that all GPSs currently use. This one is an app to provide the latter.

Now, each city will be mapped out as a network of intersections. And then, for each “edge” on this graph, we use data that we’ve gathered from other users of the app in order to predict the amount of time taken to travel. Of course, the prediction model is not going to be simple, and I’m willing to partner you (via my forthcoming quant consultancy firm) in developing it. It’s going to be a fairly complex model based on time-of-day, recency of data, outlier detection (what if someone stops off for lunch in the middle of an “edge”?) and all such.

So, now you have the city mapped out (for a particular instant) both in terms of distance and in terms of time, and in cases of any traffic jams or such, my system will help you find the quickest route to your destination. Should be useful, right?

Of course, the success of this app (like a lot of other apps, I guess) depends heavily on “network effect”. The more the users of this app, the better the model I’ll have in predicting time between intersections, and save you the headache of mentally trying to optimize the route to your destination each time you set out (like I do).

I’m pretty serious about this. If you think this hasn’t been done before, we can work together to get this up!

Shoe Shopping

I went with the significant other last weekend while she bought shoes. And realized that the way girls buy shoes is completely different from boys’ decision process. Yeah, I know you’ll be thinking I’m just stating the obvious, and I might be doing that. And again, this post is based on two data points – myself and the significant other. I conveniently extrapolate.

Fundamental theorem of shoes: The number of pairs of shoes a boy owns is small compared to the number of pairs of shoes a girl of the similar age/socio-economic stratum owns.

I don’t think I need to give any explanation for that. The rest of this post is a corollary.

Corollary 1: The amount of time a boy spends in buying one pair of shoes is significantly larger than the corresponding amount of time a girl spends.

Yeah, this might sound counterintuitive, which is why I’m writing this post. So I think there are several reasons for this, but they all follow from the fundamental theorem of shoes
1. If you have one pair of shoes of a certain kind, you can’t afford to make a mistake buying them. You need to go through a careful decision process, evaluating various pros and cons, before deciding on your perfect shoe.
2. Boys’ shoes need to multitask. For example, you will wear the same pair of black leather shoes to office, and to that random wedding reception. The same sneakers you wear to play football might be worn for a casual evening out. So each pair of shoes needs to serve several different purposes, so the search space comes down accordingly
3. The cost of going wrong is too high – if you have a policy to own a limited number of shoes, and you buy an ill-fitting shoe, you have to live with that (or throw with extreme guilt) for a very long time. ┬áThis happened with my earlier pair of sneakers, with the unintended consequence that I went to the gym much less often than I’d planned to
4. The amount of time a boy spends in a particular shoe is much more than the amount of time a girl spends in a particular shoe. So it is important for boys that each and every shoe is absolutely comfortable and fits perfectly. Again increases search time.

Recently when I had to buy a pair of formal shoes for my engagement I drove Priyanka mad with the amount of time I took to decide. I visited several shops, tried out lots of shoes, walked around, walked out, visited more shops and so forth. And all this after I had decided I wanted a pair of brown shoes without laces.

Corollary 2: The average cost of a boy’s shoe “wardrobe” is comparable to the average cost of a girl’s shoe “wardrobe”

Yeah, unintuitive again I guess. But backed up by data. My shoes, on average, cost well over a thousand rupees. Priyanka’s shoes, on average, cost well under that. It’s a vicious cycle, and I don’t know where it starts. I want my shoes to last longer, so I want to buy shoes of better quality, so I end up spending more on them. Or it could be like I wanted my shoes to last longer precisely because they are expensive. But I’ll stick my neck out and say that all this stems from the fundamental decision of not wanting to wear too many pairs of shoes.

For a girl, the cost of going wrong with a shoe purchase is low, given the frequency with which she wears a particular shoe. Also her shoes don’t multitask, so she can afford to have a few pairs which are not exactly perfect fits, as long as they serve the purpose. She has this urge to shop for shoes, and with her monthly budget in mind she is naturally conditioned to not splurge on them.

So I was kinda horrified (not exactly, since this had happened a couple of times before) last weekend when Priyanka walked into a shop, picked up a pair of chappals from the shelf, dropped them to the floor, stepped into them for a few seconds and decided to buy them. They didn’t cost too much, so I guess the cost of going wrong was small, but I would’ve never done something like that.

Women’s Reservation and Roving Bandits

There are two kinds of bandits – stationary and roving. Roving bandits (eg. Mahmud of Ghazni) attack an area, plunder it to the fullest and then abandon it and move on to another area to rape and pillage. They seldom attack the same area twice, at least not in quick succession, because of which they don’t really care about the medium-term consequences of their actions. Similarly you have shifting agriculture.

Stationary bandits, on the other hand are interested in plundering an area over a longer time period (eg. British in India). They too pillage, but given that they know that they will stick on for a reasonable amount of time, they make sure that they don’t kill the goose that lays the golden egg. And it is a possibility that they will feed the goose well, take steps to increase production of eggs and so on. In other words, they do contribute to general development of the area (though they tend to take away a large portion of the benefits), build institutions, etc. This is more like settled agriculture.

Now, it is clear that given a choice, it is in the interest of the region for it to be attacked by stationary bandits rather than by roving bandits. Yeah, the stationary bandits do stick on for longer and pain you for longer periods of time, but the damage inflicted by roving bandits is usually so severe that it will take a longer time to recover from this.

In democracies like the UK or India, what keeps the legislators honest is the possibility of re-election. It is the possibility of re-election which incentivizes the incumbent to do good for his constituents, rather than just plundering away the region’s funds (in whatever ways possible). In other words, legislators do try to act like stationary bandits, because of which some good does happen for the region.

Now, with the new women’s reservation law in the process of coming into force, what will happen is that once in three elections, constituencies will get reserved for women by rotation. The implications of this are severe. In two out of every three parliaments, the incumbent knows that there is zero chance of him/her retaining the seat in the following election (yeah, women can still continue to get elected from their constituencies when it becomes general by rotation but I’m sure parties won’t allow that). With the possibility of re-election being taken away, this will play havoc with the incentives.

There will be more incentve now for legislators to maximize their benefits in the one term they get rather than to try and put gaaji on the constituency and take benefits off it for the rest of their lifetime. This, I think will lead to overall poorer performance by legislators, irrespective of gender of the legislator and whether the constituency is reserved or not.

This is unfortunate.

Shopping in New York

When I went shopping in New York on Friday I was reminded of this article by Tim Harford that the bofi had posted as part of a comment on one of my earlier posts. The basic insight in the article (which draws upon some widely cited research – I’ve read about it in several other places) is that too much choice may not be a good thing. That basically if presented with too much choice you are likely to just put NED rather than put effort into making the choice, and so it makes sense on behalf of the marketer to restrict choice.

So on Sunday evening, after having spent most of the day with a bunch of friends I know through an online group, and an hour or so with RG Mani, a very tired me walked into Macy’s, which claims to be the largest store in the world. I don’t dispute that claim – there are some six floors with each floor being the size of an average Big Bazaar. And there are clothes. And clothes. And shoes. And clothes. And more clothes.

Since I was trying to shop not only for myself, I ended up spending a considerable amount of time in the women’s section also. And the problem there was one of plenty. There was so much stuff to look at that it caused intense NED. I ended up just giving up on large sections of the store, and not even looking at even a sample of price tags there (yeah, I’m a cheap guy and was looking only for heavily discounted stuff). I won’t elaborate further on this “too much choice => NED” funda. Read the Harford article for more on that.

I don’t know what the strategy of the store is and whether they had deeply discounted stuff at all. The sample of clothes that I happened to check the price tags of were all extremely expensive. Perhaps the store did have some cheap stuff, but I don’t understand the policy of hiding it somewhere. Is the thinking that people on the lookout for cheap stuff are going to look more carefully and will hence find it? Which means some kind of “skimming” in terms of people’s attention spans? But the problem with this strategy is that by not displaying the cheap front up front, you may end up turning away a lot of people who look for cheap stuff!

Looking through all the huge floors of Macy’s caused me so much NED that when I saw an excellent looking reasonably priced Tommy Hilfiger sweater I didn’t even bother trying it. Maybe if I’d seen that sweater earlier I would’ve owned it now! So much that choice, and size, can do!

On Monday I went to this store called Century 21 near my office and had a more productive shopping experience. They also had both cheap and expensive stuff but they prominently advertised the cheap stuff with prominent “sale” signboards. Much more targeted, much more convenient for the cheap shopper, much more sales which means much more profits. Only thing I wonder is if this strategy of theirs turned away people looking for the higher margin expensive stuff..

The Film Game

So today I was introduced to this “hangout game” called Film Aata (the Film Game). The rules of this game are fairly simple. Through a slightly complicated process, you pick a random letter in the alphabet. Everyone is given a certain amount of time (we played with five minutes), and in that time you need to write down as many films as possible whose names start with that letter.

It’s a fairly simple and fun (though can’t be played for too long or too often given that the number of letters in the alphabet) but what makes it interesting is the scoring system. You get points for each UNIQUE movie whose name that you have written. So basically if you’ve written down the name of a movie which at least one other person has written down, you get no points for it. So apart from knowing the names of lots of movies you need to know movies that others don’t know (and it’s useful to have a resource such as IMDB handy).

So basically correlation matters! If there is one other player in the group who has similar tastes as yours, you are bound to get screwed. For example, the two people with whom I was playing this game today are sisters, so there was a major overlap in the names of the movies that they knew, which meant that on a relative scale I performed better than I would have considering the length of my total list.

I found the game extremely interesting! Now, here is a modification that would make the game more interesting. Put a cap on the total number of movie names that a player can write, all other rules staying the same. Currently, with no limits, you will end up writing names of all movies that you can think of. There is no strategy per se involved in the game. It’s more a test of memory.

However, once we put a cap, that brings in an element of strategy to the game. Now you will need to pick and choose the movies whose names you want to put down – to choose the movies that you know other people won’t know. And in case the cap is really low, then to pick and choose the movies whose names you know others won’t write. Insane game theory scope are there!

This also makes the game more repeatable – you can play it more often with different sets of people, and each time you’ll be trying to read the minds of different people and that will make things fun. With the same set of people, you can play with different caps, giving a new strategy each time.

It’s a simple game. A kids’ game. Something that might appear to be all too simplistic on the face of it, but this simplicity allows easy innovation, and that can make the game extremely fun!