Mike Denness and WTC Bombers

Professors who are insecure with respect to their ability and competence demand, rather than command respect. They institute complicated procedures which ensure that students need to suck up to them. Professors who know they are good don’t care. For example, the better professors who taught me at IIT never took attendance (everybody would be marked present), and would yet lecture to a full house most of the time. Lesser professors would get finicky about attendance. And other such trivial things. By forcing students to do things in a certain way, by “being strict”, they assumed, that students would respect them. It is a wonder that none of them thought this might be counterproductive.

In our third semester at IIT, we had this course called “Digital logic and VLSI Design Lab”. It was a decent and useful course. You would build digital circuits and test them out. No rocket science to it, but something that was useful in the long run. And because there was no rocket science to it, the faculty (one of the more insecure professors) had instituted a complicated process so that he gets some respect (or attention at least). Actually it wasn’t that complex. Before an experiment, we had to write up about the circuit and how we go about the experiment and get his signature on our write up. The lab assistant had been instructed that we should be issued components only after our report had been countersigned by the professor. Nothing too complicated, but a small step to ensure we suck up to him.

Things were mostly smooth, but one day the professor was late to arrive. Or maybe he was there and we didn’t see him – I don’t remember correctly. I don’t know how it happened but we managed to get the components from the lab assistant without our report having been countersigned by the professor. In a jiffy (after all we were three bright IIT boys) we had finished the experiment. And we called the professor to show him the results.

The experiment didn’t matter to him. He didn’t care one bit about the elegant circuit we had constructed. He only looked at our write up. His signature was missing. And he went wild. I won’t get into the details here but he went absolutely ballistic and threatened to annul our experiment, and possibly even fail the three of us in that course. “Such indiscipline is not to be tolerated”, he said.

“Sir, but this is not fair”, a teammate interjected. It only ensured that the professor went even more ballistic. “You guys must be reading the newspapers”, he thundered. “You see what is happening in South Africa? Is that fair? There is absolutely no fairness in this world, so you won’t get any brownie points by arguing that something is not fair” (the professor was a big cricket fan. The events in South Africa pertained to the one match suspension of Virender Sehwag and a suspended sentence to six other Indians, handed out by match referee Mike Denness).

“I don’t want my students to be this indisciplined”, he went on. “You never know where this will take you, if it is not nipped in the bud. One day you will do your experiment without taking my signature. When that is tolerated, you get encouraged to more indiscipline. And so it grows. And one day you will be bombing the WTC”. None of the three of us was able to react to this (this was in October 2001).

I don’t exactly remember how it ended. If I remember right, we had to dismantle our set up, take the professor’s signature on our write up, re-issue the components and re-do the experiment – but I’m not sure – maybe we were let off. But it was an important lesson for us – if indiscipline is not checked right up front, you could go on to be a terrorist it seems!

Branding and traditional retail

Last night, the wife sent me to the grocer with a rather long shopping list. The grocer in question is Bhuvaneshwari Traders, a rather efficient “traditional retail” store close to home. There are lots of shop-boys there to service your requests, billing happens in a jiffy (yes, you get a printed bill) and they usually tend to stock most items that you are likely to  need. Of course, being a small kirana, they’re not able to stock a particularly wide variety of SKUs (and I don’t think that makes business sense, as well), but they seem to do quite awesome business by serving most of the customers’ needs, and very quickly.

It is in this kind of a context, I realize, that branding plays a major impact. Twice in my “shopping process”, I had to decide on the brand of a good quickly, and both times, I went for a brand that was on top of my mind – a brand that had “pull marketed” well enough for me to remember them. So, the shopping process consisted of my reading out from my long prepared list, and the shop boys producing those items at a phenomenal speed. The speed at which those guys worked made me believe that it was an insult to myself, and to them, if the speed at which I ordered was to be much slower. This was like Vyaasa dicatating the Mahabharata to his scribe Ganesha. Since Ganesha was so fast in writing, Vyaasa was compelled to dictate at the same rate.

So, when I asked for “1 kg salt”, the shopkeeper responded with “which brand?”. Given that I had to respond quickly, I had about a split second to decide what brand of salt I wanted. Captain Cook came to mind, with its ads of the “free flowing” salt. But then, I remembered having been told that the brand stopped production some ten years ago. The next thing that came to mind was Tata Salt, and I immediately remembered that my mother used to use the same. I also remembered their recent ad on Kannada TV “deshada uppu” (the country’s salt). I didn’t need to think further.

A few items down the list, when I asked for Garam Masala, two shop boys popped up with two different brands. Now, I don’t recall having bought too much Garam Masala earlier in life, and  I didn’t recall any ads either. But then, one of the packets produced was “MTR Garam Masala” and the other had a name that I had never heard. Here, the general branding of the two manufacturers in question played its part, and I instinctively went for MTR.

The purchase process for “traditional retail” is significantly different from that of “modern retail” (the supermarkets and the likes), and I hope, and think, that Indian marketers understand this difference in order to market their goods appropriately. While it is true that in the traditional retail context, “sales” plays a large part – give higher margins to the shopkeeper, and he will “push” (since some customers take his recommendation) your product rather than a competitor’s – there is also the “pull” factor. It is very rarely in these contexts that a customer sees a number of competing products side by side and has time to make a rational decision – most shopkeepers don’t afford them that luxury. The key to this is efficient branding, which leads to the customer demanding a particular brand of products, so that the shopkeeper has no opportunity to push the one that gives him better margins (some shopkeepers do try this – offering a competing brand claiming it is superior, but I’m not sure customers buy this).

And I think a lot of Indian marketers understand this.

High Performance Schooling

At the outset I want to mention that I mean no disrespect for my schoolmates or teachers from Sri Aurobindo Memorial School, where I spent twelve mostly wonderful years. It is just a thought as to whether it would have helped me later on in life had I been shifted out of there when I was in say primary school into what I would call as a “high performance school”.  Also, apologies at the outset if I were to sound boastful in this post. Unfortunately, there is no other way to get the point across.

Right from primary school, like say when I was in first standard, I was what can be described as a “high performer”. Yes, I was always first or second in class in terms of marks, but that is not so much of the issue here – there were a lot of people who did nearly as well and my marks were not so much of a differentiator. I’m talking more about being almost always significantly ahead of class.

For example, in first standard, they taught us addition in school. I remember being taught to do something like “two in the mind, four in the hand” and then count out the two in order to add two and four. By that time, however, I had already learnt addition at home and was pretty good at it. When called to the front of the class to solve one such problem for everyone, I just shouted the answer and ran back to my seat. I remember the teacher saying in a subsequent class that she would give me a “big sum” (which was 3-digit addition), and I solved that too in a jiffy.

Again in first standard, there was a spelling test. In all earlier such tests, I had done exceedingly well, getting only one or two words wrong at the max. I think by then I had already begun to read bits and pieces of the Deccan Herald which my grandfather subscribed to (my parents subscribed to Kannada Prabha, and I could read that quite well, as well). I was bored of getting everything right in every test. So I started writing wrong spellings on purpose. It was the only way to entertain myself.

This kind of stuff continued throughout schooling. I remember reading my neighbour’s 9th standard math textbooks when I was in 7th standards. History lessons never interested me because my grandfather had told me all those stories and I remembered. On several occasions in middle and high school, I would know that what the teacher was teaching was wrong, but would be too bored to point that out to her because it would lead to a pointless argument (to my credit, I did try a few times, and it was very hard for the teachers to back down. After a while I simply stopped trying).

One offshoot of this being ahead of class was that I would be constantly bored in class, and I would identify this as a potential cause of some behavioural issues I faced as a child. Being the teacher’s pet and a general geek (I was the first guy in class to wear spectacles) meant that I was a popular target for bullying and practical jokes. I would take advantage of my size (I was comfortably the biggest kid in class) and would respond by beating up people. My parents spent most of my middle school listening to complaints from teachers about my being a bully and violent type!

As I grew older and learnt the merits of non-violence, I managed to overcome this, but the more damaging effect of always being ahead of class was that I was never challenged, and hence I never developed the habit of working hard, and when I tried to (when I went to IIT), it was too late. While I didn’t particularly top or “max” every test and exam in school, I sailed through fairly comfortably and never really had to do anything like work hard till I finished my 10th standard.

Then, I went to National Public School, which had a reasonably rigorous criterion for admission into 11th standard, so in some sense it was a “high performance centre”. But the problem there was what I call as the “11th standard free-rider teacher problem”, the cause of which is the IIT-JEE. Let me explain. In 11th standard, in a school such as NPS, most kids go for JEE coaching. Consequently, some teachers assume that all kids go to JEE coaching, and thus slacken their level of involvement and quality of teaching in the classroom. Those that are going for “tuition” don’t mind/notice this drop in quality. The rest do, but are too small a minority to affect things in class.

So yes, I did feel challenged in 11th standard. But then I took a (probably wise, in hindsight) decision to not care at all about the class tests and exams, and instead look long-term – towards success in the board exam and IIT-JEE. Working at my own pace, without really pushing myself too hard, I did rather well in both of them (after having been mostly in the bottom half of my class at NPS, of course, but I didn’t care about that). And then I went to IIT, which is where the troubles began.

IIT, thanks to its (then) selection criteria, is truly a “high performance centre”, in if not anything but in the quality of the students it takes in. There is also a sharp jump in the level of tuition compared to school. You are truly challenged and considerable work is called for in order to stay abreast in class. Being in Computer Science also means you are flooded with rather intensive programming assignments. It is difficult to do well unless you are really willing to work hard, and that is where I failed to cope. I had never put in anything close to that level of involvement. Suddenly thrown into the deep end of the pool (in terms of working hard), I struggled, and the continuous nature of evaluation meant that there was no point in “focusing on big exams” here, like I had in high school. Every little exam and assignment contributed to your final CGPA. I graduated as the median of the class, and I’ve never recovered.

IIM wasn’t that hard compared to IIT, but again I didn’t work too hard in courses I didn’t get too interested in, and barely graduated in the top quartile, an under-achievement given my comfort levels in most subjects.  And my lack of ability to work hard doggedly has cost me much in my corporate career also. Some tasks that most people consider “routine” have turned out to be insanely hard for me, and in some places I haven’t been able to cope with the workload. I have a problem working long hours with concentration. I’m good at problem solving but lack that “sheer fight” which is sometimes necessary to push things through.

And now, looking back, I think it has to do with my primary education. As Malcolm Gladwell says in his “10000 hours” essay in The Outliers, working hard is also a talent. And my comfort levels in school meant that I never had to develop on that front. It was all too easy, and I never had to work hard then. And then when I actually had to, I have been inadequate.

It makes me wonder if it might have made some sense for me to have been shifted to some sort of “high performance” school when I was found to be much ahead of class in primary school. Again, there would have been a problem in identification since being ahead of class is not necessarily correlated with performance in exams, but assuming I had been thus “identified”, what if I had been sent to say a special school where I had been challenged even as a kid? Where I never felt “oh this teacher doesn’t know anything, so no use listening to her” or “I know this is the wrong answer but I know this is what the examiner demands so I’ll write this”? Where I had been pushed to work hard in a meaningful fashion? I don’t know if I would’ve still been good at entrance exams and gone to the colleges I went to, but I have a sneaking feeling I would have been able to cope with life much better in that case. What do you think?

Pricing My Best Friend’s Wedding

Any of you remember this movie called “My Best Friend’s Wedding”? If you don’t, here is a brief description of the plot. Julia Roberts and Dermot Mulroney (had to look up imdb to remember his name) have this agreement that if they are both single as of her 28th birthday, they will get married to each other. As it happens, 3 weeks before that, the hero announces that he’s found a woomaan and is going to get married to her, much to the dismay of the heroine, who now puts fight to somehow spoil this new relationship.

I was thinking of this kind of arrangement as a financial product. Actually, the movie has what I call as the “European version”. More complicated is the “American version” which I describe here. Basically I give you the OPTION to marry me on any day before my 28th birthday (6th Dec 2010). That would be simple enough to “price” (or “value”, to put it in layman’s terms) – it is a standard American option. However, let me add this twist into it. I also reserve the right to withdraw this option on any day before expiry or exercise.

So basically some day before my 28th birthday I can wake up and cancel this option that I’ve given you. Now the challenge is to price this. One thing that is obvious is that the value of this is now less than the value of the pure American option. But pricing it is a challenge (though, thinking about it carefully, it shouldn’t be too hard to solve. I think we can use option-on-option fundaes in order to price it, but still it’s nontrvial).

The European option, of course (as it is done in My Best Friend’s Wedding) easier to price. Basically, there are two events that need to happen on the day of expiry for the option (ok technically it isn’t an option since if these two events happen, then the parties are forced to execute the contract) and so it can be easily modeled using a two-factor model. The American, as we discussed, is tougher (though I’m sure that if I were to present this problem to my colleagues, they’d solve it in a jiffy).

So the reason I’m writing this is that I’m planning to enter this kind of a deal with someone. And I’m wondering if it’s better to enter into a European deal or into an American. Remember that if it is the “American” deal, I’ll be giving away the option (to marry me before either my 28th birthday or I withdraw the option) for free. Considering this, under what conditions should I try to sign the European contract, and under what conditions should I give away the American?

Also, how does the pricing of the American option change if I’m allowed to give it away to more than one person (with the understanding that as soon as one person exercises the option, I withdraw the option from all the other people I’ve given it to). And typically, will I be able to get more benefit in total by giving away this American option to a number of people than if I give it away to one person (assuming I’m indiffernet between all these people with respect to marriage).

Ok it’s late in the night and it’ s my third post in the last 1 hour, so it might be a bit muddled up. Also, you might find it a bit too technical (remember that I’m a quant). Nevertheless, I hope I’ve been able to communicate what I wanted to communicate. And am looking forward to your advice on this.