More on focal points at reunions

On Friday, just before the IIMB reunion started, I had written about reunions being focal points that help a large number of alumni to coordinate and meet each other at a particular date and venue. What I’d not written about there was the problems that could potentially be caused with the said venue being large.

In this case, the venue was the IIMB campus itself. While all official events, meals and accommodation for outstation attendees had been arranged in a single building (called MDC), the fact that people would explore the campus through the event made the task of coordination rather difficult.

The whole point of a reunion is to meet other people who are attending the event, and so it is important that people are able to find one another easily. And when the venue is a large area without clear lines of sight, finding one another becomes a coordination game.

This is where, once again, Thomas Schelling’s concept of Focal Points comes in. The game is one of coordination – to land up at locations in the venue which maximise the chances of meeting other people. While our class WhatsApp group enabled communication, the fact that people wouldn’t be checking their phones that often during the reunion meant we could assume there was no communication. So when you arrived at the venue, you had to guess where to go to be able to meet people.

Schelling’s theory suggested that we look for the “natural, special or relevant” places, which would be guessed by a large number of people as the place where everyone else would coordinate. In other words, we had to guess what others were thinking, and what others thought other others were thinking. Even within the reunion, focal points had become important! The solution was to search at those specific points that had been special to us back in the day when we were students.

On Saturday morning, I took about ten minutes after entering campus to find batchmates – I had made poor guesses on where people were likely to be. And once I found those two batchmates at that first point, we took a further twenty minutes before we met others – after making a better guess of the focal point. Given that the reunion lasted a bit more than a day, this was a significant amount of time spent in just finding people!

 

 

A simpler solution would have been to start with a scheduled event that everyone would attend – the venue and starting time of the event would have defined a very obvious focal point for people to find each other.

And the original schedule had accommodated for this – with a talk by the Director of IIMB scheduled for Saturday morning 10 am. It seemed like a rather natural time for everyone to arrive, find each other and go about the reunion business.

As it happened, revelry on the previous night had continued well into the morning, because of which the talk got postponed. The new starting point was to “meet for lunch around noon”. With people who were staying off-campus, and those arriving only on Saturday arriving as per the original schedule, search costs went up significantly!

PS: This takes nothing away from what was finally an absolutely fantastic reunion. Had a pretty awesome time through the duration of it, and I’m grateful to classmates who came from far away despite their large transaction costs.

The problem with Slack, and why it’s inferior to DBabble

When two of the organisations I’m associated with introduced me to the chatting app Slack, it reminded me of the chatting app DBabble (known to us in IIMB as BRacket) that was popular back when I was in college.

There were two primary reasons because of which Slack reminded me of DBabble. The first was the presence of forums/groups. There was a “General” that everyone in the organisation was part of, and then were other groups that you could choose to join and be a conversation in. The second was that you could not only converse on the fora, but also send personal messages to each other – something DBabble also enabled.

There are several reasons why Slack is superior to DBabble. Most importantly, you can tag people in your messages on forums and they get notified, so that they can respond – this is a critical feature for using it for work purposes.

Secondly, Slack integrates well with other tools that people use for work – such as email and a lot of development tools, for example (which one of the organisations I’m associated with uses heavily, but I’ve never got into that loop). Slack also has a very nice search feature that allows you to pull up discussions based on keywords, etc.

What Slack sorely lacks, which makes me miss DBabble like crazy, however, is threaded conversations. The conversation structure in each channel in Slack is linear – which means you can effectively have only one thread of conversation at a time.

When you have a large number of people on the channel, however, people might initiate several different threads of conversation. As things are, however, a Darwinian process means that all but one of them get unceremoniously cut out, and we end up having only one conversation.

It is also a function of whether Slack is used for synchronous or asynchronous messaging (former implies everyone replies immediately, latter means conversations can take their own time and there’s no urgency to participate immediately, like email, for example). My understanding is that the way it’s built, it can be used in both ways. My attempts to use it as an asynchronous messenger, however, have failed because some of the conversations I’ve tried to initiate have gotten buried above other conversations others on the channel have tried to start.

The problem with Slack is that it assumes that each forum will have only one active conversation at a time. Instead, if (like DBabble) it allows us to have different conversation threads, things can become a lot more efficient.

One of the nice features of forums on DBabble was that everytime you went to the forum, it would show you all the active threads by showing them in bold. DBabble allowed infinite levels of threading, and only messages that were unread (irrespective of which branch of which thread they were in) would be in bold, meaning you could follow all threads of conversation (this also proved problematic for some as we developed an OCD to “unbold” – read every single message on every forum we were part of).

Imagine how powerful threaded conversations can be at the corporate level especially when you can tag people in them – so you go to a forum, and can see all open discussions and see where your attention has been called, and contribute. Threading also means that you can carry out several different personal (1-to-1) conversations at a time without losing track of any.

It’s interesting that after DBabble (which also died after a later edition gave the option of “chat mode” which did away with threaded conversations) there has been no decent chat app that has come up that allows threaded conversations. Apart from possible bandwidth issues (which can happen when each message is suffixed with the full thread below it), I don’t see any reason this can’t be implemented!

I want my BRacket (DBabble) back. But then, chat has powerful network effects and there’s no use of me wanting a particular technology if sufficient number of other people don’t!

How my IIMB Class explains the 2008 financial crisis

I have a policy of not enforcing attendance in my IIMB class. My view is that it’s better to have a small class of dedicated students rather than a large class of students who don’t want to be there. One of the upsides of this policy is that there has been no in-class sleeping. Almost. I caught one guy sleeping last week, in what was session 16 (out of 20). Considering that my classes are between 8 and 9:30 am on Mondays and Tuesdays, I like to take credit for it.

I also like to take credit for the fact that despite not enforcing attendance, attendance has been healthy. There have usually been between 40 and 50 students in each class (yes, I count, when I’ve bamboozled them with a question and the class has gone all quiet), skewed towards the latter number. Considering that there are 60 students registered for the course, this translates to a pretty healthy percentage. So perhaps I’ve been doing something right.

The interesting thing to note is that where there are about 45 people in each class, it’s never the same set of 45. I don’t think there’s a single student who’s attended all of my classes. However, people appear and disappear in a kind of random uncoordinated fashion, and the class attendance has remained in the forties, until last week that is. This had conditioned me into expecting a rather large class each time I climbed up that long flight of stairs to get into class.

While there were many causes of the 2008 financial crisis, one of the prime reasons shit hit the fan then was that CDOs (collateralised debt obligations) blew up. CDOs were an (at one point in time) innovative way of repackaging receivables (home loans or auto loans or credit card bills) so as to create a set of instruments of varying credit ratings.

To explain it in the simplest way, let’s say I’ve lent money to a 100 people and each owes me a rupee each month. So I expect to get a hundred rupees each month. Now I carve it up into tranches and let’s say I promise Alice the “first 60 rupees” I receive each month. In return she pays me a fee. Bob will get the “next 20 rupees”, again for a fee. Note that if fewer than 60 people pay me this month, Bob gets nothing. Let’s say Eve gets the next 10 rupees, so in case less than 80 people pay up, Eve gets nothing. So this is very risky, and Eve pays much less for her tranche than Bob pays for his which is in turn much less than what Alice pays for hers. The last 10 rupees is so risky that no one will buy it and so I hold it.

Let’s assume that about 85 to 90 people have been paying on their loans each month. Not the same people, but different, like in my class. Both Alice and Bob are getting paid in full each month, and the return is pretty impressive considering the high ratings of the instruments they hold (yes these tranches got rated, and the best tranche (Alice’s) would typically get AAA, or as good as government bonds). So Alice and Bob make a fortune. Until the shit hits the fan that is.

The factor that led to healthy attendance in my IIMB class and what kept Alice and Bob getting supernormal returns was the same – “correlation”. The basic assumption in CDO markets was that home loans were uncorrelated – my default had nothing to do with your default. So both of us defaulting together is unlikely. When between 10 and 15 people are defaulting each month, that 40 (or even 20) people will default together in a given month has very low probability. Which is what kept Alice and Bob happy. It was similar in my IIMB class – the reason I bunk is uncorrelated to the reason you bunk, so lack of correlation in bunking means there is a healthy attendance in my class each day.

The problem in both cases, as you might have guessed, is that correlations started moving from zero to one. On Sunday and Monday night this week, they had “club selections” on IIMB campus. Basically IIMB has this fraud concept called clubs (which do nothing), which recruiters value for reasons I don’t know, and so students take them seriously. And each year’s officebearers are appointed by the previous year’s officebearers, and thus you have interviews. And so these interviews went on till late on Monday morning. People were tired, and some decided to bunk due to that. Suddenly, there was correlation in bunking! And attendance plummeted. Yesterday there were 10 people in class. Today perhaps 12. Having got used to a class of 45, I got a bit psyched out! Not much damage was done, though.

The damage was much greater in the other case. In 2008, the Federal Reserve raised rates, thanks to which banks increased rates on home loans. The worst borrowers defaulted, because of which home prices fell, which is when shit truly hit the fan. The fall in home prices meant that many homes were now worth less than the debt outstanding on them, so it became rational for homeowners to default on their loans. This meant that defaults were now getting correlated! And so rather than 85 people paying in a month, maybe 45 people paid. Bob got wiped out. Alice lost heavily, too.

This was not all. Other people had bet on how much Alice would get paid. And when she didn’t get paid in full, these people lost a lot of money. And then they defaulted. And it set off a cascade. No one was willing to trade with anyone any more. Lehman brothers couldn’t even put a value on the so-called “toxic assets” they held. The whole system collapsed.

It is uncanny how two disparate events such as people bunking my class and the 2008 financial crisis are correlated. And there – correlation rears its ugly head once again!

 

Teaching at IIMB: Mid-term review

IIMB has a strange policy. They are not allowed to have classes tomorrow on account of it being a national holiday so they shifted tomorrow’s concept to today, indicating a complete lack of appreciation of the concept of the long weekend. Anyway, since I didn’t have any other plans for the day or the weekend I decided to not request for a slot change and went anyways. This was my eleventh class out of twenty.

I expected the attendance to be rather thin today, but the class surprised me with more than three-fourths of the registered students turning up (on par with most sessions so far). And despite the class being at 8 am in the morning, none of them slept (at least I didn’t notice anyone sleeping). That is again on par with the course so far – more than halfway though the course and I’m yet to catch a single person sleeping in class! Maybe I should take some credit for that.

The class before today’s was about ten days back (long gap due to mid-term exams), and that day I had a minor scare. I had formulated a case that involved solving the Newsboy Problem (now politically corrected to “Newsvendor model“) as a sub-step in the solution to the case. Having worked out the sketches of the case solution the previous night I went to sleep hoping to work out the full case before I went to class. And my brain froze.

So it was 6:30 on the morning of an 8am class and I wasn’t getting the head or tail of the newsboy problem despite having known it fairly well. Decided to have cereal at home rather than go to SN to give myself more time to read up and understand the model. And my brain refused to open up. Yet I made my way to class, hoping I could “wing it”.

I didn’t have to, for the class exceeded expectations and solved the case for me. One guy popped up with “newsvendor model”. Another guy said that we could consider a certain thing as a “spot price”, thus eliminating the need to make any assumptions on costs. Then we started working out the model on Excel (remember that this is a “spreadsheet modelling” course). And the time came to implement the newsvendor model. And my brain froze in anticipation. “How do we do this?”, I asked, trying to not give away my brain freeze.

“We calculate the critical ratio”, came the chorus (sometimes I dispense with the politeness and order of people raising their hands and speaking in order). “And what is that here?”, I asked. “B6/(B5+B6)” came back the chorus. And then when I asked them how to impute the ordering level based on this, the chorus had figured out the exact way in which we should use NormInv to determine this. The troubling bit of the newsvendor problem having been thus solved, I took control and went forward with the rest of the case. And my respect for the class went up significantly that day.

Later in the day I was relating the incident to the wife, who I might have mentioned is an MBA student at IESE Business School in Barcelona. “Oh my god, your class is so quant”, she exclaimed. This is a topic for another day but perhaps due to the nature of the admissions procedure, students at IIMs are definitely much much more quantitatively oriented than students at B-schools elsewhere. Yet, IIMs don’t seem to be doing much in terms of harnessing this quant potential which should be giving their students a global competitive advantage.

And coming back to my class, they’ll be sitting for placements starting the 9th of February. If my class is a representative sample (it is most likely not, since I’m teaching an elective and these people expressed interest in learning what I’m teaching, so there is a definite bias), this seems like a great batch at IIMB. So I encourage you to go and recruit!

 

Dressing up in residential schools

As  I was getting ready this morning to go deliver my lecture at IIMB, the wife expressed surprise at how casually I was dressed (I wore jeans, a (collared, “formal”) t-shirt and a hoodie). “In my business school all professors wear suits”, she said. My mind went back to the time when I was a student at IIMB, trying to remember what professors wore. While they were generally dressed more formally than I was today, no one wore suits – the only one who wore a blazer every day was easily the worst professor who taught me at IIMB!

I was thinking about why I don’t feel like dressing formally while going to IIM. And then I thought of the students, and realised that with the odd exception, I’m easily much more formally dressed than most of my students. When students turn up to class in track pants, professors have no incentive to wear anything close to a suit!

And this is not a new phenomenon. Back in my time too, close to ten years ago, people would wear track pants and other articles of clothing you might describe as “home wear” to class (Not me, though. I don’t wear track pants. As a rule. But I remember making it a point to wear shorts to all my final term examinations). So I started thinking about what it is about IIMB that makes people wear “home wear” to class. And I realised it has to do with the proximity.

IIM Bangalore is a wholly residential campus, and the student accommodation is a short walk away from most of the classrooms. In the second year, thanks to electives time tables are such that there is a good chance of having long breaks between classes, so you go to the academic part of the institute for only one class.

When you are going to a classroom that is only a short walk away from where you live, and when you go there only for one or two classes, it doesn’t feel like you’re “going somewhere”, so you don’t see any point in dressing up. Moreover, most of the people you meet in class are people you share a hostel with – these people would have seen you in your pyjamas anyway, and seen you get sloshed all over L^2 during one of those parties which I’m told are not so common nowadays! So there is no good reason for you to dress up! And you come to the class in pyjamas!

The wife’s B-school is not residential, and people live a few kilometres away. Very few pairs of people would have seen each other in their pyjamas, and the distance means people are “going somewhere” when going to a school. And so people dress up (and by that I mean they really dress up!). And when students are well-dressed, the professor wants to show off his superior social standing, and thus wears as formal clothes as he can – which usually means a suit!

Again I’m talking from small number of data points – I’ve lived in another residential institution (IIT Madras) – and that too was famous for its rather muted/horrible dressing sense. It’s a pity/mercy (depending on the way you look at it) that us IIMB people manage to well cover up our generally bad dressing by wearing suits at interviews and PPTs and other public events!

Day 1 of teaching at IIMB

As I had mentioned yesterday I’ve started teaching at IIMB. Some thoughts after day 1.

  • The sweetener (idli-vade-chutney) at SN refreshments is awesome but leads me to take a route that is heavier on traffic than the more optimal route (via Sanjay Gandhi and East End). Too many school buses and office cabs that move haphazardly make it less than a pleasant drive
  • My car was again waved past at the IIMB gate. No questions asked. I’m still not sure how they do it every time to my car, given there is no insignia on it! I don’t believe that they remember the car from when I was a student!
  • IIMB has a new classroom complex and I “inaugurated” one of the classrooms there. It’s quite nice, students set out in a wide U format which I quite like. The projector takes HDMI input which is awesome!
  • The class started off rather quietly. I had to put on my sarcastic side and helpfully mention that “there is still time left to drop this course”. Participation picked up after that.
  • For an 8 am class, no one slept, which I take as an achievement! But then it is the first day of the term. Maybe they’ll learn as they go along
  • There were zero objections when I put up my “pie charts are evil. don’t use them” slide. This is the first time I’m not facing any resistance for saying that! In the past I’ve had people say “but then I used a pie chart once and it was very well accepted”, and this after I’ve told them about the perils of anecdata!
  • Everyone calls me “sir”, from the students to the administrative staff and officers. I’m letting them call me thus. It’s funny how one of the administrators who I used to call “sir” when I was a student now calls me “sir”.
  • The drive back was horrible. Insane traffic all along Bannerghatta road till I got past the ring road. Then it was smooth but the 3rd block circle was again jammed. But then IIMB is giving me office space so once I get that I’m unlikely to drive back immediately after the class.
  • I need to manage my voice better. Half an hour in, I realised I had come close to losing my voice. I need to be less hyper and “conserve my voice” at least for the duration of the class.
  • And no, I won’t put such an update after every class. Just that today was the first day so ..
  • I came back and added “adjunct faculty, IIMB” to my linkedin profile 😛

Teaching at IIMB

Starting tomorrow I’ll be teaching at IIMB. It’s a course called “Spreadsheet modelling for business decision problems”, and targeted at term 6 MBA students. I explicitly warned them to not take the course if they don’t consider themselves to be competent at mathematics. Yet, some 60 students have registered (current IIMB batch size is ~400)!

This promises to be fun. The only part that may not be so much fun is that in order to make it compatible with the rest of my work I requested for the 8-930am slot on Mondays and Tuesdays so that means I need to get back to my early-to-bed-early-to-rise ways which have served me so well for most of my career (last few months though I’ve become a late riser).

Now, for everything that I do I like to have a “sweetener” – something that is totally unrelated that spurs me to do whatever I’m doing. Usually the sweetener is something that sounds quite trivial but is actually useful in spurring me on. The sweetener in this case is that SN Refreshments in JP Nagar 2nd Phase lies on my way from home to IIMB, and they make absolutely awesome idli-chutney. So the plan for tomorrow (and every other class day in the next 3 months) is to leave home early and have breakfast there and then head on to IIMB.

I’m hoping for a nice lively class. I’ve reserved 20% of the evaluation for “class participation”. I hope at least that spurs them to be nice and lively! Then again it’s first thing in the morning on Mondays and Tuesdays so you never know..

I’ll keep you guys updated on anything whacky that might happen in class. Oh, and I’m going to be starting a “class blog” for my students where they can write for extra credit. Will send out the link once it’s up and populated.

Now to decide whether to go by car (for some strange reason when I take the car – the same one I had when I was a student at IIMB – I never get stopped by the security guys at the gate. there’s no sticker on the car though) or by motorcycle (easier to navigate traffic and park near SN)!