Tag: occasions

Relationship Stimulus

This post doesn’t necessarily restrict its scope to romantic relationships, though I will probably use an example like that in order to illustrate the concept. The concept that I’m going to talk about any kind of bilateral relationship, be it romantic or non-romantic, or between any two people or between man and beast or between two nations.

Let us suppose Alice’s liking for Bob is a continuous variable between 0 and 1. However, Alice never directly states to Bob how much she likes him. Instead, Bob will have to infer this based on Alice’s actions. Based on a current state of the relationship (also defined as a continuous variable between 0 and 1) and on Alice’s latest action, Bob infers how much Alice likes him. There are a variety of reasons why Bob might want to use this information, but let us not go into that now. I’m sure you can come up with quite a few yourself.

Now, my hypothesis is that the relationship state (which takes into account all past information regarding Alice’s and Bob’s actions towards each other) can be modelled as an exponentially-smoothed variable of the time series of Alice’s historical liking for Bob. To restate in English, consider the last few occasions when Alice and Bob have interacted, and consider the data of how much Alice actually liked Bob during each of these rounds. What I say is that the “current level” that I defined in the earlier paragraph can be estimated using this data on how much Alice liked Bob in the last few interactions. By exponentially smoothed, I mean that the last interaction has greater weight than the one prior to that which has more weight than the interaction three steps back, and so on.

So essentially Alice’s liking for Bob cannot be determined by her latest action alone. You use the latest action in conjunction with her last few actions in order to determine how much she likes Bob. If you think of inter-personal romantic relationships, I suppose you can appreciate this better.

Now that you’ve taken a moment to think about how my above hypotheses work in the context of human romantic relationships, and having convinced yourself that this is the right model, we can move on. To simplify all that I’ve said so far, the same action by Alice towards Bob can indicate several different things about how much she now likes him. For example, Alice putting her arm around Bob’s waist when they hardly knew each other meant a completely different thing from her putting her arm around his waist now that they have been married for six months. I suppose you get the drift.

So what I’m trying to imply here is that if you are going through a rough patch, you will need to try harder and send stronger signals. When the last few interactions haven’t gone well, the “state function of the relationship” (defined a few paragraphs above) will be at a generally low level, and the other party will have a tendency to under-guess your liking for them based on your greatest actions. What might normally be seen as a statement of immense love might be seen as an apology of an apology when things aren’t so good.

It is just like an economy in depression. If the government sits back claiming business-as-usual it is likely that the economy might just get worse. What the economy needs in terms of depression is a strong Keynesian stimulus. It is similar with bilateral relationships. When the value function is low, and the relationship is effectively going through a depression, you need to give it a strong stimulus. When Alice and Bob’s state function is low, Alice will have to do something really really extraordinary to Bob in order to send out a message that she really likes him.

And just one round of Keynesian stimulus is unlikely to save the economy. There is a danger that given the low state function, the economy might fall back into depression. Similarly when you are trying to get a relationship out of a “depressed” state, you will need to do something awesome in the next few rounds of interaction in order to make an impact. If you, like Little Bo Peep, decide that “leave ’em alone, they will come home”, you are in danger of becoming like Japan in the 90s when absolute stagnation happened.

Orange Juice and Petrol

So I was reading this article by Ajay Shah about administered pricing for petroleum. He does an excellent (though it gets a bit technical in terms of statistics) analysis about what could go wrong if the government were to free pricing of petroleum products. He mostly argues in favour of deregulation, and that is a view that I completely endorse.

One of the big fears about deregulation that he mentions is the fear that volatility in retail prices of petroleum products might increase, and he argues that this is a good thing and is much better than the government artificially hiding the prices and subjecting the junata to major price shocks once in a while. While I agree with him on this, I don’t think prices will change frequently in the first place.

While I was reading this article, I started thinking about the neighbourhood Sri Ganesh Fruit Juice (yeah there are a dozen of those in every neighbourhood in Bangalore) center. About how the guy keeps the price of orange juice constant throughout the year, despite the price and availability of oranges themselves fluctuating wildly across seasons. Yeah he might do minor adjustments such as changing the proportion of water but he can’t do too much of it since he needs to maintain quality.

The basic funda here is that customers want certainty. Every time they go to the shop for their fix of orange juice, they want certainty in the prices. Even if you are on an average cheaper, you will lose customers if your price is more volatile than your competitor’s. Of course there are occasions when you can’t help it and are forced to change your price – and on these occasions your competitors are also likely to do the same. But as far as possible, you try your best to decouple the price of orange juice from the price of orange which is pretty volatile.

Now I don’t know if the volatility in crude oil prices is more than the volatility in orange prices (it’s likely to be) but considering that oil companies are supposed to be more sophisticated than your neighbourhood juice shop guy, I would expect similar behaviour from them – of keeping retail prices of petroleum products as stable as they can. Of course they are likely to follow long-term trends but they are surely not going to pass on the short-time noise in prices to the customers.

So this fear of increase in volatility of retail prices is unfounded, assuming of course that the oil marketing companies are good businesspeople!

Pat

I’m not sure if I’d prepared this as an answer to a potential interview question but if I were asked if there was one part of my life which I’d’ve chosen to live differently, I’d probably pick my four years at IIT Madras. In many respects, it represents some kind of a void in my life. Nothing much of note happened during that. It was during that time that I learnt to put NED. There wasn’t much value added to my life in those four years, either in terms of actual value or even in terms of bullet points. There was not much “growth” in those years.

I did nothing of note in terms of academics (I ended up as class median) and apart from a bit of quizing not much in the lit scene either. I didn’t go out on too many trips, nor did I go out too much. You might be surprised to know that I’ve never in my life watched a movie at a movie hall in Chennai! I went to Besant Nagar beach thrice during my four year stay, and to the Marina Beach once. I played only a peripheral role in organizing Saarang and Shaastra, and that too only in the latter half of my stay there.

On several occasions I’ve asked myself what kept me going through those four years that I consider to be my “dark days”, and the only reasonable answer that I get is “pat”. Pat. Sri Gurunath Patisserie. The coffee shop of IIT. The life and blood of my life at IIT. Perhaps the only thing I really missed about IIT when I moved to IIMB. The venue for much discussion, and fun, and bitchery, and long nights. Open air. Bad chairs. Broken tables. Non-existtent umbrellas. Breeze. Cheap and horrible nescafe. 5 Rupis lemonade. Etecetera.

When bitching about my life at IIT, I usually lay most of the blame on the fact that I was put in a mostly PG hostel. However, one advantage of being in Marnad was that it was right opposite Patisserie, and so it took little effort to go park there. I suppose it was no coincidence that the most prolific Pat-ers (Bhaand, Shamnath and I) were all Narmadites.

It was really simple. All that one had to do when bored was to walk across and go buy yourself a cup of Nescafe for 5 rupis. And park. If you found an interesting gumbal, you would park with them. If not you would park alone, and an interesting enough gumbal would build up around you as time went by. People kept coming and people kept going but the conversation would go on for a while. And some time in the middle, Satcho would materialize and molest Mani, the dog that had been much fattened on the Patisserie leftovers.

It was at the Patisserie that the editors of The Fourth Estate would meet the correspondents and collect ideas for bitchy stories. It was at the Patisserie that plots were hatched to bring down The Fourth Estate and start the rival (shortlived) Total Perspective Vortex. It was at the Patisserie that campus couples announced themselves (though after a while action in this regard moved to “spot” near the girls’ hostel). It was at Patisserie that cheap treats were given and cheap bets were settled.

It was at the Patisserie that I first started making Pertinent Observations, and telling them to people around me. When I didn’t have access to Patisserie any more, I started this blog.

Earlier, when people told me about the crazy things they’d done in their undergrad and all the fun they had, I’d feel bad. I’d feel bad that I’d missed out on something. Now I just ask myself if I’d’ve traded my sessions at the Patisserie for the “fun” things that they’d done. And the answer, usually, is no.

Strategic Food Attack at Functions

While standing in line waiting rather impatiently for my dinner at Monkee’s engagement today, I was thinking of strategies that one can employ in order to get one’s food quickly in places where there are long lines. I’d faced the same question a couple of weeks back at Sharadha’s wedding, where again the lines were insanely long. On both occasions, I think I managed to figure out reasonable solutions.

The thing with most guests at functions like these is that they tend to approach the food in linear fashion. They start from one end and go through the whole line taking little bits of everything on the menu. Most people I know, especially from the older generation, don’t go back for a second helping. And so this means that they need to get everything the first time round.

The key to cracking the puzzle is to approach things in a non-linear fashion, as I realized at both Monkee’s and Sharadha’s functions. Like for example, today I managed to break down the queue into various sub-queues and with quick mental analysis understood the bottlenecks, and decided my diet for the night based on that.

For example, today I noticed that the main queue was for one table where you got the plates, pakodas, thair vade, jalebi and some salads. These things had all been arranged around a table which seemed non-intuitive to a lot of people because of which the crowd was heavy. And I realized that just to pick off the plate from the stack and scoot off, I could break the line without being impolite.

Next, analyzing the main course queues, I realized that one main line was at the dosa counter, and decided to forego it in the interests of getting my food quickly. Again I quickly ran this optimization algorithm in my head which told me that it was best to have rotis (involved a small wait) and curries in the first round and then rice in the second. It worked beautifully, and I had a hearty dinner without ever standing in line!

At Sharadha’s wedding too I had managed to spot and exploit arbitrage opportunities. For example, I realized that people never stood in queues to get second helpings, and that I could peacefully get around the line by taking the plate from the hardly-crowded salad counter and then going to the main line looking like I was going for second helpings.

The key at buffets is to keep your eyes and ears (yeah, I managed to “spot” that spoons had arrived by hearing their clanging) open to any sort of arbitrage opportunities, and once spotted to ruthlessly exploit them. And you need to be a little RG. If you try to take along too many people when you are implementing such plans, it will be self-defeating and your returns diminish.

And if you find yourself at a buffet which has lots of financial traders, I really pity you.

A Balance Sheet View of Life

The basic idea of this post is that interpersonal relationships (not necessarily romantic) need to be treated as balance sheets and not as P&L statements, i.e. one should always judge based on the overall all-time aggregate rather than the last incremental change in situation.

Just to give you a quick overview of accounting, the annual statement typically has two major components – the P&L statement which reflects what happened between the last release of the statement and the currrent point, and the balance sheet which reflects the position of the company at the point of time of release of the statement.

I think Bryan Caplan had made this point in one of his posts, but I’m not able to find it and hence not able to link it. The point is that you should look at relationships on a wholesome basis, and not just judge it based on the last action. The whole point is that there is volatility (what we refer to in my office as “the dW term”) and so there are obviously going to be time periods during which you record a loss. And if on each of these occasions you were to take your next course of action based on this loss alone, you are likely to be the loser.

I’m not saying that you should ignore the loss-making periods and just move on. You do need to introspect and figure out what you need to do in the next accounting period in order to prevent this kind of a loss from repeating. You will need to “work the loss”, not make a judgment to break the relationship based on it. I think a large part of the problems in this world (yeah, here goes another grand plan) stems from people using one-period losses in order to take judgments on relationships.

Another thing is not to generate the accounting statements on a shorter time period. This is similar to one funda I’d put long ago about how you shouldn’t review your investments at extremely short intervals since that will lead to a domination of the volatility term (dW) and thus cause unnecessary headache. You might notice that corporates rarely release their accounts statements more frequently than once a quarter – this has more to do with volatility than with the difficulty in generating these statements.It is similar in the case of interpersonal relationships. Don’t judge too often – the noise term will end up dominating.

One caveat though – very occasionally the last loss may be so bad that it more than wipes out the balance sheet and takes to zero (or even less) the value of the firm. In that kind of a situation, there is no option but to shut down the firm (or break the relationship) and move on. Once again, however, the clincher in the decision to break up has to be the balance sheet which has gone to zero (or negative) and not just simply the magnitude of the last loss.

Life based on a balance sheet view is a balanced life.

Bilateral Crib Arrangements and Correlation

People say that cribbing is in general good for health, and I heartily agree. I love to crib. Occasionally I bore the hell out of my listener with my cribbing. And I’m sure the readers of this blog have also been on the receiving end of this on more than one occasion. There have been occasions when I’ve been specifically asked not to crib, and others when people have tried to subtly indicate to me that they are not comfortable with my cribbing.

In order to prevent the latter problem (of boring someone with my cribs and them not being able to directly tell me to shut up), over the last few years, I’ve entered into several informal “Bilateral crib arrangements”. Ok – I’ve never used that term before – in fact, I invented that term only some two or three days back. But that doesn’t take anything away from the nature of the arrangements.

So a bilateral crib arrangement is an informal arrangement you get into where you agree to listen to someone’s cribs and lend a friendly shoulder wiht the implicit agreement that they return the favour. The terms of the arrangement are never really described in that many words but that is essentially what it is. It usually has a component where one party says “ok let’s change the subject now” or something to that effect, and the counterparty replies “no no it’s ok you can crib on”.

Occasionally I’ve also gotten into one-way arrangements – where I either only put or receive cribs, but dont’ do the opposite action. Basically this happens when one of the two parties is more comfortable with the ohter than the opposite relationship, or if one of the parties alreeady has enough crib-receivers and doesn’t need one more, but is happy to receive cribs. Though some of them have lasted, occasionally I’ve felt uncomfortable in those – assymetric relationships create mental obligations.

So coming to bilateral crib arrangements – the biggest threat to these arrangements that I’ve observed is what I call as correlation. For a bilateral crib arrangement to work effectively, it is useful if one party is in the position to receive cribs while the other wants to crib. The situation when both don’t need to crib is also good. The problem occurs if both parties want to crib and want to crib to each other.

I’ve been through this several times and it hasn’t really been pleasant. On a number of occasions, I’ve had to back down and somehow bring my cribs under control while lending a friendly shoulder to my crib-partner. On others, I’ve visibly noticed crib-partners putting up with my cribs just so as to not create conflict. Such situations are suboptimal for both parties involved, and need to be avoided.

In this regard, it is important to choose a crib partner whose correlation with you is low. That way, the chances that both of you will want to crib at the same time to each other is low, and the awkward situation of competitive cribbing or backing out can be avoided. I don’t really know how you can choose people with low correlation with you, but I supopse you’ll have to take a few data points and extrapolate. Also avoid people whose correlation with you is obviously high – such as collagues.

Another effective tool in cribpartner management is to be diversified. You need not have several bilateral crib arrangements, but with a judicious combination of unidirectional and bidirectional crib arrangements, keeping in mind various time zones, you can ensure that there is a receiver to listen to you whenever you want to crib.